India a long-term, attractive market, says Tarak Mehta of ABB

On the sidelines of the ABB Electrification Media Day event held in Bergamo, Italy, Tarak Mehta, President - Electrification business, ABB speaks to Subhajit Roy and highlights the trends that will drive the company’s electrification business in India.

Electrification remains a core business for ABB. What’s the commitment of ABB Electrification for Indian market?
Electrification business of ABB has significant presence in India. We are quite happy and exciting with the growth! We are bringing a lot of new technologies to India. We see significant sectors where ABB can make a difference – whether it is e-mobility, building automation or some new innovative solutions that we have developed from energy efficiency or impact perspective. We are investing there as the future potential of India continues to be strong.

What kind of growth has ABB Electrification achieved in the Indian market?
We have had double-digit growth in the business of electrification through the second quarter. Given the economic environment, the factor that our business has grown is quite encouraging for us.

We are almost at the end of 2019. What’s on the cards for ABB India for 2020?
In 2020, we are re-shaping the portfolio. There would be a substantial change in the solar inverter portfolio. Along with that, we are bringing in new technologies in India for data centre, e-mobility, as well as for overall energy saving on the building side. Energy efficiency is quite a big important topic in India where we are focused.

Where do you see the future growth of ABB Electrification coming from?
On the infrastructure side, certainly the Government of India spending is resulting in some good development for our business. Then we see some changes – there is a shift from traditional heavy industry to more light manufacturing. We see good growth and potential in discreet food and beverage, and quality of life related industries. Also, there are focused government programs where we clearly see the opportunity.

When you talk about government programs, the government is focusing on smart cities, renewable energy, and e-mobility. So where exactly ABB is placed in these three areas?
I think all these three areas are important to us. Let’s start with e-mobility. We are supporting NITI Aayog with installation of fast charger to bring the concept of technology into the country. Then as we move into the smart cities, it is all about what does the smart city do for the people? Is it more efficient? Are we reducing the load on their conditioning? Are we making the buildings more efficient? So, the connectivity has to result in improvement along three dimensions. Firstly use – meaning get more out of same input of energy. Second is connectivity but it should again result in something more efficient and better. Third and more importantly, it should provide a positive impact on the environment – meaning it should have an impact on the sustainability, it should reduce the pollution which is a challenge everywhere in the world, specifically, in India it is a big challenge these days. We have to come up with solutions which impact all these three. That is what we think about and execute now.

Acquisition of GEIS is considered as one of the major acquisitions for ABB and it has made significant impact in the US market. What’s the impact of this acquisition in Indian market?
GE Industrial Solutions (GEIS) also has a significant India component. In Hyderabad we have a group of very competent and capable people who are former GEIS and helping us to improve our entire portfolio worldwide. They are part of our continuous improvement product portfolio team which we run on a global basis and the biggest number of resources are former GEIS employees who are making a big contribution. That is one aspect of it. The other aspect is the portfolio. We are there to serve GE installed base in India which is not that small given its history. We are going to build GE installed base with new digital solutions that help make it more efficient and productive.

Globally, ABB Electrification invests around 3% of its turnover in R&D. What sort of investment comes into R&D in India?
Typically, in India, we have a higher percentage of turnover (into R&D). R&D in India is done in two dimensions – one is for India where we invest and make sure our portfolio meets local needs. Secondly, our global product development teams which are based, funded and supported not only in India but also out of India. So, our R&D presence in India is higher than the 3 per cent of the Indian revenue volume. And, on top of that, we have globally funded R&D that we do in India for the rest of the world.

ABB Dalmine Switchgear production line

It is understood that ABB Electrification’s major focus is on the US and China. What about India?
In terms market size, India is a significantly smaller market compared to the US and China. It does not mean it is less important to us. Because of the investments we have, the market position, and the growth potential of India, we are very focused and committed to make sure that Indian business development is in line not only with the local market but also provides us manufacturing ways for supporting the South-East Asian region and in some cases, we have global product portfolios which are based in India meaning serving the rest of the world. For us, India is a long-term, attractive market where our investments, our talent is being developed not just only for India but also for many applications in different parts of the world. Like in Italy, we will have similar capacity and capability in Bangalore or in Hyderabad where we are not only doing things for India but for the world utilising the skills and capabilities of the colleagues in India. That is what we want to do.

You are also on the board of ABB India. So, what kind of revenue commitment do you have to the group for Indian subsidiary?
Our commitment is to continue to grow the businesses we have. So, Sanjeev (Sanjeev Sharma, CEO & Managing Director, ABB India) and the team’s responsibility is to make India a significant part of ABB and they are doing a good job in terms of delivering good value. It is not only us but also our independent shareholders recognising the value and contributions. So, they have a free reign in terms of investing in the business but we want to see the continuous growth of profits as well as revenue. That’s the only small requirement we have. Double-digit is better!

Power sector in India is going through a lot of challenges. What is your take on this?
There are two components to this – generation & transmission is one and the other is distribution side. When we look at the challenges of India as a country, we do need to generate electricity in a much more renewable and sustainable manner. That means less coal-fired power plants. That is what we need in India. Though it (coal-fired) is a cheap form of electricity, we need to shift away in order to have a positive environmental impact. However, in my opinion the bigger challenge is in the distribution side. India has a lot of power that is lost between generation and the time it comes to plugs and sockets. Whether it is through the free power we give to a lot of people who don’t necessarily appreciate it. There is a big challenge for distribution companies to get returns on investment. So, privatising it might be one avenue. Cleaning up the generation might be another avenue and a distributed power generation like the solar panels which provide very nice and competitive micro-grid applications especially in villages could be another form. There power sector can provide more electricity to many more people without having too much of negative impact on the environment which is a big challenge. The complexity will come as the quality of life increases and more people come into the urban environment. As we have an opportunity now in the area of sustainable mobility like electric vehicles, the requirements on the grids whether it is distribution or transmission, will get even more important. They will have to do a better job because more power will come through electricity than any other form in next 10-15 years. So, the good news is the demand would grow. But the challenge is do we have the business models to pay for those investments in India especially, for a distribution utility? In that case, policy changes will have to be made along with investments
in technology.

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