Committed to achieving self-reliance for the domestic industry: L&T

Subrahmanyan’s comments come at a time when L&T still sources from the Chinese supply chain.
As political pressure mounts on firms to reduce imports from China, Larsen & Toubro (L&T) on Tuesday said it is committed to achieving self-reliance for domestic industry by creating a strong and feasible ‘Make in India’ ecosystem.

SN Subrahmanyan, chief executive officer and managing director of L&T, referring to tensions at the India-China border said, “With an unfortunate incident involving our brave soldiers at our border, sentiments are running high in the country.” He added that L&T firmly stands with the policy of manufacturing products locally through ‘Make in India’.

Subrahmanyan said the country “can drastically reduce our dependency on imported products, including those from China, by putting processes and systems in place to develop a large-scale, efficient and cost-effective domestic industrial ecosystem over a medium to long term.”

Subrahmanyan’s comments come at a time when L&T still sources from the Chinese supply chain.

In a June 9 interview with Business Standard, Subrahmanyan called the Chinese supply chain the most efficient. “We are one of the few organisations that decides the selling price first and then tries to keep its cost below that. Once we have a selling price, we are stuck with it for two-and-a-half years. We are not going to get single paise more from the client. Therefore, we go to the best and most efficient supply chain and at the moment it is from China,” he had said in the interview.

He had added that if the ‘Make in India’ campaign catches up and there are Indian manufacturers who are efficient in terms of pricing and technology, the company would look at those sources.

Besides, L&T stands to gain if Chinese companies’ bids for orders and projects are cancelled. For instance, if Shanghai Tunnel Engineering Company’s (STEC’s) bid for Delhi-Meerut Regional Rapid Transit System is cancelled, L&T as the L2 bidder might benefit. However, there is no word yet on whether the project will be awarded to the second preferred bidder. STEC is also a consortium partner for L&T for one of its Mumbai Metro project packages.
In Tuesday’s statement, L&T said it has been involved in developing a strong supply chain of local vendor partners. The company cited over 80 per cent localisation achieved in its K9 Vajra-T guns supplied to Indian Army as an example. “It (L&T) is also nurturing the local manufacturing and construction ecosystem involved in producing efficient and cost-effective substitutes for the global markets,” the company added.

Not everyone is impressed with L&T’s statement. “The statement seems to be an attempt to resonate with popular sentiment right now and nothing more,” said a senior analyst, who did not wish to be identified. The analyst said, “As a conglomerate, its Information Technology (IT), financial services, construction and power business are not dependent on sourcing from China. The company has a Japanese joint venture for power. It might have been sourcing heavily from China for its electricals business, which is to be sold to Schneider. Steel for its real estate business and other raw materials used in heavy engineering might be sourced from China to some extent.”

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