Spreading their wings

From highways to power plants to oil and gas pipelines to sports stadiums, Indian companies such as L&T, Shapoorji Pallonji Mistry, Punj Llyod, the public sector Ircon and hundreds of smaller companies are constructing infrastructure not only in India but also in faraway places such as Africa, the Middle East, Central Asia and South East Asia, thus, not only earning precious foreign exchange for the country but also helping project India's hard and soft power to distant corners of the world.

At a time when China has unveiled its One Belt One Road (OBOR) initiative to build a network of highways, railway lines and energy pipelines through Central Asia, the Middle East and Europe in a thinly veiled strategy to expand its sphere of influence, India, too, has its hands full with its own connectivity projects. Racing against time and rushing to make up for lost time, the Narendra Modi government has taken up work on the long-delayed $484-million Kaladan multi-modal transport project in Myanmar to connect Mizoram in India's North East to South East Asia. Kaladan, conceived in 2003, is the first major project taken up by India in Myanmar. Though construction began in 2010, it was soon abandoned due to lack of adequate funding and poor planning. It was only in October 2015 that the Modi government revised the budget upward by nearly six times to 2,904 crore and appointed the public sector Ircon Infrastructure and Services Ltd as consultant. The target: complete the project by 2019. As part of the project, the government has awarded a $250-million contract to build a 110 km road from the Paletwa river terminal to Mizoram. Other parts of this ambitious international connectivity project, like the construction of the Sittwe port on the Kaladan river in Myanmar has been completed. The construction of a river terminal about 160 km away and dredging work to ensure navigability are also nearing completion. On the Indian side of the border, the 90-km Aizawl-Saiha National Highway extension work is also drawing to a close.

The Export Import Bank of India plans to borrow $3.5 billion from overseas markets this year and use the funds to help Indian companies make inroads into new overseas markets. Exim finances three segments - overseas investment finance scheme, project exports and lines of credit, which is government to government credit. Such finance is particularly important for Indian companies bidding for and executing projects abroad. Exim Bank's aggressive financing recently helped the public sector Bharat heavy Electricals Ltd (Bhel) bag a $1.6 billion project to set up a 1320 MW power project in Bangladesh's Khulna district, beating back stiff competition from Chinese rivals. “We have been trying to bid for this project for a long time. We finally approached the PMO to secure an attractive financial package from the government of India to bid competitively. The package provided by Exim Bank was for all Indian manufacturers including L&T. It will be our largest overseas order till date,” said a senior Bhel executive on condition of anonymity. This project marks yet another instance of the convergence of India's economic and strategic interests in the country's immediate neighbourhood.

Indian project exports to Afghanistan have a significant strategic content as well. According to the Indian embassy website: “India has played a significant role in the reconstruction and rehabilitation process in Afghanistan... Government of India has taken on a number of medium and large infrastructure projects in its assistance programme in Afghanistan. Some of these include: construction of a 218 km road from Zaranj to Delaram for facilitating movement of goods and services to the Iranian border; construction of 220kV DC transmission line from Pul-e-Khumri to Kabul and a 220/110/20 kV sub-station at Chimtala; upgrading of telephone exchanges in 11 provinces; expansion of national TV network by providing an uplink from Kabul and downlinks in all 34 provincial capitals for greater integration of the country.” “Some of the ongoing/completed Indian projects in Afghanistan include (the) new Afghan Parliament building (inaugurated on December 25, 2015 jointly by H.E. Dr Ashraf Ghani, President of the Islamic Republic of Afghanistan and HE Mr Narendra Modi. Prime Minister of India)...”

The Middle East, Africa and South America are fast emerging as a major hub for Indian project exporters. L&T, India's largest engineering and construction company, for example, has a large presence a huge list of new and under construction projects in these regions. The company has opened offices in the Middle East, South Africa, Nigeria and Brazil to facilitate projects in these countries. The company now earns almost 20 per cent of its revenues from its overseas operations, a large portion of this coming from the Middle East. “The strategy of going global is for sound business reasons, since a wide international customer base enables de-risking of operations and global exposure enables L&T to benchmark its operations against global standards,” the CMD of L&T, AM Naik, had told the media.

The Shapoorji Pallonji group, another huge Indian construction major, is building a $300-million power plant in Tanzania that will speed up industrialisation in that country. According to reports, it is building this 225 MW plant in collaboration with another Indian company, the Kamal Group, in Tanzania's Bagamoyo area in the Coast Region.

In a sign that Indian project exporters are coming of age globally, they are winning increasingly larger orders for critical projects that would earlier go to Western, Japanese and Chinese companies.

Recently, L&T Construction won its single largest order, worth $817 million, in the Middle East from Qatar General Electricity & Water Corporation (for its ongoing Qatar electricity transmission network expansion plan. This project, which involves engineering, procurement and construction (EPC) of 30 new gas-insulated sub-stations of of 220 kV, 132 kV and 66 kV and laying 560 km of 132 kV and 66 kV underground cables across Qatar. “The development drive in the State of Qatar is in high gear and we are proud to be partnering in it by bagging yet another prestigious project... We have been associated with Kahramaa for over a decade which has put in place a programme well ahead of the times to provide sufficient power and water for Qatar. We look forward to furthering this significant strategic relationship and continue to play a key role in making Qatar proud and a very modern state,” SN Subrahmanyan, who was recently appointed CEO of L&T had said in a statement.

Even as L&T and other Indian firms aggressively push their presence abroad - even as private sector orders in India remain constrained by the inability of Indian companies to make large investments on new plants and fresh infrastructure - they face stiff competition from Chinese and other rivals, making it that much more difficult to bag new orders. “The government will have to spend; otherwise there will be no growth in the economy,” Naik warned.

Fortunately, the Modi government has allocated about $90 billion in the Budget for 2017-18 for spending on infrastructure. The government, thus, will pick up some of the slack created by the private sector and ensure that domestic orders, the lifeblood of Indian engineering and construction companies, keep flowing while they keep the Indian flag flying abroad.

At the recent meeting of the African Development Bank in Ahmedabad, Finance Minister Arun Jaitley said India, which is building as many as 45 greenfield projects in Africa, is now the fourth largest investor in that continent. "India-Africa co-operation is not a one-off event but part of a strategic policy over last several years. The present government has provided fresh impetus to these efforts. India′s share of announced greenfield projects grew from 3.3 per cent in 2003-08 to 6.1 per cent in 2009-15. During the same time, China′s share fell from 4.9 per cent to 3.3 per cent. India is amongst the most important emerging investors in Africa. In terms of greenfield projects, India was fourth largest investor with 45 projects in 2015 after the US, the UK, and the UAE," he said. In an unrelated development, Commerce Minister Nirmala Sitharaman lauded India's growing project exports to Africa and said Japan is keen on collaborating with India in this regard.

This initiative, undertaken by India and Japan will create a free and open Indo-Pacific region and create new sea routes along the ancient maritime trade routes connecting Africa with India and South East Asia. The project proposes to connect the Jamnagar port in Gujarat with Djibouti in the Gulf of Aden, Madurai port with Mombasa and Zanzibar and Kolkata to Sittwe port in Myanmar. Japan will contribute its state-of-the-art technology and its experience in building quality infrastructure, while India will bring to the table its experience of working in Africa. Once this initiative gets off the ground, it will open up project exports worth billions of dollars for the likes of L&T, Punj Lloyd and other Indian and Japanese companies. Experts are optimistic that experience of handling such a humungous project will change the dynamics of Indian project exports and finally enable them to rub shoulders with the behemoths from China, Japan, South Korea and the West. [caption id="attachment_11492" align="aligncenter" width="770"]

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