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KPMC, INDIA KPMC Annual Report-2015 Market Review(India, Sri Lanka, South Africa & UAE) & Activity -Ashwini Gulati 2015 NEW DELHI, INDIA KPMC Annual Report-2015 1 INDIA ..................................................................................... 6 1.1 Economy Update .................................................................................................................6 1.1.1 Market size ............................................................................................................................ 7 1.1.2 Investments/Developments .................................................................................................. 8 1.1.3 Government Initiatives ........................................................................................................ 10 1.1.4 Road Ahead ......................................................................................................................... 12 1.2 Engineering ....................................................................................................................... 14 1.2.1 Introduction......................................................................................................................... 14 1.2.2 Market size .......................................................................................................................... 16 1.2.3 Investments ......................................................................................................................... 17 1.2.4 Government Initiatives ........................................................................................................ 19 1.2.5 Road Ahead ......................................................................................................................... 21 1.3 Oil & Gas ........................................................................................................................... 22 1.3.1 Introduction......................................................................................................................... 22 1.3.2 Market Size.......................................................................................................................... 23 1.3.3 Investment .......................................................................................................................... 25 1.3.4 Government Initiatives ........................................................................................................ 27 1.3.5 Road Ahead ......................................................................................................................... 28 1.4 POWER ............................................................................................................................. 29 1.4.1 Introduction......................................................................................................................... 29 1.4.2 Market Size.......................................................................................................................... 30 1.4.3 Investment Scenario ............................................................................................................ 31 1.4.4 Government Initiatives ........................................................................................................ 33 1.4.5 The Road Ahead .................................................................................................................. 34 1.5 STEEL ................................................................................................................................ 36 1.5.1 Introduction......................................................................................................................... 36 1.5.2 Market Size.......................................................................................................................... 36 1.5.3 Investments ......................................................................................................................... 37 1.5.4 Government Initiatives ........................................................................................................ 40 1.5.5 Road ahead ......................................................................................................................... 41 1.6 Auto Component ............................................................................................................... 42 Page 2 KPMC Annual Report-2015 1.6.1 Introduction......................................................................................................................... 42 1.6.2 Market Size.......................................................................................................................... 43 1.6.3 Investments ......................................................................................................................... 44 1.6.4 Government Initiatives ........................................................................................................ 46 1.6.5 Road Ahead ......................................................................................................................... 47 1.7 Automobile Machinery ...................................................................................................... 48 1.7.1 Introduction......................................................................................................................... 48 1.7.2 Market Size.......................................................................................................................... 49 1.7.3 Investments ......................................................................................................................... 51 1.7.4 Government Initiatives ........................................................................................................ 52 1.7.5 Road Ahead ......................................................................................................................... 53 1.8 Shipping Industry .............................................................................................................. 55 1.8.1 Introduction......................................................................................................................... 55 1.8.2 Market size .......................................................................................................................... 56 1.8.3 Investments/Developments ................................................................................................ 58 1.8.4 Government Initiatives ........................................................................................................ 60 1.8.5 Road ahead ......................................................................................................................... 61 1.9 Textile Machinery ............................................................................................................. 63 1.9.1 Introduction......................................................................................................................... 63 1.9.2 Growth Drivers .................................................................................................................... 65 1.9.3 Capacity Utilization ............................................................................................................. 66 1.9.4 Exports and Imports ............................................................................................................ 67 1.9.5 Domestic Consumption ....................................................................................................... 67 1.10 Infrastructure .................................................................................................................... 69 1.10.1 Introduction......................................................................................................................... 69 1.10.2 Market Size.......................................................................................................................... 69 1.10.3 Recent Developments.......................................................................................................... 70 1.10.4 Government Initiatives ........................................................................................................ 73 1.10.5 Road Ahead ......................................................................................................................... 74 1.11 Food Processing Machinery ............................................................................................... 75 1.11.1 Introduction......................................................................................................................... 75 Page 3 KPMC Annual Report-2015 1.11.2 Market Size.......................................................................................................................... 76 1.11.3 Investments ......................................................................................................................... 77 1.11.4 Government Initiatives ........................................................................................................ 78 1.11.5 Road Ahead ......................................................................................................................... 79 1.12 1.12.1 Introduction......................................................................................................................... 80 1.12.2 Production Trends ............................................................................................................... 81 1.12.3 Government Initiatives ........................................................................................................ 83 1.13 2 Overview ............................................................................................................................. 84 1.13.2 Indian Renewable Energy Scenario ..................................................................................... 84 1.13.3 Renewable Power Installed Capacity .................................................................................. 85 1.13.4 Renewable Energy Potential ............................................................................................... 86 1.13.5 Power from Renewable ....................................................................................................... 86 SOUTH AFRICA ...................................................................... 88 Economy Update ............................................................................................................... 88 2.1.1 Overview ............................................................................................................................. 89 2.1.2 Recent Development & Prospectus ..................................................................................... 90 2.2 4 Renewable Energy ............................................................................................................. 84 1.13.1 2.1 3 Petrochemical Industry...................................................................................................... 80 Energy Sector .................................................................................................................... 91 2.2.1 Overview ............................................................................................................................. 91 2.2.2 Generation and Consumption ............................................................................................. 91 2.2.3 New and Renewable Energy ............................................................................................... 92 2.2.4 Natural Gas Sector .............................................................................................................. 92 2.2.5 Clean Coal Technologies (CCT) ............................................................................................ 93 SRI LANKA............................................................................. 94 3.1 Economy Update ............................................................................................................... 94 3.2 Power/Energy Sector......................................................................................................... 96 3.2.1 Installed Capacity ................................................................................................................ 97 3.2.2 Electricity Demand .............................................................................................................. 98 3.2.3 Energy Sector Target ........................................................................................................... 98 UAE ..................................................................................... 101 4.1 Economy Update ............................................................................................................. 101 Page 4 KPMC Annual Report-2015 5 4.2 Oil & Gas Sector .............................................................................................................. 103 4.3 Hydrocarbons Sector ....................................................................................................... 105 KPMC, India Activity ....................................................... 107 5.1 5.1.1 KOAMI-Kbiz Event, March 2015 ....................................................................................... 107 5.1.2 KOAMI Dubai Delegation, April 2015 ................................................................................ 110 5.1.3 KOFAS,May Delegation ..................................................................................................... 110 5.1.4 KOMAF, October Delegation ............................................................................................. 115 5.2 INDIA Activity.................................................................................................................. 122 5.2.1 India-Korea Import & Export ............................................................................................. 122 5.2.2 Indian EPC Vendor Registration ........................................................................................ 124 5.2.3 Indian EPC Business with Korea ........................................................................................ 125 5.2.4 Agency Agreement ............................................................................................................ 126 5.2.5 Used Machinery Market Research .................................................................................... 127 5.2.6 India Visit of CEO(KOMAX) ................................................................................................ 128 5.3 6 Delegations ..................................................................................................................... 107 Event participation .......................................................................................................... 129 5.3.1 Re-Invest India Summit ..................................................................................................... 129 5.3.2 EEPC Golden Jubilee Event ................................................................................................ 130 5.4 KOMAF 2017- India as partner country ............................................................................ 130 5.5 UAE Activity .................................................................................................................... 131 5.5.1 UAE Vendor registration ................................................................................................... 