Dr. Pawan Goenka is running an unusual public-private partnership, informing and helping policy changes.
Before the pandemic began, major players in India’s room air conditioner market had no plans to invest in large manufacturing operations, instead relying on convenient imports for over 80% of AC parts.
In the last one week, despite the decline in AC sales from COVID-19, global brands such as Hitachi, Daikin and Panasonic as well as domestic majors such as Voltas and Blue Star have committed around Rs 5,000 crore to reverse the dependence on imported AC parts. investment has been announced. 80% to 20% over the next five years.
The seeds of this turn-by-turn, partly driven by a Production Linked Incentive (PLI) scheme, were being sown from the third-floor corner office of an auto major in Worli, Mumbai. As of this April, Mahindra Group Managing Director Dr Pawan Goenka is running an unusual public-private partnership that is informing and helping policy changes already leading to grassroots results in sectors such as air conditioners.
For example, when domestic and global AC companies pointed out that India’s ₹25,000-crore AC market did not require large manufacturing investments to replace established import supply chains, Dr. Goenka struck down his deal to arrive at an attractive formulation. skills to be used.
Recalling the challenge, he said: “An Indian player may not have the technology for the compressor, so they are forced to import. A multinational company has the technology, but does not want to make it in India.” Is.
Their solution – persuading multinationals to make more compressors in India to buy from them rather than importing the domestic player – thus adding volumes that justify new investments and to invest with both domestic and foreign players. Let’s repeat this idea for the different AC components by stepping in. For each.
While this debate was on and Dr. Goenka discussed with industry players the ideas of expanding the market to ₹1 lakh crore, taking the local value addition to a higher level and starting export of AC components over time, a And the battle was won without any ado. After the government banned the import of ACs with pre-filled refrigerants in October 2020, imports of ready-made air conditioners, which make up almost a quarter of the room AC market last year, have come down to almost zero.
Over the past year and a half, Dr Goenka has been diving deep into areas like ACs two days a week, which have been away from the auto industry for 41 years, to recommend practical strategies and policy changes – not just scale manufacturing, But also to boost exports, reduce import dependence and expand domestic demand.
Govt-industry panel chalks out policy to revive manufacturing
To remove Indian manufacturing from the loss of import-dependence exposed by the pandemic, Dr. Goenka leads a group that started working informally soon after the national lockdown was announced in 2020, following a meeting between industry captains and the commerce and industry minister. Piyush Goyal.
Noting that many of them had more time due to the lockdown, Mr Goyal had suggested the CEOs to put their thinking and come up with ideas to tap the global sentiment against China and strengthen Indian manufacturing.
To his surprise, the minister asked Goenka to conduct this introspection, which was later formalized by his ministry as the Steering Committee for Local Value Addition, Manufacturing and Exports or Scale. The group is now working on such ideas for 17 sectors – from toys, textiles, furniture and e-bicycles to drones and even fisheries.
The SCALE includes top officials from three industry bodies – CII, FICCI and Asschoham, three representatives of the government, Manmeet Kaur Nanda, Member Secretary, Department for Promotion of Industry and Internal Trade (DPIIT) and three industry honours, including JSW Steel. Joint Managing Director and Group CFO Seshagiri Rao MVS.
India has seen several similar committees in India over the past two decades to increase the share of manufacturing in the economy, with recommendations either gathering dust, spoiled by inter-ministerial and inter-industry crossfire, or non-committal. Leading to bad policies like Starter National. Manufacturing Investment Zone (NMIZ). SCALE differs for a few reasons.
First, it has no time limit and the draft is not a voluntary report – all of its proposals are best put together in one presentation. Second, it does not simply collect the views of various regional players and bundle them together for the government to consider, as does general industry representation. Third, it follows a rigorous process of consultations to align different factions of the industry with differing agendas at multiple levels and tries to nail down the alignment of interests before taking up relevant issues with the government , where differences seem difficult.
“Usually, industry bodies come to the government and say, ‘Give me this, give me that’,” Dr Goenka told The Hindu. “My first sentence for them in a scale interaction is, ‘It should be ‘I’m going to do this, and that’s the help I need.’ And if you don’t have ‘I’m going to do this,’ then let’s not even talk.”
As a result, none of its presentations contained policy suggestions without the same commitment from industry, for example, what it would commit to do in terms of investment and job creation if those suggestions were accepted.
In fact, in the case of air conditioners, one of the first areas it started working on, industry players actually gave Mr Goyal a commitment letter that they would invest more and take home value-addition up to 80% . The current 20% in the five years before the government notified the PLI scheme for the sector.
“It was signed by the industry and it is almost a contract,” said Dr. Goenka, “Unlike drones, air conditioners, another sector whose PLI plan has taken input from SCALE, was considered a sunset zone. In which there was no room for change. in the status quo. The panel’s ideas for other uninterrupted sectors, including fisheries and TV, are also in advanced stages of deliberations within the government.
The scale panel’s approach is more effective, but also has general risks to the dynamics of India’s political economy, said former Planning Commission member Arun Maira, who worked on drafting an industrial policy using the same technique of extensive consultation. Roping and small scale industries, even in trade unions, to find wider synergies.
“The aim of the national industrial policy should be to increase the result, which should be a rapid increase in the income of citizens in the country, especially for the downtrodden so that poverty is reduced,” he told The Hindu, emphasizing on the firms doing business. Even though it is easy to invest in China because its market is huge.
“Large scale industrial units will not produce this result. They employ fewer people per unit of capital and less per unit of land. They also have a huge negative impact on the environment. New technologies along with new business models make small units viable, as well as provide solutions to the problems of inclusion and environmental sustainability,” he said, emphasizing that NMIZ never started.
In his first innings, Prime Minister Narendra Modi tasked an industry body to come up with a policy prescription for what he said was a central challenge to the Indian economy – raising people’s income and employment levels. Associated with the exercise, Mr. Maira said that industry big players objected to the recommendations, which were based on scenarios that encouraged smaller units as well as larger units to create a more vibrant manufacturing ecosystem.
“There was a feeling that the room’s landscapes seem to suggest that small is beautiful and big is bad. While Dr. Goenka is following the right approach to scale panels, it may face the same limitation and ‘who what and why’ One must use one’s own lens to carefully assess ‘is asking’,” concluded Mr. Maira.
Having traversed through India’s industrial ecosystem for decades, the president of SCALE is aware of these homely truths.
“All companies want to do well. But overall, even if there are exceptions, companies also want to do good for the country. The desire is: is there any way that without compromising on the requirements of my company, am I able to add value to the country,” he said, adding that to that extent, Atma Nirbhar Bharat has been an ‘inspiring’ clarion call.