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Thursday, April 09, 2020

A Maruti For Rail

The high-speed project is a chance to replicate the success of the auto industry

Written by Mukul Saran Mathur | Updated: May 6, 2017 12:10:31 am
bullet train, shinkansen, japan bullet train, ahmedabad mumbai bullet train, indian railway, india high speed railway The HSR project creates a unique opportunity in India to replicate the success of Maruti, in the rail sector.

Transfer of Technology (ToT) and Make in India are important pillars of the Indo-Japanese agreement on the Mumbai-Ahmedabad high-speed train (HSR) project. However, these concepts pose as much of a challenge as the projects themselves. Issues like ToT in what areas, to whom and how need to be addressed.

To address which areas ToT will take place in, a detailed analysis of the components needs to be undertaken by Indian industries and entities involved. This analysis should aim to capture first, the long-term capabilities of Indian industry to supply quality critical components for the project both during the construction and operations and management (O&M) phases and second, be conducted with the objective to reduce O&M costs through the adoption of universal specifications and enhanced localisation.

To address issues related to whom ToT will involve and how complicated this might be, it is worthwhile to see how other countries have handled similar situations. China successfully expanded its HSR network by opening its market to foreign players who created large-scale joint ventures with local Chinese enterprise. The government encouraged the absorption of technology through state-sponsored companies. It initiated an excellent engineer development programme to promote HSR education. Lastly, it merged local rolling stock and rail equipment businesses to make them more competitive.

The aircraft industry in Brazil and the automotive industry in South Africa grew with substantial government support. In both cases, apart from tax incentives, the government facilitated building physical capacity, human resources and technological capabilities by establishing collaborations with foreign partners. Growth was also supported by the close interaction of industry and government research or academic institutions.

In India, the pharmaceutical sector grew as the government encouraged private drug companies to undertake collaborative research through government-owned institutions. Many successful joint ventures (JVs) were also formed in the Indian automobile sector. These JVs, with international collaboration, became a preferred route for technology acquisition. In the 1980s, the Government of India set up Maruti Udyog Ltd, a JV with Japanese car maker Suzuki having 74 per cent equity. The company achieved 65 per cent indigenisation of car components by 1991. Over four decades, the initial joint venture led the automobile revolution in the country.

JVs in manufacturing require substantial support from both government and industry associations to facilitate business-to-business interaction between Japanese and Indian industry. The capabilities of Indian industry will have to be assessed in terms of their willingness to partner Japanese counterparts and upgrading their processes to suit Japanese manufacturing companies.

Considering that the high-speed project will be a technological jump for India, a suitable mechanism needs to be firmed up which can absorb the technology and expand the capabilities of Indian industry and human resources. It will be worthwhile to create a new JV for the initial rolling stock production, between a key Japanese manufacturer and a Government of India entity. A commitment by the government to a HSR rolling stock JV will minimise risks for a foreign manufacturer, enable effective technology absorption and enhance the technological capabilities of the Indian Railways.

Technology absorption will also require large-scale skill upgradation. As part of the high-speed train project, a high-speed training centre is already proposed. While the training centre will provide required skills to Indian employees, there is a need to undertake an engineering development programme in Indian technical institutes. The growth of information technology companies is supported by a number of qualified IT engineers. A similar expansion of HSR will not be possible without skilled engineers.

The HSR project creates a unique opportunity in India to replicate the success of Maruti, in the rail sector.

The writer was head, Asia region, International Union of Railways. Views are personal

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