131 5.5.2 UAE EPC Business with South Korea ................................................................................. 132 India, South Korea business treaty ........................... 133 Page 5 KPMC Annual Report-2015 1 INDIA 1.1 Economy Update India is set to emerge as the world’s fastest-growing major economy by 2015 ahead of China, as per the recent report by The World Bank. India’s Gross Domestic Product (GDP) is expected to grow at 7.5 per cent in FY 2015-16, as per the report. The improvement in India’s economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, RBI's inflation focus supported by benign global commodity prices. Page 6 KPMC Annual Report-2015 1.1.1 Market size According to IMF World Economic Outlook April, 2015, India ranks seventh globally in terms of GDP at current prices and is expected to grow at 7.5 per cent in 2016. India’s economy has witnessed a significant economic growth in the recent past, growing by 7.3 per cent in FY2015 as against 6.9 per cent in FY2014. The size of the Indian economy is estimated to be at Rs 129.57 trillion (US$ 2.01 trillion) for the year 2014 compared to Rs 118.23 trillion (US$ 1.84 trillion) in 2013. The steps taken by the government in recent times have shown positive results as India's gross domestic product (GDP) at factor cost at constant (2011-12) prices 2014-15 is Rs 106.4 trillion (US$ 1.596 trillion), as against Rs 99.21 trillion (US$ 1.488 trillion) in 2013-14, registering a growth rate of 7.3 per cent. The economic activities which witnessed significant growth were ‘financing, insurance, real estate and business services’ at 11.5 per cent and ‘trade, hotels, transport, communication services’ at 10.7 per cent. According to a Goldman Sachs report released in September 2015, India could grow at a potential 8 per cent on average during from fiscal 2016 to 2020 powered by greater access to banking, technology adoption, urbanization and other structural reforms. Page 7 KPMC Annual Report-2015 1.1.2 Investments/Developments With the improvement in the economic scenario, there have been various investments leading to increased M&A activity. Some of them are as follows: India has emerged as one of the strongest performers with respect to deals across the world in terms of mergers and acquisitions (M&A). M&A activity increased in 2014 with deals worth US$ 38.1 billion being concluded, compared to US$ 28.2 billion in 2013 and US$ 35.4 billion in 2012. The total transaction value for the month of July 2015 was US$ 6.7 billion involving a total of 156 transactions, which were higher in terms of volume (47 per cent) and value (17 per cent) compared with the same period last year. In the M&A space, Energy and natural resources was the dominant sector, amounting to 38 per cent of the total transaction value. Also, Private equity (PE) investments increased 16 per cent y-o-y to US$ 2.2 billion, marking the highest activity in 2015. India’s Index of Industrial Production (IIP) grew by 4.2 per cent in July 2015 compared to 3.8 per cent in June 2015. The growth was largely due to the boost in Electricity sector growth, which was 3.5 per cent in July compared to 1.3 per cent in the previous month. India’s Consumer Price Index (CPI) inflation rate eased to 3.66 per cent in August 2015 compared to 3.69 per cent in the previous month. On the other hand, the Wholesale Price Index (WPI) inflation rate remained negative at Page 8 KPMC Annual Report-2015 4.95 per cent for the tenth consecutive month in August 2015 as against negative 4.05 per cent in the previous month, led by low crude oil prices. India's consumer confidence continues to remain highest globally for the fifth quarter in a row, riding on positive economic environment and lower inflation. According to Nielsen’s findings, India’s consumer confidence score in the second quarter of 2015 increased by one point from the previous quarter (Q1 of 2015). With a score of 131 in the second quarter (2015), India's consumer confidence score is up by three points from the corresponding period of the previous year (Q2 of 2014) when it stood at 128. India’s current account deficit reduced sharply to US$ 1.3 billion (0.2 per cent of GDP) in the fourth quarter of 2015 compared to US$ 8.3 billion (1.6 per cent of GDP) in the previous quarter, indicating a shrink in the current account deficit by 84.3 per cent quarter-on-quarter basis. India's foreign exchange reserve stood at a high of US$ 352 billion in the week up to September 18, 2015 – indicating an increase of US$ 631.5 million compared to previous week. Owing to increased investor confidence, net Foreign Direct Investment (FDI) inflows touched a record high of US$ 34.9 billion in 2015 compared to US$ 21.6 billion in the previous fiscal year, according to a Nomura report. The Page 9 KPMC Annual Report-2015 report indicated that the net FDI inflows reached to 1.7 per cent of the GDP in 2015 from 1.1 per cent in the previous fiscal year. 1.1.3 Government Initiatives Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India. Mr. Narendra Modi, Prime Minister of India, has launched the Make in India initiative with an aim to boost the manufacturing sector of Indian economy. This initiative is expected to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy. Finance Minister Mr Arun Jaitley stated that the government is looking at a number of reforms and resolution of pending tax disputes to attract investments. Currently, the manufacturing sector in India contributes over 15 per cent of the GDP. The Government of India, under the Make in India initiative, is trying to give boost to the contribution made by the manufacturing sector and aims to take it up to 25 per cent of the GDP. Following the government’s initiatives several plans for investment have been undertaken which are as follows: Page 10 KPMC Annual Report-2015 - Foxconn Technology group, Taiwan’s electronics manufacturer, is planning to manufacture Apple iPhones in India. Besides, Foxconn aims to establish 10-12 facilities in India including data centers and factories by 2020. - US-based First Solar Inc and China’s Trina Solar have plans to set up manufacturing facilities in India. Clean energy investments in India increased to US$ 7.9 billion in 2014, helping the country maintain its position as the seventh largest clean energy investor in the world. - Hyderabad is set to become the mobile phone manufacturing hub in India and is expected to create 150,000 – 200,000 jobs. Besides, the Telangana Government aims to double IT exports to Rs 1.2 trillion (US$ 18.7 billion) by 2019. - General Motors plans to invest US$1 billion in India by 2020, mainly to increase the capacity at the Talegaon plant in Maharashtra from 130,000 units a year to 220,000 by 2025. - Hyundai Heavy Industries (HHI) and Hindustan Shipyard Ltd have joined hands to build warships in India. Besides, Samsung Heavy Industries and Kochi Shipyard will be making Liquefied Natural Gas (LNG) tankers. - JSW Group plans to expand its cement production capacity to 30 MTPA from 5 MTPA by setting up grinding units closer to its steel plants. Page 11 KPMC Annual Report-2015 Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the Government of India has recently approved 23 proposals of FDI amounting to Rs 10,378.92 crore (US$ 1,567.75 million) approximately in August. The Government of India has launched an initiative to create 100 smart cities as well as Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for 500 cities with an outlay of Rs 48,000 crore (US$ 7.47 billion) and Rs 50,000 crore (US$ 7.78 billion) crore respectively. Smart cities are satellite towns of larger cities which will consist of modern infrastructure and will be digitally connected. The program was formally launched on June 25, 2015. The Phase I for Smart City Kochi (SCK) will be built on a total area of 650,000 sq. ft., having a floor space greater than 100,000 sq. ft. Besides, it will also generate a total of 6,000 direct jobs in the IT sector. 1.1.4 Road Ahead The International Monetary Fund (IMF) and the Moody’s Investors Service have forecasted that India will witness a GDP growth rate of 7.5 per cent in 2016, due to improved investor confidence, lower food prices and better policy reforms. Besides, according to mid-year update of United Nations World Economic Situation and Prospects, India is expected to grow at 7.6 per cent in 2015 and at 7.7 per cent in 2016. Page 12 KPMC Annual Report-2015 As per the latest Global Economic Prospects (GEP) report by World Bank, India is leading The World Bank’s growth chart for major economies. The Bank believes India to become the fastest growing major economy by 2015, growing at 7.5 per cent. According to Minister of State for Finance, Indian economy would continue to grow at 7 to 9 per cent and would double in size to US$ 4–5 trillion in a decade, becoming the third largest economy in absolute terms. Page 13 KPMC Annual Report-2015 1.2 Engineering 1.2.1 Introduction The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to India’s economy. Page 14 KPMC Annual Report-2015 India on its quest to become a global superpower has made significant strides towards the development of its engineering sector. The Government of India has appointed the Engineering Export Promotion Council (EEPC) as the apex body in charge of promotion of engineering goods, products and services from India. India exports transport equipment, capital goods, other machinery/equipment and light engineering products such as castings, forgings and fasteners to various countries of the world. India became a permanent member of the Washington Accord (WA) in June 2014. The country is now a part of an exclusive group of 17 countries who are permanent signatories of the WA, an elite international agreement on engineering studies and mobility of engineers. Page 15 KPMC Annual Report-2015 1.2.2 Market size The capital goods & engineering turnover in India is expected to reach US$ 125.4 billion by FY17. Engineering exports from India are expected to cross US$ 70 billion in FY 15 registering a growth of 15 per cent over the previous fiscal, as demand in key markets such as the US and the UAE is on the rise. Apart from these traditional markets, markets in Eastern and Central European countries such as Poland also hold huge promise. Page 16 KPMC Annual Report-2015 India exports its engineering goods mostly to the US and Europe, which accounts for over 60 per cent of the total exports. Recently, India's engineering exports to Japan and South Korea have also increased with shipments to these two countries rising by 16 and 60 per cent respectively. 1.2.3 Investments The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing costs, technology and innovation. The above, coupled with favourable regulatory policies and growth in the manufacturing sector has enabled several foreign players to invest in India. The foreign direct investment (FDI) inflows into India's miscellaneous mechanical and engineering industries during April 2000 to June 2015 stood Page 17 KPMC Annual Report-2015 at around US$ 4,053.72 million, as per data released by the Department of Industries Policy and Promotion (DIPP). In the recent past there have been many major investments and developments in the Indian engineering and design sector Engineers India Ltd (EIL) inked a US$ 139 million consultancy deal for a 20 million tonnes (MT) refinery and polypropylene plant being built in Nigeria by Dangote Group. Reliance Infrastructure acquired India’s largest ship building and heavy industries company Pipavav Defence and offshore Engineering Company Limited, whose infrastructure will facilitate Reliance Infrastructure to build submarines and aircraft carriers on the back of a technological alliance with Swedish defence company SAAB. Tractebel Engineering (India) acquired Cethar Consulting Engineers Ltd. (CCE), the renowned and respected engineering consultancy company. This acquisition makes Tractebel Engineering a key player in thermal tower sector in India and strongly enhances the portfolio of offerings, which include gas pipelines, Liquefied Natural Gas, hydro power sector. Bharat Forge acquired Mecanique Generate Langroise (MGL), French oil and gas machining company, via its German arm CDP Bharat Forge GmbH. Bharat Forge will benefit from MGL’s expertise in precision machining and Page 18 KPMC Annual Report-2015 other high value processes like cladding which have critical application in the oil and gas industry. Leading aircraft maker Airbus announced it has began sourcing components for almost all its jets from India and it aims to take its cumulative sourcing from India to US$ 2 billion by 2020. 1.2.4 Government Initiatives `Make in India' campaign has received the attention of several infrastructure and engineering multi nationals including GE and ThyssenKrupp, which are considering investing in the country. The Government has also awarded a record 56 defence manufacturing permits to private sector entities like Mahindra, Tata and Pipavav, etc., in the past year to set up production units for major military equipment. The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles. It has also reduced the basic customs duty from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Page 19 KPMC Annual Report-2015 The Government of India in its Union Budget 2014-15, has provided investment allowance at the rate of 15 per cent to a manufacturing company that invests more than US$ 4.17 million in any year in new plant and machinery. The government has also taken steps to improve the quality of technical education in the engineering sector by allocating a sum of Rs 500 crore (US$ 75.33 million) for setting up five more IITs in the states of Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala. Steps have also been taken to encourage companies to perform and grow better. For instance, EIL was recently conferred the Navaratna status after it fulfilled the criteria set by the Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises, Government of India. The conferred status would give the state-owned firm more financial and operational autonomy. Government of India has also taken initiatives to provide a level playing field to domestic and foreign private players bidding for the government contracts in defence sector. The government has withdrawn excise and customs duty exemptions granted to goods manufactured and supplied to the defence ministry by state-owned defence firms. These steps will also encourage participation of foreign Original Equipment Manufacturers such as Boeing, Airbus, Lockheed Martin, BAE Systems, etc., in the sector. Page 20 KPMC Annual Report-2015 1.2.5 Road Ahead The engineering sector is a growing market. Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020. With development in associated sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected to touch US$ 120 billion by 2015. Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a reality. Page 21 KPMC Annual Report-2015 1.3 Oil & Gas 1.3.1 Introduction The oil and gas sector is among the six core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. In 1997–98, the New Exploration Licensing Policy (NELP) was envisaged to fill the ever-increasing gap between India’s gas demand and supply. A recent report points out that the Indian oil and gas industry is anticipated to be worth US$ 139.8 billion by 2015. India’s economic growth is closely related to energy demand; therefore the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment. Page 22 KPMC Annual Report-2015 The Government of India has adopted several policies to fulfill the increasing demand. The government has allowed 100 per cent foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products, and refineries, among others. