The Indian Power sector suffers from a strange contradiction, while there is a huge opportunity due to the demand-supply mismatch; the sector is presently going through a difficult phase grappling with critical issues such as fuel availability, surge in coal prices, access to domestic coal, fuel transportation & logistical issues, land acquisition, water & environmental issues, overseas equipment purchase, financially precarious condition of distribution utilities, distribution network improvement, sustainability concerns, competition amongst others.
Rajiv Vastupal, CMD, Rajiv Group shares his views with Sandeep Sharma about his company, contribution to the Power sector in India, demand scenario for electric cables and switchgears, expansion plans, R&D spending, challenges before the power sector, budget reaction and immediate solution to power deficit in India. Edited Excerpts…
Could you tell us in brief about your group, mission, objectives, products & solutions offered?
Rajiv Group, founded in 1979, is a diversified group with total revenues of Rs. 550 cr. in 2010-11. The group is a leading player in the polymers, woven sack bags & fabrics, electrical cables and switchgears, light fittings and panel boards.
The group’s flagship company, Rajiv Petrochemicals Pvt. Ltd., is a leader in trading of petrochemicals and polymers. It is one of the largest distributors of polypropylene and polyethylene from Haldia Petrochemicals, PVC resin and EDC from Finolex, polysterine from LG, polyester film from Jindal and many other products.
Atlantis Products Pvt. Ltd. has emerged as one of the largest producers of woven sack bags and fabrics in the country with significant part of its sales coming through exports to over 10 countries globally.
Optiflex Industries manufactures winding wires as well as flat & flexible cables. It is an ISO 9001:2008 certified company and has been awarded an NSIC-CRISIL rating: SE 2A for high performance.
Optic Liting Pvt. Ltd. is engaged in manufacturing of lighting products like architectural fine lights, CFL down lighter, LED spot lights, street lights, outdoor lights and office lighting products.
Riddhi Enterprise makes various kinds of panels required by end customers
At Rajiv Group, we believe that progress must be achieved in harmony with welfare to society. This belief is an integral part of the group.
Could you elaborate on your contribution to the Indian Power sector?
70% of our manufactured products go to agricultural clients, which includes power cables, wires, submersible pumps, switchgear, etc.
How is the demand scenario so far in FY2011-12 for electrical cables and switchgears?
India is emerging as an important global supplier of goods and services. Pre-requisites for this growth are continuous power supply and the availability of quality electrical equipment. The increase in automation is the driving force of the switchgear market. The trend of end user segments such as oil and gas, petrochemicals, etc. consuming more switchgear products is a very positive factor.
The future holds great promise for electrical cables and switchgears. The current scenario where capacity building in industries is on an increase bodes well for the electrical industry. The construction of residential complexes, malls, IT parks, hospitals, stadiums, etc. has created an increase in demand for switchgears and control panels too. The 12th Plan period (April 2012 to March 2017) is almost here and throws huge opportunities for growth with a foreseeable investment of approximately USD 300 billion, together with a growth in exports.
Do you expect demand moving northward in the next fiscal?
Based on your experience of the Indian Power sector, what’s your take on the current challenges being faced by the sector?
The Indian Power sector suffers from a strange contradiction – while there is a huge opportunity due to the demand- supply mismatch; the sector is presently going through a difficult phase grappling with critical issues such as fuel availability, surge in coal prices, access to domestic coal, fuel transportation & logistical issues, land acquisition, water & environmental issues, overseas equipment purchase, financially precarious condition of distribution utilities, distribution network improvement, sustainability concerns, competition amongst others.
Do you have any expansion plans to further explore the power sector potential in India?
Optiflex Industries is our flagship cable manufacturing company, which is growing at 40% per annum over the last few years and posted sales of Rs. 260mn in FY 2010-11. We recently increased our manufacturing capacity by 40% and in addition to submersible pumps, also manufacture flat cables, power cables and house wires.
Optiflex has recently entered into the manufacturing of flexible cable and house wires as there is great potential for them. In the current financial year, the company expects to reach a turnover of Rs. 360mn.
We are developing our product range horizontally and vertically with backward and forward integration.
The market for all products manufactured by Optiflex Industries has been witnessing strong growth. Optiflex has a good presence in the South and we plan to have an outlet in Northern India too soon due to the fact that 70% of our products are sold to agricultural-based clients.
What’s your take on the recent budget announcement?
There is nothing great in this budget. It looks like a flat budget with an introduction of Rs. 44,000 cr. pf new taxes and relief of Rs. 46,000 cr. on a personal side. This flat and inflationary budget will have a bad impact to the automobile market and demand in general. The direction towards GST & DTC is very unclear, but this was expected from the budget. On the other hand, the budget is a welcome step for the aviation as well as the power industry.
What’s your take on the need for R&D spending in the manufacturing sector?
The investments in R & D by the electrical industry are amongst the largest in the corporate sector in India. Large electrical equipment used in steel plants, petrochemical complexes and other such heavy industries are also being manufactured in the country. The domestic heavy electrical equipment manufacturers are making use of the developments of the global market with respect to product designs and upgrading of manufacturing and testing facilities. The heavy electrical industry has established itself in the global arena as well. These encompass thermal, hydro and gas based power plants, substation projects, rehabilitation projects, besides a wide variety of products like transformers, photo voltaic equipments, insulators, switchgears, motors, etc.
As funds are becoming dearer, what your advice to companies looking for project finance?
Companies looking for project finance should get it from overseas sources at fixed prices, cover up the dollar and try to get a soft loan from foreign financial institutes, which are available in ample. Funds can also be borrowed from foreign financial centres like New York, London & Dubai.
Lastly, what’s the immediate solution for India’s growing power deficit mainly the peak hour shortage?
Power should be spent sensibly and there should be a higher tariff during peak hours. For household purpose, it should be charged negligibly. Incentives should be given to the extent of higher prices taken for evenings & night shifts. Furthermore, industries & pharma sectors should change the usage pattern to meet the power deficit.
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