Indian pump industry An in depth look

Present Scenario The Indian pump industry is comparatively a mature industry and has a strong manufacturing base. It has large and medium scale manufacturers in the organised sector producing pumps for various applications at all price levels, besides there are hundreds of small scale units in the unorganised sector producing mainly pumps and spares for domestic and agricultural applications. About 12 lakhs pumps are produced every year. Though there are no established figures, the market is believed to be worth about Rs 2000 crore. The Indian manufacturers have always adhered to quality standards. Many companies have obtained the ISO 9000 certification. Some of the indigenously developed achievements include Sodium coolant and primary coolant pumps for nuclear power stations, concrete volute and large sized vertical turbine pumps for irrigation and thermal power stations. The indigenously developed polyester- coated, polypropylene wrapped winding wire for submersible motor is worth appreciation.

Challenges before the Pump Industry Indian manufacturers have to face several obstacles including labour issues and extremely high manufacturing costs on one hand and cheap exports on the other. The imports have been freed. There is a mismatch between the input tariffs for the raw material and the prices at which the pumps are being imported. The pump customer is also more aware and informed today. He is more knowledgeable on pump selection and maintenance and more demanding in his requirement, willing to pay higher price for efficiency and reliability. Constant availability of better pumps for a better price is the challenge the industry faces, the entry of foreign companies is likely to further hit the industry, margins are likely to be thinner as these pumps are priced more competitively with improved technology. Indian manufacturers perceive threats from Chinese and Taiwanese pumps as they may be not durable but cheaper as produced on mass scale.

Low Growth is major cause of Worry The low industrial growth is affecting the pump sector prospects. Reduction in the number of new projects is affecting adversely the growth of industrial application pump companies. Lack of fresh investment in the pump industry is the major cause for worry. Spending on research and development is low and the level of technology is not rising, as it should be. New product models and designs are not very forthcoming. In this period of low growths, a consolidation in the pump industry is expected. The current status of the Indian pump industry is highly fragmented. Large players, therefore view this situation favourably as the possibility of Mergers & Acquisitions is going to increase substantially.

While the leading manufacturers are expected to increase their presence, the medium level will find difficult to survive. Foreign companies will be looking at acquisitions in the Indian market for quick growth.

Innovations - The need of hour The manufacturing of medium technology pumps will have to be considered in India, New product technologies are also coming in to the Indian market. New materials and material coatings are replacing conventional and expensive materials along with improvements in reliability and lifetime of existing pump designs for many fields of application. Indian industry has to adopt new techniques in pump production as implemented in developed countries The pumps will no longer be marketed as a mere hardware item, They will be packaged to provide total solution for customer's specific liquid transfer problems. Skills for providing customer support in terms of application engineering will have to be developed. Information technology will also be exploited to edge over competition. Software programs for pump selection, documentation, spare parts support etc will be made available to customers. Portals for trouble-shooting support will be on net for immediate customer service. As is being done for several products, pumps too will be selected, configured and ordered through websites. Supply chain management through ERP programs will make distribution more effective in terms of costs and availability.

Key growth areas for pumps in India The growth in the pump industry is closely linked to the growth trends in the user industries, even factors like investments and overall economic growth directly influence the pump industry. In a market with low growth rates and few new projects, different trends have been emerging as players use a range of strategies to ensure their survival. The market leader of most of the segments, Kirloskar Brothers Limited has been adapting itself to becoming a project management company. This systems approach is welcomed by the clients who look for complete solution or turn key job by the vendor who can design, install, commission and complete the project.

