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Manufacturing's role cannot be less strategic, says Dalmia Bharat Cement MD

Puneet Dalmia, Managing Director of Dalmia Bharat Cement, explains why the country desperately needs manufacturing.

twitter-logoGoutam Das | October 27, 2014 | Updated 11:27 IST
Puneet Dalmia, Managing Director of Dalmia Bharat Cement.
Puneet Dalmia, Managing Director of Dalmia Bharat Cement.

Puneet Dalmia, Managing Director of Dalmia Bharat Cement, explains why the country desperately needs manufacturing, in an interview with Goutam Das. Edited excerpts:

Q. You still have people in India who think India should remain a services economy. Why do we need manufacturing?

A. Advanced economies that let manufacturing move out realised after 20-30 years that it leads to a lot of local job creation. While in India services should continue to grow and become a very important part of our international presence, manufacturing's role cannot be less strategic. Large parts of our economy are rural. We need to create jobs closer to where people live. It can even employ people of lesser skill. A factory in a village creates tremendous inspiration for people.

Lot of direct and indirect employment gets created. For the cement industry, for every one direct job, almost 10 indirect jobs are created. A lot of trucks are employed where there are two drivers, two cleaners. For each truck, four-five jobs get created. One cement plant costs Rs 1,500 crore. A large plant could cost Rs 3,000 crore. There is a money circulation that starts. Three wheelers, education, housing happens. A steel plant would be even bigger; same for power plants. So there are two benefits - one is local employment and two, you don't need that much skill. Given that in India, almost one million people are entering the workforce every month, we need to create jobs.

Q. What has been your biggest bottlenecks?

A. Decisions take a very long time in India. And there is a lot of uncertainty - environmental clearances, land buying, mining licence. (There are 43 clearances required from different authorities for a greenfield cement project.) A cement plant could take five years to be ready for market. The first is a prospecting permit - prospect the land to see how much mineral is there. Then you apply for a mining licence. Then you have to buy the land. As you know, land holdings in India are small. You may have to do 1,500 transactions to complete the entire land purchase. It is a time-consuming process - it can take two to three years. You don't get contiguous land - there are patches that remain unsold and people want a hefty price. If you are stuck because of a small plot, you pay a hefty price and then others who sold land a year back also come back to negotiate. This has happened many times. Then there is the environmental permit and the forest permit. Land inflation is higher than anything in the country. If we look at our project cost, maximum inflation is in land - 20 to 35 per cent a year. This is across states. We have operations in 14 Indian states.

Q. So what is the solution?

A. My view is that there need to be zones which are demarcated for industrialisation. The government should do strategic planning. After that no government agencies should stop you. There has to be a time bound process to say yes or no.

Q. What has been the impact of slow decision making on your company?

A. We have gone slow. We would have expanded faster. We are now focused more on acquisitions, not greenfield projects. We did three acquisitions in the last three years and spent Rs 3,500 crore on acquisitions. Greenfield projects may have cost less but had a higher uncertainty.

Q. What do you think of the Make in India campaign?

A. Make in India is a great strategic direction. It will create local jobs and lots of jobs. However, capital doesn't come by invitation. It comes with trust and confidence. I should have the trust and confidence that i will not lose money.

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