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India. 1.3.2 Market Size Backed by new oil fields, domestic oil output is anticipated to grow to 1 MBPD by FY16. With India developing gas-fired power stations, consumption is up more than 160 per cent since 1995. Gas consumption is likely to expand at a CAGR of 21 per cent during FY08–17. Presently, domestic production accounts for more than three-quarters of the country’s total gas consumption. Page 23 KPMC Annual Report-2015 India increasingly relies on imported LNG; the country was the fifth-largest LNG importer in 2013, accounting for 5.5 per cent of global imports. India’s LNG imports are forecasted to increase at a CAGR of 33 per cent during 2012–17. However, net imports of Natural Gas fell from 13.14 BCM in 201213 to 13.03 BCM in 2013-14. State-owned Oil and Natural Gas Corporation (ONGC) dominates the upstream segment (exploration and production), accounting for approximately 68 per cent of the country’s total oil output (FY14). Page 24 KPMC Annual Report-2015 Indian Oil Corporation Limited (IOCL) operates 11,214 km network of crude, gas and product pipelines, with a capacity of 1.6 MBPD of oil and 10 million metric standard cubic metre per day (MMSCMD) of gas. This is around 30 per cent of the nation’s total pipeline network. IOCL is the largest company, operating 10 out of 22 Indian refineries, with a combined capacity of 1.3 MBPD. 1.3.3 Investment According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted foreign direct investment (FDI) worth US$ 6.58 billion between April 2000 and June 2015. Following are some of the major investments and developments in the oil and gas sector: Page 25 KPMC Annual Report-2015 - Kirloskar Oil Engines Ltd (KOEL) and MTU Friedrichshafen, GmbH signed a memorandum of understanding (MoU) towards exclusive cooperation on the building and commissioning of emergency diesel gensets (EDG). - CDP Bharat Forge GmbH acquired 100 per cent equity shares of Mécanique Générale Langroise (MGL) for € 11.8 million (US$ 12.91 million) to consolidate Bharat Forge’s position in the oil and gas sector by enhancing service offerings and geographical reach. - Technip won a € 100 million (US$ 109.37 million) contract from ONGC to build an onshore oil and gas terminal in Andhra Pradesh. -RIL and Mexican state-owned company Petroleos Mexicanos (Pemex) entered into a memorandum of understanding (MoU) for cooperation in the oil and gas sector. - GAIL Global USA LNG LLC (GGULL) signed an agreement with the USbased WGL Midstream Inc to source gas required to produce 2.5 MT of liquefied natural gas (LNG) a year at the Cove Point Terminal in Maryland, US. - Russian oil major Rosneft and the Essar Group have entered into a contract for Rosneft to buy 49 per cent stake in Essar’s Vadinar refinery and supply 100 million tonnes of oil to Essar for the next 10 years. Page 26 KPMC Annual Report-2015 - The Carlyle Group plans to invest US$ 500 million in Magna Energy Ltd, an India-focused upstream oil and gas company that aims to secure local licenses in India with a primary focus on development and production. - RIL aims to invest US$ 31.7 billion in core oil and petrochemical business over the next 12-18 months. - Essel Group Middle East plans to acquire 60 per cent participating interest in the African oil and gas exploration projects of a Canadian publicly traded oil and gas company, Simba Energy Inc. - IOCL targets to increase the capacity of its Panipat refinery by 34 per cent, to 20.2 million tonnes by 2020 through an investment of US$ 2.38 billion. IOC also plans to increase capacity of Koyali and Mathura refineries. 1.3.4 Government Initiatives Some of the major initiatives taken by the Government of India to promote oil and gas sector are: Government of India entered into bilateral discussion with Norway to extend co-operation between the two countries in the field of oil and natural gas and hydrocarbon exploration. Page 27 KPMC Annual Report-2015 To strengthen the country`s energy security, oil diplomacy initiatives have been intensified through meaningful engagements with hydrocarbon rich countries. The Government of India launched the 'Give It Up' campaign on LPG subsidy that helped it save Rs 140 crore (US$ 21.11 million) as on 22nd July 2015 with nearly 12.6 lakh Indians registering for the cause. As per recent statistics from oil ministry, as many as 30,000 to 40,000 households are giving up LPG subsidy each day. 1.3.5 Road Ahead By 2015-16, India’s demand for gas may touch 124 MTPA against a domestic supply of 33 MTPA and higher imports of 47.2 MTPA, leaving a shortage of 44 MTPA, as per projections by the Petroleum and Natural Gas Ministry of India. Business Monitor International (BMI) predicts that India would account for 12.4 per cent of Asia-Pacific regional oil demand by 2015. Page 28 KPMC Annual Report-2015 1.4 1.4.1 POWER Introduction Power is one of the most critical components of infrastructure crucial for the economic growth and welfare of nations. The existence and development of adequate infrastructure is essential for sustained growth of the Indian economy. India’s power sector is one of the most diversified in the world. Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional sources such as wind, solar, and agricultural and domestic waste. Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. Page 29 KPMC Annual Report-2015 1.4.2 Market Size Indian power sector is undergoing a significant change that has redefined the industry outlook. Sustained economic growth continues to drive electricity demand in India. The Government of India’s focus on attaining ‘Power For All’ has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides (fuel, logistics, finances, and manpower). The Planning Commission’s 12th Five-Year Plan estimates total domestic energy production to reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22. By 2030–35, energy demand in India is projected to be the highest among all countries according to the 2014 energy outlook report by British oil giant, BP. Page 30 KPMC Annual Report-2015 As of July 2015, total thermal installed capacity stood at 191.6 gigawatt (GW), while hydro and renewable energy installed capacity totalled 41.9 GW and 36.5 GW, respectively. At 5.8 GW, nuclear energy capacity remained broadly constant compared with the previous year. Indian solar installations are forecasted to be approximately 2,200 megawatt (MW) in 2015, according to Mercom Capital Group, a global clean energy communications and consulting firm. India’s wind energy market is expected to attract investments totalling Rs 1,00,000 crore (US$ 15.7 billion) by 2020, and wind power capacity is estimated to almost double by 2020 from over 23,000 MW in June 2015, with an addition of about 4,000 MW per annum in the next five years. 1.4.3 Investment Scenario Around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India over the Page 31 KPMC Annual Report-2015 next 5–10 years. The initiative would entail an investment of about US$ 310–350 billion. Between April 2000 and May 2015, the industry attracted US$ 9.7 billion in FDI. Some major investments and developments in the Indian power sector are as follows: - Inox Wind Ltd, a subsidiary of Gujarat Fluorochemicals, a wind energy solutions provider, plans to double its manufacturing capacity to 1,600 MW at a total investment of Rs 200 crore (US$ 31.6 million) by the end of the next financial year. - The Dilip Shanghvi family, founders of Sun Pharma, acquired 23 per cent stake in Suzlon Energy, with a preferential issue of fresh equity for Rs 1,800 crore (US$ 284.8 million). - Reliance Power Ltd signed an accord with the Government of Rajasthan for developing 6,000 MW of solar power projects in the state over the next 10 years. - Hilliard Energy plans to invest Rs 3,600 crore (US$ 600 million) in Ananthapur district of Andhra Pradesh in the solar and wind power sector for the generation of 650 MW of power. Page 32 KPMC Annual Report-2015 - Solar technology provider SunEdison signed a definitive agreement to acquire Continuum Wind Energy, Singapore, with assets in India. The company, headquartered in Belmont, California, would take over 242 MW of operating wind assets that Continuum owns and operates in Maharashtra and Gujarat as well as 170 MW of assets under construction. - Japanese internet and telecommunications giant SoftBank, along with Bharti Enterprises (of Sunil Mittal) and Taiwanese manufacturing giant Foxconn, plan to invest US$ 20 billion in solar energy projects in India. 1.4.4 Government Initiatives The Government of India has identified power sector as a key sector of focus so as to promote sustained industrial growth. Some initiatives by the Government of India to boost the Indian power sector: A Joint Indo-US PACE Setter Fund has been established, with a contribution of US$ 4 million from each side to enhance clean energy cooperation. The Government of India announced a massive renewable power production target of 175,000 MW by 2022; this comprises generation of 100,000 MW from solar power, 60,000 MW from wind energy, 10,000 MW from biomass, and 5,000 MW from small hydro power projects. The Union Cabinet of India approved 15,000 MW of grid-connected solar power projects of National Thermal Power Corp Ltd (NTPC). Page 33 KPMC Annual Report-2015 The Indian Railways signed a bilateral power procurement agreement with the Damodar Valley Corporation (DVC). The agreement was signed between North Central Railway and DVC. This is the first time the Railways will directly buy power from a supplier. US Federal Agencies committed a total of US$ 4 billion for projects and equipment sourcing, one of the biggest deals for the growing renewable energy sector in India. The Reserve Bank of India (RBI) has notified to include renewable energy under priority sector lending (PSL). Therefore, banks can provide loans up to a limit of US$ 2.36 million to borrowers for renewable energy projects. 1.4.5 The Road Ahead The Indian power sector has an investment potential of Rs 15 trillion (US$ 237 billion) in the next 4–5 years, thereby providing immense opportunities in power generation, distribution, transmission, and equipment, according to Union Minister Mr Piyush Goyal. The government’s immediate goal is to generate two trillion units (kilowatt hours) of energy by 2019. This means doubling the current production capacity to provide 24x7 electricity for residential, industrial, commercial and agriculture use. Page 34 KPMC Annual Report-2015 The government had revised the National Solar Mission with the electricity production target of 100,000 MW by 2022. The government has also sought to restart the stalled hydro power projects and increase the wind energy production target to 60 GW by 2022 from the current 20 GW. Page 35 KPMC Annual Report-2015 1.5 STEEL 1.5.1 Introduction India is the world’s third-largest producer of crude steel (up from eighth in 2003) and is expected to become the second-largest producer by 2016. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India’s manufacturing output. The Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernisation and up-gradation of older plants and higher energy efficiency levels. 1.5.2 Market Size Steel production capacity of the country expanded from about 75 Million Tonnes Per Annum (MTPA) in 2009-10 to about 90.5 Million Tonnes (MT) in 2014-15. Page 36 KPMC Annual Report-2015 India produced 7.4 MT of steel in the month of June 2015 reporting the third highest production level globally which was 0.8 per cent higher than the country's steel production in the same month last year. The steel sector in India contributes nearly two per cent of the country’s gross domestic product (GDP) and employs over 600,000 people. The per capita consumption of total finished steel in the country has risen from 51 Kg in 2009-10 to about 59 Kg in 2014-15. India's steel consumption for FY 2015-16 is estimated to increase by 7 per cent, higher than 2 per cent growth last year, due to improving economic activity, as per E&Y's 'Global Steel 2015-16' report. 1.5.3 Investments Steel industry and its associated mining and metallurgy sectors have seen a number of major investments and developments in the recent past. Page 37 KPMC Annual Report-2015 According to the data released by Department of Industrial Policy and Promotion (DIPP), the Indian metallurgical industries attracted foreign direct investments (FDI) to the tune of US$ 8.7 billion, respectively, in the period April 2000–May 2015. Some of the major investments in the Indian steel industry are as follows: - Posco Korea, the multinational Korean steel company, has signed an agreement with Shree Uttam Steel and Power (part of Uttam Galva Group) to set up a steel plant at Satarda in Maharashtra. Page 38 KPMC Annual Report-2015 - SAIL plans to invest US$23.8 billion to increase the steel production to 50 MTPA by 2025. - Arcelor Mittal, world’s leading steel maker, has agreed a joint venture with Steel Authority of India Ltd (SAIL) to set up an automotive steel manufacturing facility in India. - Iran has evinced interest in strengthening ties with India in the steel and mines sector, said ambassador of the Islamic Republic of Iran, Mr Gholamreza Ansari in his conversation with Minister of Steel and Mines, Mr Narendra Singh Tomar. Public sector mining giant NMDC Ltd will set up a greenfield 3-million tonne per annum steel mill in Karnataka jointly with the state government at an estimated investment of Rs 18,000 crore (US$ 2.8 billion). Page 39 KPMC Annual Report-2015 JSW Steel has announced to add capacity to make its plant in Karnataka the largest at 20 MT by 2022. 1.5.4 Government Initiatives The Government of India is aiming to scale up steel production in the country to 300 MT by 2025 from 81 MT in 2013-14. The Ministry of Steel has announced to invest in modernisation and expansion of steel plants of Steel Authority of India Limited (SAIL) and Rashtriya Ispat Nigam Limited (RINL) in various states to enhance the crude steel production capacity in the current phase from 12.8 MTPA to 21.4 MTPA and from 3.0 MTPA to 6.3 MTPA respectively. The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs 200 crore (US$ 31.67 million). Some of the other recent government initiatives in this sector are as follows: Government has planned Special Purpose Vehicles (SPVs) with four iron ore rich states i.e., Karnataka, Jharkhand, Orissa, and Chhattisgarh to set up plants having capacity between 3 to 6 MTPA. Page 40 KPMC Annual Report-2015 SAIL plans to invest US$ 23.8 billion for increasing its production to 50 MTPA by 2025. SAIL is currently expanding its capacity from 13 MTPA to 23 MTPA, at an investment of US$ 9.6 billion. A Project Monitoring Group (PMG) has been constituted under the Cabinet Secretariat to fast track various clearances/resolution of issues related to investments of Rs 1,000 crore (US$ 152 million) or more. To increase domestic value addition and improve iron ore availability for domestic steel industry, duty on export of iron ore has been increased to 30 per cent. 1.5.5 Road ahead India is expected to become the world's second largest producer of crude steel in the next 10 years, moving up from the third position, as its capacity is projected to increase to about 300 MT by 2025. Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors. Page 41 KPMC Annual Report-2015 1.6 Auto Component 1.6.1 Introduction The Indian auto-components industry has experienced healthy growth over the last few years. Some of the factors attributable to this include: a buoyant end-user market, improved consumer sentiment and return of adequate liquidity in the financial system. Page 42 KPMC Annual Report-2015 The auto-components industry accounts for almost seven per cent of India’s Gross Domestic Product (GDP) and employs as many as 19 million people, both directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever increasing development in infrastructure have made India a favorable destination for investment. 