Agriculture Sector The growth can be envisaged in the Domestic & agriculture sectors - in terms of volumes. In the early years after Independence, Indian economy was basically agrarian. Green revolution prompted a spurt for agricultural monoblocs, sinking of groundwater tables caused spurt for submersible pumps. Although prospects in agriculture sector depend on external factors like monsoon, Over the years, share of agriculture in GDP has also reduced but due to adopting new developments and cash crops by the farmers, their income level has gone up, lower water table and poor irrigation facilities by the

government has encouraged them to go for own water sources, this led to sudden spurt in demand of submersible pumps in the last two decades. About 80 percent requirement of submersible pumps comes from agriculture sector. As a result many companies emerged in the organised sector who produce good quality and efficient pumps. Credit goes to Indian manufacturers for developing field rewindable and hence user friendly, wet motor designs for submersible pumps which can work against vagaries of power supply. but the kits manufactured in the unorganised sector have spoilt the market. These are low efficiency pumps, consume high power and produced locally without paying taxes etc. Traditionally, the customer buys the cheapest product without considering the life cycle cost, efficiencies and reliability. Farmers are attracted towards such pumps for their low price, they are not much concerned for low efficiency as power in most of the states is subsidised to the agriculture sector and rates are fixed for different ratings. Lower initial investment supercedes everything therefore such manufacturers are cornering major market share. It is expected from the Government that some action will be taken up immediately to curb this menace. Such players may not last for long but they end up spoiling the market and hurting the established players.

Residential Segment The domestic segment has seen the entry of a number of multinationals as well as smaller players with new designs and product features. Grundfos has been the most active amongst international players. With its leading technology and product innovations, it is targeting the domestic segment. Population keeps growing, standard of living is becoming more consumptive so demand ought to be growing. A highly attractive segment, the growth rates have gone at 10-12 percent as due to water shortage in urban areas number of private borewells are increasing, pumps for residential applications are having good demand. But again, there is always the lurking threat of the Chinese dumping. Major competition from China on pumps produced in large volumes - the segments of Agriculture & domestic can be affected.

Industrial Scene The industrial segment includes pumps for various water movement and process applications in different industries. These include major areas like chemicals, sugar, fertilizers, paper and pharma. While key sectors like power and pharma have been growing, others like paper and chemicals have been quite stable. The overall segment is growing at around 10 percent annually. Important industry trends such as better water management and conservation and re-use, combined cycle power generation and paper recycling coupled with evertightening, environmental norms, promise a reasonably good potential for pump companies to play a vital role in future. The sewage treatment segment is set to grow at a faster pace. According to survey, Urban water treatment and wastewater treatment equipment market is likely to reach a year -on-year growth rate of about 16 percent by 2005.

Indian companies in the Global market India has been importing pumps in a big way until independence and exports had started with small pumps for irrigation to Africa and Middle East, till 1960 export was very dormant. Export of pumps received a big boost In 1975 when Kirloskar group signed agreement with UK based company. The entire product range in the form of whole units or components were manufactured in India for the world market. This success encouraged manufacturers from U K, U S A and France to sign contracts with other Indian companies to get components or whole units as buyer seller relationship or buy back arrangement with technical collaboration. The globalization of Indian economy has developed keen interest in the International pump community. With the excellent engineering expertise available in the country along with cheap labour, it is not workable to import pumps here and market. Design modifications are always required due to poor power supply and other ground realities. To overcome this, International players are planning to set up a manufacturing base here and cater other markets in South East, Far East, Africa and Middle East and also for buy backs and re-export. Setting up of a joint venture with major foreign equity share is more beneficial and a long term strategy. A number of Indian manufacturers are looking at the export market. Mather and Platt Pumps Limited have won big orders in water and sewage handling in the Gulf countries. KSB AG is using excellent engineering and technical expertise of its Indian subsidiary KSB Pumps Limited as a global sourcing base for selected European markets, particularly for submersible pumps. There are many other companies who are exporting centrifugal, submersible and even special application pumps. Since growth is not forthcoming in India, manufacturers are taking keen interest in exports, where they get better margins. Besides companies in the organised sector, there are several small scale units in various parts of the country who are producing world class castings with excellent machining capabilities as per orders in their hand from developed countries. It is worth mentioning that Indian players often enterprises in reverse engineering at very competitive costs, conversant to English language also gives them slight edge..