Manufacturing Moving Marvelously

Many things are happening in the country that assures of a great going in manufacturing sector. While the big manufacturing companies are trying to expand the wings, even SMEs are contributing in a major way. The opening of defence equipment for private sector, many SMEs are trying to get into it. As ‘India Today’ reported recently, M Kumar Udyog (MKU), a small Kanpur-based company produces some 25,000 ballistic helmets costing $200 (Rs 8,000) each in a month and exports to the armies of over 40 countries, including the police and homeland security forces of the US.

Neeraj Gupta, who heads the MKU’s foreign sales department, narrated an interesting aspect. Five years ago, foreign firms cited lower costs in China to counter his price. Recently, Gupta bagged a $15-million (Rs 60 crore) order to armour Turkish naval frigates despite his quote being 40 per cent higher than his nearest competitor’s. Gupta proudly says, “When I recently asked a foreign defence company if the Chinese were not competing any more, they said they were looking for armoured protection, not soft toys.”

5,000 SME companies in India are supplying 20-25% of the components such as helmets, electronic processors, nuclear fallout selters, simulators and unmanned aerial vehicles to state-owned defence firms. According to the Pune-based Defence Electronics Manufacturers Association (DEMA), an SME grouping, there are about 150 major SMEs, located around Pune, Bangalore and Hyderabad, with a combined annual turnover of Rs 1,500 crore.

Even the big manufacturers such as Mahindra & Mahindra, and Tata Motors are getting into defence sector. The Tatas had teamed up with the Defence Research and Development Organisation (DRDO), to make Pinaka rocket launchers. Pinaka was the first defence contract given to private companies in India. The strategic electronics division of Tata Power is manufacturing Pinaka launchers along with Larsen & Toubro. Recently, two Tata group companies–Tata Power and Tata Advanced Systems–had signed agreements with Rafael and Israel Aviation Industries to manufacture a wide range of defence products.

India has become an attractive destination for all the global manufacturers. Nissan Motor and Renault last week signed a MoU with Tamil Nadu government to set up a state-of-the-art automotive facility on 678 acres at Oragadam, near Chennai; and have envisaged an investment of Rs 4,500 crore ($1,140 million) over seven years through their 50:50 venture for creating a capacity to produce four lakh cars per annum.

Honda Siel Cars India has inaugurated a new manufacturing facility at Greater Noida increasing its capacity from 50,000 to 100,000 units per annum investing Rs 1,620 crore. Honda will launch Civic hybrid in a couple of months, and the company’s small car, a petrol version, will be launched in 2009. Honda’s Rajasthan plant will be operational in the last quarter of 2009 that will ramp up its total capacity to 200,000-240,000 units in India. Honda will initially invest Rs 1,000 crore in Rajasthan plant, which is likely to go up to Rs 3,000 crore.

Ashok Leyland, the flagship company of the Hinduja Group, has decided to double investment in Uttaranchal from Rs 1,000 crore to Rs 2,000 crore as a part of its expansion plan. The company would be manufacturing 40,000 annually, according to sources.

India has been doing pretty good in manufacturing of automotive sector. India is the second largest two-wheeler, the 11th largest passenger car and the fifth largest commercial vehicle producer in the world. The sector can create a ripple effect and generate huge number of employment. An additional car manufactured generates five jobs, a commercial vehicle 13. India can certainly become a manufacturing hub of small cars, and even compact cars. ‘Nano’ has laid the roadmap. The government’s Automotive Mission Plan 2006-2016 (AMP) aims to make India a global automotive hub, accounting for 10 per cent of the GDP and creating 25 million additional jobs by 2016. The industry is investing over Rs 75,000 crore, nearly 50 per cent of the investments envisioned in the AMP.

As a welcome change, even the PSUs are getting into global game of excellence. PSUs can outsource and create or support a large number of small manufacturers creating a lot of employment. Potential is huge.

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