1.6.2 Market Size The Indian auto-components industry can be broadly classified into the organized and unorganized sectors. The organized sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganized sector comprises low-valued products and caters mostly to the aftermarket category. Revenues of the Indian auto-components industry grew by 11 per cent over the past year to Rs 2.34 lakh crore (US$ 34.7 billion) in FY 14-15. This Page 43 KPMC Annual Report-2015 growth was primarily driven by healthy recovery for major Original Equipment Manufacturers (OEMs) in the medium and heavy commercial vehicles (M&HCV) and Passenger Vehicle (PV) segment. According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of US$ 66 billion by FY 15–16 with the likelihood to touch US$ 115 billion by FY 20–21 and US$ 200 billion by 2026. In addition, industry exports are projected to reach US$ 12 billion by FY 15–16 and add up to US$ 30 billion by FY20–21, further rising to US$ 80 billion by 2026. The sector’s contribution to manufacturing GDP is expected to double from 5 per cent in 2015 to 10 per cent in 2026. 1.6.3 Investments The cumulative Foreign Direct Investment (FDI) inflows into the Indian automobile industry during the period April 2000 – June 2015 were recorded Page 44 KPMC Annual Report-2015 at US$ 13.5 billion, as per data by the Department of Industrial Policy and Promotion (DIPP). Some of the major investments made into the Indian auto components sector are as follows: - Everstone Capital, a Singapore-based private equity (PE) firm, has purchased 51 per cent in Indian auto components maker SJS Enterprises for an estimated Rs 350 crore (US$ 54 million). - ArcelorMittal signed a joint venture agreement with Steel Authority of India Ltd (SAIL) to establish an automotive steel manufacturing facility in India. - German auto components maker Bosch Ltd opened its new factory at Bidadi, near Bengaluru, which is its fifth manufacturing plant in Karnataka. Page 45 KPMC Annual Report-2015 - French tyre manufacturer Michelin announced plans to produce 16,000 tonnes of truck and bus tyres from its Indian facility this year, a 45 per cent rise from last year. - Amtek Auto Ltd acquired Germany-based Scholz Edelstahl GmbH through its 100 per cent Singapore-based subsidiary Amtek Precision Engineering Pte Ltd. - MRF Ltd plans to invest Rs 4,500 crore (US$ 679.5 million) in its two factories in Tamil Nadu as part of its expansion plan. - German luxury car maker Bayerische Motoren Werke AG’s ( BMW ’s) announced it will start sourcing parts from at least seven India-based auto parts makers in response to promote ‘Make in India’. - Hero MotoCorp is investing Rs 5,000 crore (US$ 754.9 million) in five manufacturing facilities across India, Colombia and Bangladesh, to increase its annual production capacity to 12 million units by 2020. 1.6.4 Government Initiatives The Government of India’s Automotive Mission Plan (AMP) 2006–2016 has come a long way in ensuring growth for the sector. It is expected that this sector's contribution to the GDP will reach US$ 145 billion in 2016 due to the government’s special focus on exports of small cars, multi-utility vehicles (MUVs), two and three-wheelers and auto components. Separately, the Page 46 KPMC Annual Report-2015 deregulation of FDI in this sector has also helped foreign companies to make large investments in India. 1.6.5 Road Ahead The rapidly globalising world is opening up newer avenues for the transportation industry, especially while it makes a shift towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto-component manufacturers, who would need to adapt to the change via systematic research and development. The Indian auto-components industry is set to become the third largest in the world by 2025. Indian auto-component makers are well positioned to benefit from the globalization of the sector as exports potential could be increased by up to four times to US$ 40 billion by 2020. Page 47 KPMC Annual Report-2015 1.7 1.7.1 Automobile Machinery Introduction The Indian auto industry is one of the largest in the world with an annual production of 23.37 million vehicles in FY 2014-15, following a growth of 8.68 per cent over the last year. Page 48 KPMC Annual Report-2015 The automobile industry accounts for 7.1 per cent of the country's gross domestic product (GDP). The Two Wheelers segment with 81 per cent market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 13 per cent market share. India is also a prominent auto exporter and has strong export growth expectations for the near future. In FY 2014-15, automobile exports grew by 15 per cent over the last year. In addition, several initiatives by the Government of India and the major automobile players in the Indian market are expected to make India a leader in the Two Wheeler (2W) and Four Wheeler (4W) market in the world by 2020. 1.7.2 Market Size The industry produced a total 14.25 million vehicles including PVs, commercial vehicles (CVs), three wheelers (3W) and 2W in April-October 2015 as against 13.83 in April-October 2014, registering a marginal growth of 3.07 per cent year-on-year. Page 49 KPMC Annual Report-2015 The sales of PVs grew by 8.51 per cent in April-October 2015 over the same period last year. The overall CVs segment registered a growth of 8.02 per cent in April-October 2015 as compared to same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) registered very strong growth of 32.3 per cent while sales of Light Commercial Vehicles (LCVs) reduced by 5.24 per cent during April-October 2015 year-on-year. Page 50 KPMC Annual Report-2015 In April-October 2015, overall automobile exports grew by 5.78 per cent. PVs, CVs, 3Ws and 2Ws registered growth of 6.34 per cent, 17.95 per cent, 18.59 per cent and 3.22 per cent respectively in April-October 2015 over April- October 2014. 1.7.3 Investments In order to keep up with the growing demand, several auto makers have started investing heavily in various segments of the industry during the last few months. The industry has attracted foreign direct investment (FDI) worth US$ 13.48 billion during the period April 2000 to June 2015, according to data released by Department of Industrial Policy and Promotion (DIPP). Some of the major investments and developments in the automobile sector in India are as follows: ⃝ Global auto major Ford plans to manufacture in India two families of engines by 2017, a 2.2 litre diesel engine codenamed Panther, and a 1.2 litre petrol engine codenamed Dragon, which are expected to power 270,000 Ford vehicles globally. ⃝ The world’s largest air bag suppliers Autoliv Inc, Takata Corp, TRW Automotive Inc and Toyoda Gosei Co are setting up plants and increasing capacity in India. Page 51 KPMC Annual Report-2015 ⃝ General Motors plans to invest US$ 1 billion in India by 2020, mainly to increase the capacity at the Talegaon plant in Maharashtra from 130,000 units a year to 220,000 by 2025. ⃝ US-based car maker Chrysler has planned to invest Rs 3,500 crore (US$ 525 million) in Maharashtra, to manufacture Jeep Grand Cherokee model. ⃝ Mercedes Benz has decided to manufacture the GLA entry SUV in India. The company has doubled its India assembly capacity to 20,000 units per annum. ⃝ Germany-based luxury car maker Bayerische Motoren Werke AG’s (BMW) local unit has announced to procure components from seven India-based auto parts makers. ⃝ Mahindra Two Wheelers Limited (MTWL) acquired 51 per cent shares in France-based Peugeot Motorcycles (PMTC). 1.7.4 Government Initiatives The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route. Some of the major initiatives taken by the Government of India are: ⃝ Government of India aims to make automobiles manufacturing the main driver of ‘Make in India’ initiative, as it expects passenger vehicles market to Page 52 KPMC Annual Report-2015 triple to 9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26. ⃝ In the Union budget of 2015-16, the Government has announced to provide credit of Rs 850,000 crore (US$ 127.5 billion) to farmers, which is expected to boost the tractors segment sales. ⃝ The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle, and electric vehicle and also made mandatory of 5 per cent ethanol blending in petrol. The Automobile Mission Plan (AMP) for the period 2006–2016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector. 1.7.5 Road Ahead India’s automotive industry is one of the most competitive in the world. It does not cover 100 per cent of technology or components required to make a car but it is giving a good 97 per cent, as highlighted by Mr Vicent Cobee, Corporate Vice-President, Nissan Motor’s Datsun. Leading auto maker Maruti Suzuki expects Indian passenger car market to reach four million units by 2020, up from 1.97 million units in 2014-15. Page 53 KPMC Annual Report-2015 The Indian automotive sector has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product, as per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government. Page 54 KPMC Annual Report-2015 1.8 Shipping Industry 1.8.1 Introduction According to the Ministry of Shipping, around 95 per cent of India's trading by volume and 70 per cent by value is done through maritime transport. India has 12 major and 187 non-major ports. Cargo traffic, which recorded 1,052 million metric tonnes (MMT) in 2015, is expected to reach 1,758 MMT by 2017. The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce. India is the Page 55 KPMC Annual Report-2015 sixteenth largest maritime country in the world, with a coastline of about 7,517 km. The Indian Government plays an important role in supporting the ports sector. It has allowed Foreign Direct Investment (FDI) of up to 100 per cent under the automatic route for port and harbour construction and maintenance projects. It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports. 1.8.2 Market size The handling capacity of major ports in India is sufficient to match trade demand. The capacity of all the major ports as on March 31, 2015 was 871.52 MMT, compared with 581.54 MMT in cargo traffic handled through 2014–15. Thus, the capacity utilization through 2014–15 was around 66 per cent. Furthermore, as per internationally-accepted norms, the gap between traffic and capacity is usually around 30 per cent. Additionally, the government has taken several measures to improve operational efficiency through mechanization, deepening the draft and speedy evacuations. Page 56 KPMC Annual Report-2015 According to the latest provisional data from Indian Ports Association, the publicly-owned major ports in India reported healthier levels of growth in container throughput in FY 2014–15 than in the previous year. Containerhandling in FY 2015 expanded 6.7 per cent year-over-year to 8 million twenty foot-equivalent units (TEUs) from 7.46 million TEUs through the same period in 2013–14. The data also showed that containerized cargo tonnage grew 4 per cent to 119 million tons. Page 57 KPMC Annual Report-2015 In FY 2014–15, cargo volumes at the major ports expanded 4.7 per cent year-over-year to 581.3 MMT. In FY15, coal cargo traffic grew 13.4 per cent to 118.1 MMT from 104.2 MMT in FY14. With regard to commodities, fertiliser handling rose 19 per cent to 16.3 MMT in FY15. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, reported that the Indian ports sector received FDI worth US$ 1,637.3 million between April 2000 and May 2015. The ports sector was also awarded 30 projects in FY14, investing over Rs 20,000 crore (US$ 3.16 billion), which is a threefold increase over the preceding year. 1.8.3 Investments/Developments The Indian Minister for Shipping, Road Transport and Highways, Mr Nitin Gadkari, announced a massive investment in India’s ports and roads sector, which is likely to help boost the country’s economy. The Indian government plans to develop 10 coastal economic regions as part of plans to revive the country’s Sagarmala (string of ports) project. Page 58 KPMC Annual Report-2015 The zones would be converted into manufacturing hubs, supported by port modernisation projects, and could span 300–500 km of the coastline. The government is also looking to develop the inland waterway sector as an alternative to road and rail routes to transport goods to the nation’s ports and hopes to attract private investment in the sector. Jindal ITF plans to invest nearly Rs 500 crore (US$ 79.1 million) to further transloading operations in Haldia. The company, which already transports imported coal in barges to NTPC's power plants in Farakka and Kahalgaon from the Sandheads, plans to transload cargo at the deep-drafted location at Kanika Sands and transport it to Haldia. The state-run Shipping Corporation of India Ltd (SCI) is expected to purchase five vessels from the state-owned Cochin Shipyard Ltd. It is also likely to issue tenders to buy two used liquefied petroleum gas (LPG) carriers as it looks to re-start ship purchases that were frozen after poor financial performance. Maharashtra’s Jawaharlal Nehru Port Trust (JNPT) plans to build a satellite port at Wadhwan near Dahanu (bordering Gujarat), which is estimated to cost Rs 10,000 crore (US$ 1.56 billion) to build and likely to ease the congestion of ships at JNPT. Page 59 KPMC Annual Report-2015 1.8.4 Government Initiatives While unveiling plans worth Rs 10 trillion (US$ 158.2 billion) in the highway and shipping sectors by 2019. The Union Minister stated that the Government of India has set an ambitious target to convert 101 rivers across the country into waterways to promote water transport and propel economic growth. The government is considering a proposal to set up an Integrated National Waterways Transport Grid (INWTG), which covers primarily five national waterways. The INWTG plan involves the development of these national waterways with at least 2.5 metres of least available depth (LAD), upgrade/setting up of priority terminals, and establishment of road connectivity (wherever feasible) and rail and port connectivity. The Government is undertaking the following measures for the ports’ capacity expansion: ⃝ Up to 100 per cent FDI would be allowed under the automatic route for port development projects. ⃝ Income tax incentives would be allowed as per the Income Tax Act, 1961. ⃝ Bidding documents such as RFQ, RFP and Concession Agreement have been standardised. Page 60 KPMC Annual Report-2015 ⃝ The Shipping Ministry’s power to delegate finances has been enhanced to accord investment approval for PPP projects. ⃝Security clearance procedures have been streamlined. ⃝ The major ports’ developmental projects are being closely monitored. The Ministry of Shipping has formulated a Perspective Plan ‘The Maritime Agenda 2010–2020’ to develop the maritime sector. This Plan includes forecasts for traffic and capacity additions at the ports up to 2020. The estimated capacity of the ports would be 3,130 MMT by 2019–20. The Union Ministry of Shipping has chalked out a comprehensive plan to raise Rs 100,000 crore (US$ 15.6 billion) to develop ports, build ships and improve inland waterways in the country. 