Despite price sensitivity of the Indian market remaining a major challenge, Conrad Latham, General Manager, Atlas Copco Compressor Technique, India cites that to be competitive in India, the global players are willing to pay for the value of options that are normally associated with improved energy efficiencies like variable speed drive compressors, permanent magnetic motors, cost-effective adsorption dryers or even higher IE-rated motors.
Besides the rise in the income level of consumers that has led to a spurt in home appliances, according to you, what are the other factors or trends that have fueled the demand for stationary air compressors?
One of the largest changes in the last few years is the drive for manufacturing and other industries to reduce their electricity bills in order to remain competitive. More efficient compressors and compressed air systems are helping here and this move towards a more sustainable solution is driving the demand for compressors.
Companies are becoming more demanding on the lowest life cycle when it comes to choosing a compressed air system and need the manufacturer to be clear in not only the capital cost but also the energy operating costs and maintenance costs. A compressed air system can account for up to 30 per cent of the energy bill for some industries and reducing this cost is a strong driver for driving the demand for compressors in India.
What has lead to the augmentation of oil-filled stationary air compressors?
The choice of a compressor is driven by the application and simplified to the required air flow and pressure. For some applications, the most suitable choice of a compressor is a scroll compressor or a small piston, but most common in a lot of industries today is the oil-lubricated screw compressor and for some, it is an oil-free screw compressor. The screw compressor has become the preferred choice for many industries due to its ease of operation and lower maintenance costs, compared to piston compressors.
The choice of oil-lubricated vs oil-free is often due to the required quality of air and the demand flow. For industries like pharmaceutical, food and beverage, electronics and power, the recommendation is for oil-free screw compressors as the quality of compressed air can have an impact on the quality of the product. Also for larger flow applications, oil-free screw and oil-free turbo compressors are preferred as they are more energy efficient than oil-lubricated screw compressors, if sized correctly.
By 2022, what do you think will be the potential of the compressor market in India?
This is difficult to predict as the present market size is not universally known or documented. Unlike many countries, in India, there is no independent body that collects the market size. The best guess is that the present market size is around 12,000-17,000 units a year. With the expected market growth, it is estimated that the market will grow above 20,000-25,000 units a year by 2022.
List down a few areas that are driving the growth of the company.
The company's growth is mainly coming from the positive investments that the government is making as well as the industry confidence. Some segments are seeing stronger than the others, like automotive and some segments are seeing the need to shift quickly to more efficient solutions like agro sector (rice sortex) and textiles. The power projects are giving a boost as well, as compared to 2017, where there was a significant slowdown. Now, more projects are coming online and with the shift towards more investment into FGD, we believe that the future remains positive for compressed air systems in power.
Recently, the company invested Rs 1 billion in a greenfield manufacturing facility in Chakan. Would you please elaborate on its potential (manufacturing and employment generation-wise).
The investment in the Chakan plant was to improve the manufacturing of our smaller range of stationary oil-lubricated screw compressors as well as our portable screw-compressors.
This factory is world-class in the portfolio of Atlas Copco manufacturing facilities and is using more than just lean techniques but now digitalisation is used to allow the best quality and repeatability. Focus remains on using as many local suppliers from India and working with them to develop their facilities and skills to maintain the expected Atlas Copco quality.
We have invested in a new warehouse as well to improve the speed of deliveries and with the new solar panel installation, we can now generate up to 85 per cent of the electricity needed to produce and test our compressors.
What is the current scenario for industrial compressor industry in India?
Presently, it is bright and is expected to remain so whilst manufacturing and power industries invest. More major projects in metals and cement are expected as the demand slowly begins to grow bigger than the supply. We see many companies continuing to invest in India and with that drive, we will continue to partner with them to provide the most sustainable solutions.
How has GST and the Make in India programme affected the compressor market in the country?
GST created a slight slowdown in the market during the implementation phases in 2017. Towards the end of 2017, as companies managed to regain their cash flow, the business started showing improvements. Now, we see growing positive signs of investment and whilst the major investments are predicted to come towards the end of 2018 and 2019, GST appears to provide a positive effect.
Make in India is still being implemented in many companies and the main challenge to overcome by a lot of international companies is how to make their production facilities competitive in India and how to handle the extremely price sensitive Indian market conditions. Many global players are adopting their strategies to be competitive in India and the expected rise in foreign investment is still yet to be heavily seen across the country but signs are positive.
What is the company doing in order to encourage and build a sustainable ecosystem?
The majority of the cost of running a compressor is in the energy costs. Atlas Copco's biggest contribution to a sustainable future is to make products that are more energy efficient year by year. Investment into CFD software, a few years ago by us, is revolutionising the development of compressors and Atlas Copco's core value of innovation continues to drive the belief that there is always a better way.
In India, the investment of the solar panels in our Chakan factory has shown how we can meet the demands of our manufacturing and testing as well as give back power to the local community.
Our drive to allow clean and easily accessible water through our Water for All charity is something that many people working for Atlas Copco feel proud to contribute to.
In India, we are a strong believer in CSR and have been allocating funds to various NGO’s mainly in Maharashtra and recently, the completion of Project Jaldoot worked to provide sustainable water solutions to more than 25 villages and provide water harvesting solutions and training that will positively affect the lives of more than 50,000 people.
What has prompted an increase in the number of global players’ participation in the compressor market?
India is the largest growing economy and as such, every major player in the compressor market wants to be active in India to capitalise on this growth. As such, we now see in India that there is a growing trend in the new manufacturers with a lot of new companies entering the market. These are often being imported in as components and being assembled here in India. We see this as a rapidly moving sector of the market, but one that is normally very fragmented, unorganised and grows only to around 50-60 unit sales a year. The major companies are focused more on sustainable solutions and serving customers all over India with organised sales and service teams as well as a well-supported dealer network.
What are the challenges surfacing the Indian compressor market at present?
The major challenge remains the price sensitivity of the Indian market. Global players are seeing that to be competitive in India, they need to provide products that represent their brand promises of quality and reliability but at prices accepted in the market. There are companies that are willing to pay for the value of options that are normally associated with improved energy efficiency like variable speed drive compressors, permanent magnetic motors, cost-effective absorption dryers or even higher IE-rated motors.
The other challenge remains like many traditional engineering industries is to the right level of graduating students. A lot of investment in promotional activities to attract the right level of engineers is required and then a lot of training is required to develop them to the expected level. Atlas Copco has a strong brand reputation and we continuously invest in training and still see the need to work closely with many institutes to find the right talent which is able to deliver the expected work class solutions that our customers demand.
What role are the compressors playing in the power industry and the solutions Atlas Copco is providing for the same?
Atlas Copco has been heavily involved in the power segment in India for many years and for the thermal power generation, there are two main applications. The first is the conveying of fly-ash. For this, we use the proven and reliable technology of our single stage oil-free screw compressor. The second is the instrument air application (compressed air used for the opening and closing of the many actuator valves in a power plant). The main products here are our proven ZR oil-free screw compressor and our energy efficient MD rotary drum dryer. For both these applications, reliability and up time are the major criteria. Having a large service team that can serve companies like NTPC all over India is one of the main reasons that we believe we are the preferred choice for the power segment.