Country should be spending $100 b on infrastructure: Naik

Country should be spending $100 b on infrastructure: Naik
Hindu Business Line, September 9, 2009, Page 3

L&T chief calls for long-term approach for building power plants.

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“Many projects are not viable for the private sector because there is a lot of social responsibility attached to infrastructure and we need to find innovative schemes to marry both.”
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S. Shanker, Mumbai

His steely resolve to take Larsen & Toubro beyond the competition is obvious. Mr A. M. Naik, Chairman and Managing Director, L&T, speaks of growth in a subdued market.

Excerpts from an interview:

Given the slowdown, where do you see growth coming from, in the near term?

I think the Prime Minister’s 100-day programme has begun to move. How long this will last remains to be seen. Well all I know is that accumulated tenders are coming out, maybe for the next 100 days. How long this infrastructure building lasts depends on the kind of resources the Government can mobilise. With the drought, it is possible that some of the money meant for development plans is being diverted, which I can fully appreciate.

What is your take on the private sector’s role in nation building and the viability of public-private partnerships in general?

We have to get diversified funding for infrastructure projects and there is no question more projects have to be built by the private sector.

Many projects are not viable for the private sector because there is a lot of social responsibility attached to infrastructure and we need to find innovative schemes to marry both.

For example, L&T has finished the Vadodara-Baruch six-lane toll highway. However, the rural roads leading to the highway have to be built by the State. Instead of the Government seeking Rs 1,000 crore as concession charges, we could have been asked to complete the byroads leading to the district headquarters and important towns free of charge. This connectivity would help transportation of agriculture products onto the highway. Development should reach out to the under-privileged.

Which sectors, in your view, could take the lead in the near term?

Infrastructure will grow in the near term. India could do with a 25-year growth plan because we have very little to speak of, compared to even under-developed countries. A lot needs to be done for the next 25 to 40 years.

China continues to spend $150 billion on infrastructure building and has spent over $2.5-3 trillion over the last 25 years. Compared with that, we spend $25-30 billion when we should be spending at least $100-150 billion. Only then will it take 30 years to come up to somewhere near what people want it (infrastructure) to be. So, that is something that is near term but which will be relevant for the long term as well.

Next is power. It is unfortunate that over 50,000 MW of power equipment has been ordered by the Indian private sector to China. And why was that? There is only one BHEL (Bharat Heavy Electricals) and hence deliveries will not be on time.

L&T has spent over Rs 3,500 crore to build turbines, boilers and heavy forging shops, besides quite a few associated equipment manufacturing facilities. However, India needs a long-term approach to building power plants.

Since the entire Twelfth Plan requirements of power equipment have been ordered out, we have to see movement away from sub-critical boilers to super-critical and away from Chinese to Indian products. In the olden days, there was only 4,000-5,000 MW of capacity available with BHEL. Today, the public sector company has 10,000-plus MW and L&T 4,000 MW, which can be scaled up to 6,000 MW. But we don’t seem to get orders at this point of time, because of the huge commitments made to China.

What kind of potential do you see from nuclear power?

It will take time. The Indian nuclear power programme, which has got 4X700 MW, has kicked off. We already have received steam generators for two while two others have gone to BHEL. More are expected to follow.

The entry of Areva, Westinghouse and GE will take time. Agreements have to be signed and these will go up to 2011 and thereafter. On the ground, there is potential for four more reactors. Then the 16 to 18 reactors that are to come beyond 2011 to 2020 will take India’s capacity to around 25,000 MW.

As for your shipyard programme, would you take more orders for commercial ships beyond the current level of 10?

We are not taking any more orders for commercial ships. Anyway, the world has seen a great depression in shipbuilding. I think it will take the commercial ship market three to five years to improve.

However, our main purpose was to build a defence shipyard. The bigger ones — the frigates and destroyers and submarines — will be done at Kattupalli, near Chennai, which should be operational in 2011. But at the same time we are ready to build ships today as initial work can always be started at Hazira and when it is comes for assembly, Kattupalli will be ready and possibly waiting for it.