1.8.5 Road ahead Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance (O&M), pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments. The Planning Commission of India forecasts an investment of Rs 180,626 crore (US$ 28.6 billion) for this industry in its 12th Five Year Plan. In addition, through The Maritime Agenda 2010–2020, the Ministry of Shipping Page 61 KPMC Annual Report-2015 has set a target capacity of over 3,130 MMT by 2020, which would be driven by participation from the private sector. Non-major ports are expected to generate over 50 per cent of this capacity. Page 62 KPMC Annual Report-2015 1.9 Textile Machinery 1.9.1 Introduction The textile machinery manufacturing section is one of the largest segments of the machinery manufacturing industry in India. This industry is nearly sixty years old and has about 1000 machinery and component manufacturing units. Nearly 300 units produce complete machinery and the remaining produces various textile machinery components. The total investment in this industry is around 2000 Crores. However, not all the units work to full capacity or even the optimum capacity level. Except for the units in the spinning sector where the machineries are of international standards; in the other sectors, machinery manufacturing for weaving, knitting and wet-processing lack standard of quality and performance (in most of the cases) to compete with the European manufacturers. In the weaving sector, shuttle-less weaving machinery (rapier or jet) and in the knitting sector Page 63 KPMC Annual Report-2015 (circular knitting and flat knitting) machineries hardly have any presence in the industry. The machinery manufacturing operation takes place both in the organised and the unorganised sectors. In the organised sector, in addition to the public limited companies, machinery manufacturing is done in independent units, which have collaborative joint ventures with the foreign entities. In the decentralized sector, there are small-scale industrial units as well as tiny units engaged in the production of accessories pertaining to the textile machinery. Textile Engineering Goods Industry classified as follows: lied machines Page 64 KPMC Annual Report-2015 1.9.2 Growth Drivers Purchase of new machinery is the key growth driver of the market. One of the major growth drivers for global machinery market is the strong economic recovery; postrecession, increasing demand for textile products, and environmentally friendly fibers, and a growing demand for the developing nations. Today machinery manufacturers produce textile machineries at competitive prices, and sophisticated machines of higher speed, and production capacity. Presence of numerous small scale players also makes the machinery sector more competitive. Along with them, MNCs have also entered the global arena, taking the competition to the next level, driving companies to work on their productivity and innovation. The global demand of textile machinery is rising due to growing demand of textile industry. Today, Textile machinery sourcing is majorly done from European countries, which is relatively costly. India is strategically located from most of major textile & apparel producing countries and India has good potential to explore global opportunities & tap global market. India has to Page 65 KPMC Annual Report-2015 first focus on exports to the neighboring countries which are emerging as significant textile producers. 1.9.3 Capacity Utilization Most of the textile machinery manufacturing units are under utilization. Not all the textile machinery manufacturing units in India work to full capacity or even the optimum capacity level. Page 66 KPMC Annual Report-2015 1.9.4 Exports and Imports Indian imports for textile machinery parts and accessories are growing at a CAGR of 25% in last few years, whereas exports are very low as compare to imports, but it is also showing increasing trend and it is increasing at a CAGR of 36%. 1.9.5 Domestic Consumption Domestic demand for textile machinery is increasing at a CAGR of 17% over the year. The demand is increasing; but demand met by indigenous manufacturer is not even half of the total demand. Page 67 KPMC Annual Report-2015 The major problem in the textile machinery manufacturing industry is the lack of investment in Research and Development, except for the manufacturing units who have technical collaboration with reputed foreign companies; no progress has been made in the quality of the machinery produced. This dependence on borrowed technology and want of research has kept most of the sectors except spinning machinery sector far behind in the standard and performance of the machinery produced. This has resulted in the import of second hand machinery especially in the area of weaving thus discouraging the advancement of technology in the manufacturing of similar machinery in India. Lack of systematic fiscal support to the industry by the Government has also added to the problems. Page 68 KPMC Annual Report-2015 1.10 Infrastructure 1.10.1 Introduction Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure timebound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. 1.10.2 Market Size The Indian power sector has an investment potential of US$ 250 billion in the next 4-5 years, providing immense opportunities in power generation, distribution, transmission and equipment. The total approximate earnings of Indian Railways on originating basis during FY 2014-15 were Rs 1,57,880 crore (US$ 23.76 billion) compared with Rs 1,40,761 crore (US$ 21.19 Page 69 KPMC Annual Report-2015 billion) in FY 2013-14, registering an increase of 12.2 per cent. The total approximate earnings from goods during FY 2014-15 were Rs 1,07,074 crore (US$ 16.17 billion) compared with Rs 93,476 crore (US$ 14.07 billion) in FY 2014-15, an increase of 14.5 per cent. The number of export and import containers moving through major ports in India expanded 7.34 percent year-over-year from April to October 2014, as a result of the Modi Government’s efforts to make port development a major priority. Foreign direct investment (FDI) received in construction development sector from April 2000 to June 2015 stood at US$ 24.09 billion, according to the Department of Industrial Policy and Promotion (DIPP). 1.10.3 Recent Developments India is witnessing significant interest from international investors in the infrastructure space. Many Spanish companies are keen on collaborating Page 70 KPMC Annual Report-2015 with India on infrastructure, high speed trains, renewable energy and developing smart cities The Government of India has earmarked Rs 50,000 crore (US$ 7.53 billion) to develop 100 smart cities across the country. The Government released its list of 98 cities for the smart cities project in August 2015. The Government of India has unveiled plans to invest US$ 137 billion in its rail network over the next five years, heralding Prime Minister Narendra Modi's aggressive approach to building infrastructure needed to unlock faster economic growth. The Government of India has announced highway projects worth US$ 93 billion, which include government flagship National Highways Building Project (NHDP) with total investment of US$ 45 billion over next three years. Page 71 KPMC Annual Report-2015 International Finance Corporation (IFC), part of The World Bank group, plans to invest at least US$ 700 million in existing transport and logistics infrastructure projects in India. The World Bank has approved a US$ 650 million debt funding for a part of the eastern arm of the Dedicated Freight Corridor (DFC) project in India. Andhra Pradesh-based regional airline Air Costa will add eight aircrafts before 2016 to its existing four aircrafts. The airline, which reported an operating profit in the month of December, 2014 for the first time, said that it will be a pan-India player by the end of 2015. Government-owned Kolkata Port Trust has signed an agreement with the West Bengal government to set up a new port at Sagar Island in South 24 Parganas district. The Sagar Island port is estimated to cost Rs 11,900 crore (US$ 1.79 billion) and will be the first port to be built by the Union government in 14 years. Page 72 KPMC Annual Report-2015 Indostar Capital Finance Limited and Reliance Capital Limited have invested Rs 200 crore (US$ 30.10 million) in Alliance group, a real estate company. The consortium of institutions has invested in the holding company of Alliance group, Alliance Infrastructure Projects Private Limited. 1.10.4 Government Initiatives The Government of India is taking every possible initiative to boost the infrastructure sector. Some of the steps taken in the recent past are being discussed hereafter. The Reserve Bank of India (RBI) has notified 100 per cent foreign direct investment (FDI) under automatic route in the construction development sector. The new limit came into effect in December 2014. The Government of India has relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement. It has also liberalised the exit norms. In fact, the Cabinet has also approved the proposal to amend the FDI policy. In the Budget 2015-16, the capital outlays for roads, and railways have been increased by Rs 140.3 billion (US$ 2.11 billion) and Rs 100.5 billion (US$ 1.51 billion) respectively. India and the US have signed a memorandum of understanding (MoU) in order to establish Infrastructure Collaboration Platform. The document Page 73 KPMC Annual Report-2015 showcases the relationship between both the Governments which intend to facilitate US industry participation in Indian infrastructure projects to improve the bilateral relationship and benefit both economies. The MoU’s scope envisages efforts in the areas of Urban Development, Commerce and Industry, Railways, Road Transport and Highways, Micro Small and Medium Enterprises, Power, New & Renewable Energy, among others. 1.10.5 Road Ahead Indian port sector is poised to mark great progress in the years to come. It is forecasted that by the end of 2017 port traffic will amount to 943.06 MT for India’s major ports and 815.20 MT for its minor ports. Along with that, Indian aviation market is expected to become the third largest across the globe by 2020, according to industry estimates. The sector is projected to handle 336 million domestic and 85 million international passengers with projected investment to the tune of US$ 120 billion. Indian Aviation Industry, which currently accounts for 1.5 per cent of the gross domestic product (GDP), has been instrumental in the overall economic development of the country. Given the huge gap between potential and current air travel penetration in India, the prospects and possibilities of growth of Indian aviation market are enormous. Page 74 KPMC Annual Report-2015 1.11 Food Processing Machinery 1.11.1 Introduction The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry. Accounting for about 32 per cent of the country’s total food market, the food processing industry is one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. The total food production in India is likely to double in the next 10 years with the country’s domestic food market estimated to reach US$ 258 billion by 2015. Page 75 KPMC Annual Report-2015 The Government of India has been instrumental in the growth and development of the food processing industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licences and 100 per cent export oriented units. 1.11.2 Market Size The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. It is projected to grow at the rate of 104 per cent, touching US$ 482 billion by 2020. The Indian food processing industry accounts for 32 per cent of the country’s total food market, 14 per cent of manufacturing GDP, 13 per cent of India’s exports and six per cent of total industrial investment. Indian food service industry is expected to reach US$ 78 billion by 2018.The Indian gourmet Page 76 KPMC Annual Report-2015 food market is currently valued at US$ 1.3 billion and is growing at a CAGR of 20 per cent. It is expected to cross US$ 2.8 billion by 2015. The online food ordering business in India is in its nascent stage, but witnessing exponential growth. The organised food business in India is worth US$ 48 billion, of which food delivery is valued at US$ 15 billion. With online food delivery players like FoodPanda, Zomato, TinyOwl and Swiggy building scale through partnerships, the organised food business has a huge potential and a promising future. 1.11.3 Investments According to the data provided by the Department of Industrial Policies and Promotion (DIPP), the food processing sector in India has received around US$ 6,429.15 million worth of foreign investments during the period April 2000—June 2015. The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US$ 33 Page 77 KPMC Annual Report-2015 billion of investment over the next 10 years and also generate employment of nine million person-days. 1.11.4 Government Initiatives In order to promote food processing industries, increase level of processing and exploit the potential of domestic and international market for processed food products, Vision Document-2015 was prepared by the Ministry of Food Processing Industries. The document envisages trebling the size of investment in the processed food sector by increasing the level of processing of perishables from 6 per cent to 20 per cent, value addition from 20 per cent to 35 per cent and share in global food trade from 1.5 per cent to 3 per cent by 2015. According to the Ministry, an investment of Rs 100,000 crore (US$ 16 billion) would be required in 2015 to achieve these targets. The Ministry of Food Processing Industries has taken some new initiatives to develop the food processing sector which will also help to enhance the incomes of farmers and export of agro and processed foods among others. Page 78 KPMC Annual Report-2015 In the Budget 2015-16, a corpus of Rs. 2,000 crore (US$ 301.27 million) was created under National Bank for Agriculture and Rural Development (NABARD) to provide cheaper credit to food processing industry. Excise duty on plant and machinery for packaging and processing has been brought down to six per cent from 10 per cent. 1.11.5 Road Ahead Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry offers several benefits. It would enable adherence to stringent quality and hygiene norms and thereby protect consumer health, prepare the industry to face global competition, enhance product acceptance by overseas buyers and keep the industry technologically abreast of international best practices. Page 79 KPMC Annual Report-2015 1.12 Petrochemical Industry 1.12.1 Introduction The chemical industry is a knowledge intensive as well as capital intensive industry. It is an integral constituent of the growing Indian Industry. It includes basic chemicals and its products, petrochemicals, fertilizers, paints, varnishes, gases, soaps, perfumes and toiletry and pharmaceuticals. The diversification within the chemical industry is large and covers more than eighty thousand commercial products. Page 80 KPMC Annual Report-2015 This Industry occupies a pivotal position in meeting basic needs and improving quality of life. The industry is the main stay of industrial and agricultural development of the country and provides building blocks for several downstream industries, such as textiles, papers, paints, soaps, detergents, pharmaceuticals, varnish etc. 1.12.2 Production Trends Petrochemicals, which comprise of plastic and host of other chemicals, are downstream hydrocarbons derived from crude oil and natural gas. The value additions in the petrochemicals chain offer immense possibilities and cater to the need of textiles and clothing, agriculture, packaging, infrastructure, healthcare, furniture, automobiles, information technology, power, electronics and telecommunication, irrigation, drinking water, construction and a host of other articles of daily and specialized usage amidst other emerging areas. Page 81 KPMC Annual Report-2015 Three new petrochemical products have been included in the coverage of the products that are monitored by the Department. These new products are Polyester chips or PET chips, Polytetrafluoroethylene (covered under the group Performance Plastics and Polyol (Other-Petro based Chemicals). The production data of these new products have been collected on the basis of information supplied by the CSO. From Table II, it may be seen that the production of polymers account for around 60% of the total production of basic major petrochemicals. The chemical industry in India is a key constituent of Indian economy, accounting for about 2.11 per cent of the gross domestic product (GDP). In terms of volume of production, Indian chemical industry is the third largest producer in Asia and sixth largest in the world. Indian chemical industry generated business worth US$ 118 billion in 2014. Bulk chemicals account for 39 per cent of the Indian chemical industry, followed by agrochemicals (20.3 per cent) and specialty chemicals (19.5 per Page 82 KPMC Annual Report-2015 cent). Pharmaceuticals and biotechnology accounted for the remaining share. India’s growing per capita consumption and demand for agriculture-related chemicals offers huge scope of growth for the sector in the future. Lured by the size and returns of the Indian market, foreign firms have strengthened their presence in India. From April 2000 to May 2015, total foreign direct investment (FDI) inflows into the Indian chemicals industry (excluding fertilisers) were US$ 10.49 billion. 1.12.3 Government Initiatives The Government of India has been supportive to the sector. 100 per cent FDI is permissible in the Indian chemicals sector while manufacturing of most chemical products is de-licensed. The government has also been encouraging Research and Development (R&D) in the sector. Moreover, the government is continuously reducing the list of reserved chemical items for production in the small-scale sector, thereby facilitating greater investment in technology up-gradation and modernisation. The Government has launched the Draft National Chemical Policy, which aims to increase chemical sector’s share in country’s GDP. Page 83 KPMC Annual Report-2015 1.13 Renewable Energy 1.13.1 Overview In more ways than one, 2014-15 has been a decisive leap forward for renewable energy in India. In his inaugural address to the 1st Renewable Energy Global Investor Meet & Expo (RE-INVEST 2015) organized by the Ministry of New and Renewable Energy (MNRE) during 15-17 February, 2015, Shri Narendra Modi, Prime Minister of India, has articulated the future of renewable as “Moving from megawatt to gigawatt”. Many investors and stakeholders have evinced their interest to the sector by making their commitments of over 266 GW, in the solar energy, wind energy, small hydro and bio energy sectors. The RE-INVEST has laid a strong foundation for the penetration of renewable energy in India in the coming years. 1.13.2 Indian Renewable Energy Scenario Over the years, renewable energy sector in India has emerged as a significant player in the grid connected power generation capacity. It supports the government agenda of sustainable growth, while, emerging as Page 84 KPMC Annual Report-2015 an integral part of the solution to meet the nation’s energy needs and an essential player for energy access. At present around 60 per cent of India’s power generation capacity is based on coal. Net coal import dependency has risen from a negligible percentage in 1990 to nearly 23 per cent in 2014. This, in addition to India’s increasing dependence on imported oil, is leading to imports of around 28 per cent of India’s total energy needs Despite increase in installed capacity by more than 110 times in 62 years, India is still not in a position to meet its peak electricity demand as well as energy requirement. The peak power deficit during financial year 2001-02 was 12.2 per cent, approximately 9252 MW, however, at the end of Financial Year 2013-14, the peak power deficit decreased to the order of 4.5 per cent and in absolute terms peak deficit was at 6103 MW. 1.13.3 Renewable Power Installed Capacity As of December 2014, solar, wind, biomass and small hydropower contribute about 13 per cent of the total installed capacity for electricity. The total Page 85 KPMC Annual Report-2015 installed capacity touched the figure of 33,791 MW with wind power contributing 22,465 MW, Solar 3,062 MW, Bio energy 4,272 and Small hydro 3,990 MW. 1.13.4 Renewable Energy Potential India has an estimated renewable energy potential of about 900 GW from commercially exploitable sources viz. Wind – 100 GW (at 80 metre mast height); Small Hydro – 20 GW; Bio-energy – 25 GW; and 750 GW solar power, assuming 3% wasteland is made available. 1.13.5 Power from Renewable The gross installed capacity of grid interactive renewable power in the country stood at about 33.8 GW as on 31st December 2014. India occupies the fifth position in the world with a wind power installed capacity of 22.5 GW. During the year, 1,333 MW wind power projects were commissioned. The generation from wind power projects during the year was around 30 billion units. Page 86 KPMC Annual Report-2015 Source: Ministry of Renewable energy Page 87 KPMC Annual Report-2015 2 SOUTH AFRICA 2.1 Economy Update Annual growth in GDP fell to 1.5% in 2014, but is expected to rebound to 2.0% in 2015, as the large rand depreciation may stimulate an export-led recovery and the global economy gradually improves. The macroeconomic policy framework is expected to remain unchanged, as the governing African National Congress (ANC) won 62% of the vote in the country’s fifth national elections held in May 2014. South Africa has designed significant policies of spatial development at the local, regional and improvements in national service levels, delivery including and development decentralisation corridors, policies; but implementation has been slow and unequal across regions. Page 88 KPMC Annual Report-2015 2.1.1 Overview In 2014 South Africa’s growth continued to slow down, recording only 1.5%, the weakest performance since the global financial crisis. The nation’s economy was affected by its most protracted industrial action since the end of apartheid and significantly weak demand from trading partners. Various infrastructure gaps, notably inadequate energy supply, weak domestic demand, and anaemic investment rates also acted as a drag on growth. Nevertheless, projections based on improvements in the global economy, the successful completion of major government projects (including the edupi power station), and new investment plans, suggest that growth could rebound to 2.0% in 2015. As one of the BRICS (Brazil, Russia, India, China and South Africa) the country is well integrated into the global economy. The strong labour unrest marked a crack in the tripartite alliance between the ANC, the South African Communist Party (SACP) and the Congress of South Africa Trade Unions (COSATU). Page 89 KPMC Annual Report-2015 South Africa’s fiscal position improved with the deficit falling to 3.4% of gross domestic product (GDP), thanks to increased tax revenues, which helped offset increasing government expenditure. High wage demands by public sector unions in 2015 could pose a fiscal risk. The new administration announced a number of measures to consolidate the budget and reduce the growth of expenditure to a real rate of 1.3% over the next two years, mainly by freezing government personnel expenditure and reducing non-essential spending. 2.1.2 Recent Development & Prospectus The drop in real GDP growth in 2014 reflected a recent downward trend with GDP growth declining from 3.2% in 2011, to 2.2% in 2012 and 2.2 % in 2013. Slow growth reflected continued feebleness in South Africa’s main trading partners, in particular the European Union and China, as well as structural weaknesses, such as labour market rigidities, skills shortages and infrastructure gaps. The performance of the manufacturing sector was worsened by strong labour unrest; labour costs that were higher than productivity increases; a volatile rand within a 9.1% band during the first three quarters of 2014; and severe energy bottlenecks. Growth had a positive, though marginal, effect on job creation in 2014. In recent years, however, it has not created sufficient jobs to match the supply of low-skilled labour The manufacturing sector, in particular, saw its share in GDP decline and capital intensity levels rise. Unemployment, at 25% in the Page 90 KPMC Annual Report-2015 third quarter of 2014, remains the most pressing social and economic challenge. Youth unemployment remained extremely high at 51% in that quarter, up from 50% during the same period in 2013. Unemployment has a racial dimension, reflecting South Africa’s unequal educational background and historical legacy, and disproportionately affects “Black African” and “Coloured” population groups at 29% and 24% respectively, compared to “Asian/Indian” and “White” population groups at 12% and 7% respectively. 2.2 Energy Sector 2.2.1 Overview - South African Electricity generation is dominated by ESKOM which is state owned power company. -ESKOM has presently produces 96.7% of the power consumed in country. -ESKOM has currently 45,000 MW installed capacity. -South Africa require at least 40,000 MW new generation capacity by 2025. 2.2.2 Generation and Consumption Source: Dept of Energy, South Africa Page 91 KPMC Annual Report-2015 2.2.3 New and Renewable Energy -South Africa is relatively infant but growing Renewable energy industry. -Renewable energy may contribute nearly 18.2 GW by 2030(nearly 42% of total new installed capacity) - SA Govt. has decided to procurement global suppliers for nearly 3625 MW and also entertain their bidding. Source: Dept of Energy 2.2.4 Natural Gas Sector -South Africa has very limited resource of Natural gas. -Natural gas accounts only 3% of energy consumption. Page 92 KPMC Annual Report-2015 -Petro SA always try to source Gas-to-Liquid facility in Mossel Bay from other African Countries. -IRP(Integrated Resource Plan) 2010-2030 expects that imported gas will reach the share of 6% of total energy consumption. -A liquid natural gas (LNG) power plant is being planned for Port Elizabeth that is expected to be South Africa's most efficient and safest energy capacity expansion. 2.2.5 Clean Coal Technologies (CCT) -Eskom’s coal-fired power stations are the mainstay of the South African economy and 93% of the country’s electricity production needs are met by coal. Page 93 KPMC Annual Report-2015 3 SRI LANKA 3.1 Economy Update Sri Lanka’s economy grew by 4.4% in the first quarter of 2015 and 6.7% in the second quarter (base year 2010). Of note, however, is the fact that changes to national accounting required that Gross Domestic Product (GDP) growth projections be revised. Construction, which had driven growth for the previous 5 years, declined markedly in the first half of the year from the period a year earlier. Offsetting this in part, robust spending in consumption-related sectors such as wholesale and retail trade sustained relatively strong growth. Page 94 KPMC Annual Report-2015 Inflation slowed markedly, and Sri Lanka experienced deflation in July and August, with the consumer price index recording each month a 0.2% contraction year on year. Food inflation that was 12.0% in December 2014 fell to 2.5% in August, and the nonfood component has been deflationary since the last quarter of 2014, largely due to lower administered fuel prices. Exports fell by 0.6% over the first half of 2015 from the same period last year, rather than improving as expected in ADO 2015, while imports grew by 5.7%, higher than expected. Export performance was affected by declining exports of textiles and garments to the European Union, a ban on seafood exports to that market from January 2015, and poor performance in tea production. Rapid import growth was driven mainly by goods for consumers and investment (in particular transport equipment now with a lowered tariff), despite a marked decline in fuel imports from lower global oil prices. Remittances expanded marginally by 2.2%, while earnings from tourism Page 95 KPMC Annual Report-2015 grew by 14.0%. Reflecting weakening in the current and financial accounts, the overall balance recorded a deficit of $792 million, and gross official reserves fell at the end of June to $7.5 billion, which is cover for 4.5 months of imports. 3.2 Power/Energy Sector Sri Lanka is on the path towards becoming an internationally competitive middle-income country. This power and energy sector development plan is aligned to the country’s development drive, and has been prepared to provide affordable, high quality and reliable energy for all citizens, rich or poor, equally by conserving country’s precious natural environment, giving priority to the indigenous energy sources, and minimizing regional disparities in energy service delivery. The power and energy sector vision is to capture the full potential of all renewable and other indigenous resources in order for Sri Lanka to become a nation self-sufficient in energy. The total energy requirement of the country was around 11,125 ktoe in 2013, and the primary energy supply mainly consisted of 4,814 ktoe ( Tons Page 96 KPMC Annual Report-2015 of Oil Equivalent) of biomass, 4,582 ktoe of fossil fuels, and 1,442 ktoe of hydro. Accordingly, 56% of total energy consumption is from indigenous (biomass + hydro), and Sri Lanka has to import fossil fuels to meet the balance. 3.2.1 Installed Capacity Sri Lanka has already achieved a grid connectivity of 98%, which is commendable by South Asian standards. Current total installed power generation capacity of the country is approximately 3700 MW, consisting of 1400 MW of coal power, 525MW of oil burning thermal power, 1,356 MW of hydro power and 400 MW of non-conventional renewable energy sources such as wind, mini hydro, biomass and solar power plants. Page 97 KPMC Annual Report-2015 3.2.2 Electricity Demand The annual total electricity demand is about 10,500 GWh, comprising of 38% from domestic consumers, 39% from industries and 20% from commercial enterprises, with the balance coming from other sectors such as religious organizations and street lighting. The overall annual demand for electricity is expected to increase by around 4-6 %, a number constrained by high prices. Sri Lanka will be elevated to a regional hub by increasing its refinery capacity and utilizing the gas and condensate discoveries in the Mannar basin to create and meet domestic demand as well as to supply international oil and gas markets. 3.2.3 Energy Sector Target i) To make Sri Lanka an energy self-sufficient nation by 2030. Page 98 KPMC Annual Report-2015 ii) Increase the share of electricity generation from renewable energy sources from 50% in 2014 to 60% by 2020 and finally to meet the total demand from renewable and other indigenous energy resources by 2030. iii) Increase the electricity generation capacity of the system from 4,050 MW to 6,400 MW by 2025. iv) Generate a minimum 1,000 MW of electricity using indigenous gas resources discovered in Mannar basin by 2020. v) Increase generation capacity of low cost thermal power plants fired by natural gas and biomass to 2,000 MW to reduce the generation costs and to diversify generation mix by 2020. vii) Reduce the technical and commercial losses of the electricity transmission and distribution network from 11% to 8% by 2020. viii) Reduce annual energy demand growth by 2% through conservation and efficient use. ix) Reduce the petroleum fuel use in the transport sub-sector by 5% by introducing alternative strategies such as efficient modes of transport and electrification of transport by 2020 x) Produce the total petroleum product demand of the country through our own refinery by 2025. Page 99 KPMC Annual Report-2015 xi) Upgrade quality of Gasoline and Diesel to EURO IV and EURO III respectively by 2018. xii) Further enhance the quality and reliability of electricity and fuel supply xiii) Broadening energy sector investment windows to include bonds, debentures, public private partnerships and other such novel financial instruments. xiv) Reduce the carbon footprint of the energy sector by 5% by 2025. Page 100 KPMC Annual Report-2015 4 UAE 4.1 Economy Update The Emirates’ current macroeconomic performance and near-term outlook remain favorable. Following a strengthening of UAE real GDP growth to 5.2% in 2013, driven by the expansion in the non-oil sector, namely services and construction, strong momentum persisted in 2014, with real GDP growth forecasted at 4.3% according to the latest IMF World Economic Outlook amidst a sound non-oil sector growth coupled with a moderation of oil sector growth. Leading economic and financial indicators actually all point to continued strong non-hydrocarbon growth driven by tourism, transportation, trade and the real estate sector. Notwithstanding an influx of wealth from emerging markets such as Russia, India and China, the UAE has been the major beneficiary of private capital flows from other MENA countries following the political unrest in the Arab World since 2011. This lies within the context of a sound political stability in the UAE providing a safe haven for capital from within the region and outside of it. Page 101 KPMC Annual Report-2015 Undoubtedly, the UAE has successfully pressed ahead with economic diversification in recent years. The share of non-hydrocarbon in total GDP has continued to rise to exceed 70% today against 53% back in 2000. Likewise, non-oil exports as a percentage of total exports exceed two-thirds nowadays, the highest among oil exporting countries in the region. Dubai is now a services hub for the region, while the economic diversification strategy in Abu Dhabi continues to rely on manufacturing, petrochemicals and renewable energy. When accounting for direct obligations of the governments and official entities, consolidated public debt remains low and stable at 26% of GDP. The government has also made some progress in strengthening its economic institutions. It has established a debt management office, launched a public expenditure review and set up a medium term budget framework. However, Page 102 KPMC Annual Report-2015 the availability of macroeconomic data and disclosure of the government’s external assets is relatively poor. It is also widely believed that political institutions in the UAE are nascent compared with those of non-regional peers. 4.2 Oil & Gas Sector O&G production remains central to the UAE economy. In 2012, UAE hydrocarbon exports were $118 billion, more than half of the country’s goods exports and comprised 80 percent of government revenues. The industry is set for expansion as the UAE seeks to increase daily production from approximately 2.7 million to 3.6 million bbl/d by 2020. UAE is looking to increase production from existing O&G assets. ADNOC’s expansion of production in O&G fields, both onshore and offshore provides opportunities across a wide range of technologies and services. As costs of field exploitation rise, technologies that improve yield and drive costs down will be particularly attractive. To keep production up and to meet the 3.6 million bbl/d target by 2020. A consortium owned by ADNOC (60 percent), ExxonMobil (28 percent), and the Japan Oil Development Company (12 percent). In July 2012, ZADCO awarded an $800 million engineering, procurement, and construction contract to Abu Dhabi's National Petroleum Construction Company—along with French firm Technip—with the goal of expanding production to 750,000 bbl/d by 2016. Production from the Lower Zakum field—operated by the Abu Page 103 KPMC Annual Report-2015 Dhabi Marine Operating Company (ADMA-OPCO)—should also increase from the 300,000 bbl/d it currently produces to 425,000 bbl/d. Monetary policy remains focused on protecting the banking sector and ensuring that liquidity is sufficient but not excessive. UAE’s 3-month interbank offered rate has continued to fall, to around 0.7%, indicating high liquidity. It is estimated that inflation trended upwards but remained moderate in 2014 averaging 2.2% (1.1% in 2013), as housing prices increased further. The still benign inflation is tied to subdued global prices, subsidy schemes, the strength of the US Dollar and the ease of importing foreign labor to accommodate the increased demand for non-tradables without the need to significantly change relative prices. Page 104 KPMC Annual Report-2015 4.3 Hydrocarbons Sector The UAE’s hydrocarbons sector grew at a forecasted 3.0% in 2014, lower than the 4.8% growth rate in 2013, reflecting lower oil prices and elevated production levels. In fact, average oil prices declined by 45.6% at endDecember 2014 compared to end-December 2013 with output slightly higher in 2014. Despite the hydrocarbon sector contributing to close to one-third of the UAE’s GDP, the recent oil price decline would not dent the country’s fiscal strength as it benefits from several buffers, as per Moody’s. In fact, the country’s fiscal breakeven oil prices falling below US$ 80 and Abu Dhabi’s high reserves would continue to ease the impact of oil price cycles. The UAE’s proven oil and gas reserves were approximated at 138 billion barrels of oil equivalent in 2013. About 94% of the UAE’s crude oil reserves are located in the Emirate of Abu Dhabi, with Abu Dhabi National Oil Company (ADNOC) controlling upstream Page 105 KPMC Annual Report-2015 activity throughout the Emirate, and investing to expand production. Contributing to the company’s expansion plans, the Abu Dhabi Marine Operating Company, an affiliate of ADNOC, began initial production from the offshore Umm Lulu oilfield in October 2014. The UAE’s biggest imports of O&G equipment are boring and sinking machinery, line pipe for O&G lines, sub-sea line pipe and casing and tubing. Page 106 KPMC Annual Report-2015 5 KPMC, India Activity 5.1 Delegations 5.1.1 KOAMI-Kbiz Event, March 2015 This event was co-organized by KBIZ and KOAMI together. To participate in the event, KOAMI India office arranged below EPC/Govt organization to participate in the event- MARCH 4th~7th, 2015 Delegation [INDIA] Sr. No Company Type of Enetrprises Turn Over (US$) Website 1 GAIL India Ltd (Govt of India Undertaking) PSU-NG Transmission, LPG Pant,Petrochemicals 8 Billion 2 MECON Limted (Govt of India undertaking) Engineering and Consultant 100 Million www.meconlimited.co.in 3 Fluor Corporation EPC Company 27 Billion www.fluor.com 4 McNally Bharat Engineering Co., Ltd Engineering, Procuerement & Construction [EPC] company 340 Million www.mbecl.co.in 5 Mohan Energy Corpn Pvt Ltd EPC Company 70 Million www.mohanenergy.com www.gail.co.in 1. GAIL India Ltd GAIL (India) Ltd was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG). Keeping in mind the requirement of growth and consolidation as well as opportunities arising out of New Exploration Licensing Policy (NELP) of Government of India, the company has moved into upstream of Page 107 KPMC Annual Report-2015 gas value chain i.e. Exploration & Production and currently has stakes in 20 E&P blocks including 2 blocks overseas (in Myanmar). 2. MECON Limited MECON LIMITED is a public sector under taking under the Ministry of Steel, Government of India. It's India’s frontline engineering, consultancy and contracting organization, offering full range of services required for setting up of Project from concept to commissioning including turnkey execution. Their key areas of activities are- Metal, Power. Oil & Gas, Infrastructure etc. 3. Larsen & Toubro Ltd (L&T) Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector. More than seven decades of a strong, customer-focused approach and the continuous quest for world-class quality have enabled it to attain and sustain leadership in all its major lines of business. L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its global footprint, with offices and manufacturing facilities in multiple countries. 4. Fluor Corporation Page 108 KPMC Annual Report-2015 Fluor is one of the world’s leading publicly traded engineering, procurement, construction, maintenance, and project management companies. Fluor Daniel India Pvt. Ltd. (Fluor India) has been operating since 1995 in India, combining global strength with local focus for clients in India and around the world. Fluor services in India include Engineering, Procurement, Construction, and Project Management. Fluor offers a full range of EPC and project management services to Clients in India and globally. Fluor leverages the expertise of Fluor engineers around the globe, as well as locally. 5. McNally Bharat Engineering Company Ltd. MBE is one of the leading Engineering Companies in India engaged in providing turnkey solutions in the areas of Power, Steel, Aluminium, Material Handling, Mineral Beneficiation, Pyroprocessing, Pneumatic Handling of powdered materials including fly ash handling and high concentrate disposal, coal washing, Port cranes, Cement, Oil & Gas, civic and industrial water supply etc. 6. Mohan Energy Corporation (MEC) is a leading international contracting company engaged in executing turnkey projects in the power sector. MEC offers specialized services in the areas of Rural Electrification, Overhead Transmission Lines, Sub-station Page 109 KPMC Annual Report-2015 Projects, Solar Electrification Projects, Wind Power Projects, Mini and Micro Hydel Projects and Biomass projects etc. 5.1.2 KOAMI Dubai Delegation, April 2015 It was held in April comprising 18 Korean Delegates companies and during this event presentation seminar being organized by prestigious Middle East companies like Petrofac, CCC, Kanoo Group etc to educate Korean suppliers to help in vendor registration. Apart of B2B meeting also been organized with local Agents and interested buyer companies. More than 200 meetings been organized with Korean supplier companies. 5.1.3 KOFAS,May Delegation This Delegation consisted 9 EPC/Govt. Organizations from India and Middle East. KOFAS May 10th~15th, 2015 Delegation Sr. No Company Country Employees Turn Over (US$) Website 1 Abu Dhabi Distribution Company (ADDC – ADWEA Group), Govt Organization Abu Dhabi, UAE 1200 200 Millions www.addc.ae 2 PETROFAC INTERNATIONAL LTD. Sharjah, UAE 20000 6.3 Billion www.petrofac.com 3 CONSOLIDATED CONTRACTORS INTERNATIONAL COMPANY Abu Dhabi, UAE 125,000 Officially Not Declared www.ccc.ae Page 110 KPMC Annual Report-2015 4 Abu Dhabi Gas Industries Limited (GASCO), Govt. Organization Abu Dhabi, UAE 6000+ Officially Not Declared www.gasco.ae 5 Larsen & Toubro Ltd (L&T) Mumbai, India 75,000 14 Billion www.lntenc.com 6 MECON Limited (Govt of India undertaking) New Delhi, India 100 Million www.meconlimited.co.in 7 JINDAL STEEL & POWER LIMITED New Delhi, India 20,000 3.3 Billion www.jindalsteelpower.com 8 GAIL Gas LTD. (Govt of India) New Delhi, India 4,000 10 Billion www.gail.co.in 9 Paharpur Cooling Towers Limited New Delhi, India 1,200 300 Million www.paharpur.com All of the EPC are very famous and procure globally for their current or upcoming projects. Govt. organization publish global tender to invite bidding from interested suppliers. 1. ADDC Abu Dhabi Distribution Company (ADDC) is a public joint stock company which is a wholly owned subsidiary of Abu Dhabi Water and Electricity Authority. ADDC is responsible for distributing high quality water and electricity services to all customers in the Emirate of Abu Dhabi, excluding the Al Ain region. 2. Petrofac Page 111 KPMC Annual Report-2015 Petrofac is a leading provider of oilfield services to the international oil and gas industry. They support customers to unlock the potential of their assets on and offshore, new and old. They have a 33-year track record and have grown significantly to become a constituent of the FTSE 100 Index and have 31 offices and more than 18,000 staff worldwide, comprising more than 80 nationalities. 3. Consolidated Construction Co (CCC), Abu Dhabi CCC composed of more than 80 nationalities, in almost every country of the Middle East, Africa, Europe (including Russia), CIS countries, the Caribbean, Australia and Papua New Guinea. At the end of 2012, CCC’s total revenues were in excess of US$ 5 billion dollars. The construction activities of CCC cover fields in Heavy Civil Construction, Buildings and Civil Engineering Works, Pipelines, Slurry, Oil & Gas, and Water, Mechanical Engineering Works, Heavy and Light Industrial Plants, Marine Works, Offshore Installations, Maintenance of Mechanical Installations and Underwater Structures etc. 4. GASCO, Abu Dhabi GASCO is an ADNOC Operating Company engaged in the extraction of Natural Gas Liquids (NGL) from associated and non-associated gas. Page 112 KPMC Annual Report-2015 They play a strategic role in the UAE’s hydrocarbon chain and are a vital enabler of industrial and economic progress. Other industries in this highly integrated chain include on and off shore oil production, petrochemicals, refining, fertilizers, water and electricity agencies and infrastructure industries such as steel, cement and aluminum smelting. 5. Larsen & Toubro Ltd (L&T), India Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector. More than seven decades of a strong, customer-focused approach and the continuous quest for world-class quality have enabled it to attain and sustain leadership in all its major lines of business. L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its global footprint, with offices and manufacturing facilities in multiple countries. 6. MECON Limited, India MECON LIMITED is a public sector under taking under the Ministry of Steel, Government of India. It's India’s frontline engineering, consultancy and contracting organization, offering full range of services required for setting Page 113 KPMC Annual Report-2015 up of Project from concept to commissioning including turnkey execution. Their key areas of activities are- Metal, Power. Oil & Gas, Infrastructure etc. 7. Jindal Steel & Power Ltd, India JSPL is an industrial powerhouse with a dominant presence in steel, power, mining and infrastructure sectors. Part of the US $ 18 billion OP Jindal Group. JSPL has been rated as the second highest value creator in the world by the Boston Consulting Group. In Africa, the company has large mining interests in South Africa, Mozambique, Namibia, Botswana and Mauritania and is expanding into steel, energy and cement. In Australia, the company is investing in greenfield and brownfield resource sector companies and projects to supplement its planned steel and power projects in India and abroad. 8. GAIL India Ltd, India GAIL (India) Ltd was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG). Keeping in mind the requirement of growth and consolidation as well as opportunities arising out of New Exploration Licensing Policy (NELP) of Government of India, the company has moved into upstream of gas value chain i.e. Exploration & Production and currently has stakes in 20 E&P blocks including 2 blocks overseas (in Myanmar). 9. Paharpur Cooling Tower, India Page 114 KPMC Annual Report-2015 Paharpur is famous name in Indian Energy Sector and they have supplied to many major industries like electricity generating, petroleum refining, chemical processing, sugar, air-conditioning and refrigeration, steel and so on use a vast assortment of cooling towers and air cooled heat exchangers. 5.1.4 KOMAF, October Delegation KOMAF Oct 26th~30th, 2015 Delegation Sr. No Company Boarding Employees Turn Over (US$) Website 1 TARGET ENGINEERING & CONSTRUCTION CO LLC Abu Dhabi 4000 Not declared www.target.ae 2 The Kanoo Group Abu Dhabi 1000 450 Million www.kanooenergy.com www.kanoogroup.com 3 CONSOLIDATED CONTRACTORS COMPANY Abu Dhabi 125,000 5 Billion www.ccc.gr 4 Abu Dhabi Gas Industries Limited (GASCO) Abu Dhabi 4000+ Officially Not Declared www.gasco.ae 5 National Electric Power Co, Amman, Jordan (Govt of Jordan) Jordan 1400 Not declared www.nepco.com.jo 6 Almeer Technical Services Co. W.L.L. Kuwait 3500+ 150 Million 7 PETROFAC INTERNATIONAL LTD. Dubai 19800 6200 million www.petrofac.com 8 Al Hassan Engineering Co. Abu Dhabi Abu Dhabi 500 Million www.al-hassan.com 9 TRANS-ASIA PIPELINE SERVICES FZC. Dubai 50 20 Million www.transasiapipelines.com 10 Central Electricity Generating Company(CEGCO),Govt. Organization Jordan 1000 980 Million www.cegco.com.jo 11 Toyo Engineering India Ltd Mumbai 1,900 200 Million 12 Larsen & Toubro limited Mumbai 50,000+ 15 Billion 13 Essar Projects (India) Limited Mumbai 60,000 35 Billion 14 Godrej & Boyce Mfg Co Ltd Mumbai 11000+ 1.2 Billion 7000 www.almeer.com.kw www.toyoindia.com www.lntenc.com www.essar.com www.godrejped.com www.godrej.com Delegates Profile: 1. Larsen & Toubro Ltd (L&T) Page 115 KPMC Annual Report-2015 Larsen & Toubro Limited (L&T) is a technology, engineering, construction and manufacturing company. It is one of the largest and most respected companies in India's private sector. More than seven decades of a strong, customer-focused approach and the continuous quest for world-class quality have enabled it to attain and sustain leadership in all its major lines of business. L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly. It continues to grow its global footprint, with offices and manufacturing facilities in multiple countries. 2. GASCO, Abu Dhabi GASCO is an ADNOC Operating Company engaged in the extraction of Natural Gas Liquids (NGL) from associated and non-associated gas. They play a strategic role in the UAE’s hydrocarbon chain and are a vital enabler of industrial and economic progress. Other industries in this highly integrated chain include on and off shore oil production, petrochemicals, Page 116 KPMC Annual Report-2015 refining, fertilizers, water and electricity agencies and infrastructure industries such as steel, cement and aluminum smelting. 3. Consolidated Construction Co (CCC), Abu Dhabi CCC composed of more than 80 nationalities, in almost every country of the Middle East, Africa, Europe (including Russia), CIS countries, the Caribbean, Australia and Papua New Guinea. At the end of 2012, CCC’s total revenues were in excess of US$ 5 billion dollars. The construction activities of CCC cover fields in Heavy Civil Construction, Buildings and Civil Engineering Works, Pipelines, Slurry, Oil & Gas, and Water, Mechanical Engineering Works, Heavy and Light Industrial Plants, Marine Works, Offshore Installations, Maintenance of Mechanical Installations and Underwater Structures etc. 4. Petrofac Petrofac is a leading provider of oilfield services to the international oil and gas industry. They support customers to unlock the potential of their assets on and offshore, new and old. They have a 33-year track record and have grown significantly to become a constituent of the FTSE 100 Index and have 31 offices and more than 18,000 staff worldwide, comprising more than 80 nationalities. 5. Kanoo Group, Abu Dhabi Page 117 KPMC Annual Report-2015 The Kanoo Group, a UAE-based diversified business conglomerate, one of the largest independent, family-owned group of companies in the Gulf region with business activities across the world's most dynamic industries from Shipping, Travel, Holidays, Machinery, Engineering, Oil & Gas, Power & Industrial Projects to Exhibition services, Courier Services, Logistics, Specialty Chemicals and Business Centers and other retail and commercial activities. 6. National Electric Power Company National Electric Power Company is considered to become the natural and legal successor to Jordan Electricity Authority which was established in accordance with an independent financial and administrative existence. National Electric Power Company was restructured into three separate companies in execution of the Council of Ministers' resolution which stipulated that government should maintain the ownership of the activities of transmission, power control. Power purchase and sale and power exchange with neighboring countries. The company's headquarter is located in Amman. 7. Target Engineering Construction Company Target Engineering Construction Company LLC was established in 1975 and is a leading single source EPC contractor with stand alone specialties with Page 118 KPMC Annual Report-2015 operations in UAE, Qatar and Saudi Arabia. It is part of the Arabtec Holdings PJSC (owning 98% equity in the Company), the largest UAE based construction group. Major customers include the Oil & Gas companies such as ADNOC, ADMAOPCO, TAKREER, ADCO, ADGAS, GASCO, BOROUGE, ZADCO, Qatar Petroleum, Qatar Chemicals and Qatar Gas, Industry leaders such as ADWEA, Qatalum and EMAL. Major EPC contractors such as Petrofac, GS Engineering, Saipem, Technip, Tecnimont, Toshiba, Fisia Italimpianti, SNCLavalin, Hyundai, Siemens, and ABB contribute to the balance of the Industrial and Oil & Gas sector revenue. 8. Essar Group Essar is a multinational corporation with annual revenues of US$39 billion and investments in Steel, Energy, Infrastructure and Services. With operations in more than 29 countries, it employs over 60,000 people. Essar Energy is a world-class, low-cost, integrated energy company focused on India and positioned to capitalize on India's rapidly growing energy demand. We have an established track-record and assets worth US$12 billion across the power and oil and gas industries. The combined assets of Essar Power and Essar Oil constitute Essar Energy. 9. Toyo Engineering India Ltd Page 119 KPMC Annual Report-2015 Toyo Engineering India Ltd. (Toyo - India), an Engineering Consultancy & Contracting Company, is a perfect blend of Japanese technology and management practices with Indian expertise and ingenuity. Toyo-India is a professionally managed corporate entity undertaking EPC, PMC or EPCM project assignments in diverse sectors such as Oil & Gas Refineries, Petrochemicals, and Fertilizers, Cryogenics, Infrastructure and Industrial solutions. 10. National Electric Power Company National Electric Power Company is considered to become the natural and legal successor to Jordan Electricity Authority. NEPCO deals into various kind of Business like Planning, Constructing, developing, operating and maintaining the power system. Purchasing Electrical Energy from Various Sources and selling it to distribution companies and large consumers. 11. Almeer Technical Services Almeer offers total solutions to major process industries in a wide variety of engineering disciplines like Instrumentation, Electrical, Mechanical & Civil. The major specialized services provided by Almeer are turnkey EPC, long & short term Maintenance, Control System Integration, Field & In-House Calibration, Galvanizing, Manufacturing and Sales & Marketing. Servicing its Page 120 KPMC Annual Report-2015 client-base of notable industrial undertakings such as KOC, KNPC, PIC, MEW, JO, EQUATE, KAFCO and the Private Sectors as well. 12. Trans-Asia Pipelines Services It is a leading provider of Pipeline and Process Services to the Oil , Gas and Petrochemical industry. Established in the United Arab Emirates in 2001, the company now has over 300 employees working in 12 countries providing a variety of Pipeline and Process Pre Commissioning and Commissioning services for the Oil and Gas industry. They have successfully executed a number of projects for some renowned Oil companies and EPC Contractors through our offices in the Middle East, South East Asia and Indian Subcontinent. 13. Al-Hassan Engineering Co. Al Hassan Group is structured around 11 operating companies in Oman and UAE classified under three Strategic Business Units (SBUs), viz., Contracting, Manufacturing and Trading. Al Hassan Group also has a joint venture with Asian Paints for manufacturing Paints. AHEC has strong & unique references in key business sectors of - Oil & Gas, Petrochemicals and Refineries; Power Generation, Transmission & Distribution; Pipelines; Civil Construction & Water/Wastewater Treatment. 14. CEGCO Page 121 KPMC Annual Report-2015 CEGCO offers a wide range of operation and maintenance services utilizing solid qualified resources, maintenance contracts are tailored to match our client’s specific requirement and need, meanwhile CEGCO is working in offering one integrated Portfolio of Field Service activities, Repairs, Spare Parts Supply, Innovative Upgrades and Long Term Service Agreements (LTSA) with international firms. 5.2 INDIA Activity 5.2.1 India-Korea Import & Export India - Imports by Country (Millions of US Dollars) January - June % Share Rank Country % Change 2013 2014 2015 2013 2014 2015 - 15/14 - 248493.75 222965.51 195627.29 100.00 100.00 100.00 -12.26 0 -- World -- 1 China 24795.76 26049.23 29127.73 9.98 11.68 14.89 11.82 2 Saudi Arabia 17169.17 18286.20 10823.27 6.91 8.20 5.53 -40.81 3 United Arab Emirates 19446.05 12719.33 10302.16 7.83 5.71 5.27 -19.00 4 United States 12077.50 9940.53 10294.66 4.86 4.46 5.26 3.56 5 Switzerland 20718.12 8910.55 9264.07 8.34 4.00 4.74 3.97 6 Indonesia 7899.08 7247.70 7627.62 3.18 3.25 3.90 5.24 7 Korea, South 6375.94 6520.23 6530.89 2.57 2.92 3.34 0.16 8 Germany 6954.87 6002.85 5890.76 2.80 2.69 3.01 -1.87 9 Iraq 10685.32 8735.67 5754.24 4.30 3.92 2.94 -34.13 7095.98 8605.20 5136.29 2.86 3.86 2.63 -40.31 10 Qatar DGCI&S, Ministry of Commerce India - Export to Country (Millions of US Dollars) January - June % Share Rank Country 2013 2014 2015 2013 2014 2015 % Change - 15/14 - Page 122 KPMC Annual Report-2015 0 -- World -- 156500.51 161748.29 137271.02 100.00 100.00 100.00 -15.13 1 United States 19311.68 20519.87 20294.39 12.34 12.69 14.78 -1.10 2 United Arab Emirates 16901.73 16737.70 15756.21 10.80 10.35 11.48 -5.86 3 Hong Kong 6810.75 6571.09 6568.33 4.35 4.06 4.79 -0.04 4 China 6222.82 7082.62 5134.13 3.98 4.38 3.74 -27.51 5 United Kingdom 4763.58 4927.97 4488.62 3.04 3.05 3.27 -8.92 6 Singapore 7067.50 5372.68 3853.93 4.52 3.32 2.81 -28.27 7 Germany 3746.17 3988.93 3577.10 2.39 2.47 2.61 -10.32 8 Saudi Arabia 5910.22 6741.01 3399.26 3.78 4.17 2.48 -49.57 9 Sri Lanka 1689.59 2766.87 3326.57 1.08 1.71 2.42 20.23 10 Malaysia 2857.98 2392.27 3222.85 1.83 1.48 2.35 34.72 11 Bangladesh 2805.85 3740.31 3014.30 1.79 2.31 2.20 -19.41 12 Belgium 3174.72 3242.85 2638.31 2.03 2.01 1.92 -18.64 13 France 2480.55 2496.50 2525.80 1.59 1.54 1.84 1.17 14 Netherlands 3984.23 3366.42 2377.81 2.55 2.08 1.73 -29.37 15 Turkey 1903.78 2795.99 2293.35 1.22 1.73 1.67 -17.98 16 Japan 3257.95 3234.65 2280.75 2.08 2.00 1.66 -29.49 17 Italy 2603.98 2684.27 2209.82 1.66 1.66 1.61 -17.68 18 Vietnam 2232.09 2782.25 2172.76 1.43 1.72 1.58 -21.91 19 Nepal 1664.52 2175.49 2115.01 1.06 1.35 1.54 -2.78 20 South Africa 2469.32 2275.51 2011.00 1.58 1.41 1.47 -11.62 21 Korea, South 2093.89 2387.59 1886.75 1.34 1.48 1.37 -20.98 DGCI&S, Ministry of Commerce India - Imports Machinery (Millions of US Dollars) January - June % Share Rank Country % Change 2013 2014 2015 2013 2014 2015 - 15/14 - 1 China 4960.20 4511.23 5168.21 29.51 30.48 32.11 14.56 2 Germany 1930.29 1774.61 1742.07 11.48 11.99 10.82 -1.83 3 United States 1464.54 1331.88 1571.01 8.71 9.00 9.76 17.95 4 Japan 1561.81 1173.72 1108.19 9.29 7.93 6.88 -5.58 Page 123 KPMC Annual Report-2015 5 Korea, South 1023.71 771.52 917.61 6.09 5.21 5.70 18.93 6 7 Thailand 655.74 666.00 779.20 3.90 4.50 4.84 17.00 Italy 873.31 790.10 729.38 5.20 5.34 4.53 -7.68 8 Singapore 508.78 558.05 592.37 3.03 3.77 3.68 6.15 9 Malaysia 426.98 348.67 396.93 2.54 2.36 2.47 13.84 United Kingdom 371.84 283.25 344.87 2.21 1.91 2.14 21.76 10 DGCI&S, Ministry of Commerce 5.2.2 Indian EPC Vendor Registration INDIAN EPC COMPANIES Paharpur Cooling Towers Samjin Industrial, Seoul tech, JHM, Seoul Machinery, ACE Valves, Saperlock, Keonsae, Soosung Valve, Seewon Cellotech, Hyundai Forging, YT Valves, DJF, MS Engineering, S&S Valves, Jokwang ILI, K-Metal, YJ Flex, BS Metal 18 L&T Daeyang Rollent Co., Dongyang P&F, Duclean, E &S Tec, Greentech, GSA Co, haegang, Hitrol Co, HKR, Hyosung, Hyudai Forging, Imjin, Jain tech, Jeongwoo, Jin heung, Jokwang, ILI, Juchan Corpn, Kopecs, MOV Ltd, S & S valves, Samsung Stainless, Samjin Industrial, Seoul Tech, Soosung Valves, Taewon Co, Tongil Boiler, Unison E-Tech, Wonil Bearing, Woorim Machinery, XEONET, Youngnam Metal, Yulwon, Wonil T&I 33 TOYO India EWHA Corpn, FDC Co, Jain Technology, Wooyang ENG, Yulwon, E-Tech HKR 6 Godrej & Boyce DU Clean Co, Hyundai Forging, Juchan Corpn, Kyong Dong, Samicktech, Tesllon, TMC CO Ltd, Xeonet, Youngnam Metals 9 Jindal Power SeoulTech, Haisung Goods three, Saperlock, Seoul Machinery, Jin Heung, Soosung Valves, S&S Valves, Wonil T & I, HKR, Booyong CST 10 Essar Doonghwa, DR Valves, Gtops, Uni-Lok Corpn, Vitzro C&C, YT Valves, East Velley, Seoul Tech,Haegang Alloy, Jin Heung Matel, Hyundai Forging, MS Engineering, S&S Valves, Dukji Pumps, DJF Co, Booyang CST. 16 Angelique India S&S Valves, YT Valves, Soosung Valves, Jokwang ILI, Booyang CST, Samjin Industrial, Dong Hae, ACE Valves, Jin Heung, Daeyang Rollent 10 GAIL India DR Valves, BMT Co, Youngnam Metal, Dong Kang, Sung Won Fittings, MTS Co, Hapsung, Jeongwoo Coupling, Samjin JMC 9 Page 124 KPMC Annual Report-2015 5.2.3 Indian EPC Business with Korea EPC Business with Korea in 2015 EPC Company Business Value Korean Co Item Project Name ESP(Electro Static Precipitator) BPCL INDIAN EPC Essar Corpn, Mumbai(India) 3.19 Million USD Fluor Corpn, India KNPC (Kuwait National Petroleum Corpn) awarded 3.4 Billion Contract to Fluor, Dawoo Engineering & Hyundai jointly and Flour is continuously procuring Pressure vessels, Steel Structure, Valves, Fittings etc from Korea. Due to management policy, they not able to disclose the business value. Kalyani Steel, India 15 Million USD (Approx) POSCO 1313.4 US$ M/S. TK CORPORATION 8000 US$ 119 US$ 2406.9 US $ 3254.7 US$ 1053.4 US$ TOYO India Larsen & Toubro (L&T), India Godrej & Boyce KC Cottrell M/S. KEONSAE HIGH PRESSURE CO.,LTD. M/S. KEONSAE HIGH PRESSURE CO.,LTD. M/S. KEONSAE HIGH PRESSURE CO.,LTD. M/S. KEONSAE HIGH PRESSURE CO.,LTD. M/S. KEONSAE HIGH PRESSURE CO.,LTD. Steel Fittings & Flanges Own Purpose Petronet LNG Ltd., Dahej, Gujarat (Project name PDR3) Petronet LNG Ltd., Dahej, Gujarat (Project name PDR3) Petronet LNG Ltd., Dahej, Gujarat (Project name PDR3) Petronet LNG Ltd., Dahej, Gujarat (Project name PDR3) Petronet LNG Ltd., Dahej, Gujarat (Project name PDR3) Petronet LNG Ltd., Dahej, Gujarat (Project name PDR3) Gujarat State Petroleum Corporation, Mundra, Gujarat (Project Name GLMRF) 1422.52 US$ M/S. TK CORPORATION 19725.2 US$ M/S. KEONSAE HIGH PRESSURE CO.,LTD. Gujarat State Petroleum Corporation, Mundra, Gujarat (Project Name GLMRF) 4000 US$ M/S. KEONSAE HIGH PRESSURE CO.,LTD. Gujarat State Petroleum Corporation, Mundra, Gujarat (Project Name GLMRF) 112700 US$ M/S. Fluid & Thermal Engineering Co. Ltd. Gujarat State Petroleum Corporation, Mundra, Gujarat (Project Name GLMRF) 537511.51 US$ DONG YANG STEEL PIPE CO.LTD. PIPES 197952.38 US$ TK CORPORATION FITTINGS 66055 US$ SAM HWA CHEMICALS Co. Ltd Insulation Adhesive 2250 US$ TK CORPORATION FITTINGS RIL-BOP 2.33 Million US$ Taewoong Forgings Multiple 87,000 US $ KPC Metals Forgings Multiple 97,500 US $ Mysco Forgings Multiple 2.33 Million US $ DCM Corporation Precoated steel Appliance division 1.33 Million US $ D K DONGSHIN CO LTD Precoated steel Appliance division 1 Million US $ DONGKUK STEEL MILL CO LTD Precoated steel Appliance division 2.2 Million US $ LG HAUSYS LTD Precoated steel Appliance division ADIA Aviation Fuel Depot Project TAKREER ADIA Aviation Fuel Depot Project TAKREER RILJ3 - ETHYLENE CRYOGENIC PACKAGE Page 125 KPMC Annual Report-2015 5.2.4 Agency Agreement Sebotech interested to appoint an local Agent in India and they approached to get support. In that context, Amogh Consultant showed interest in Sebotech product profile. Understanding the interest, Sebotech arranged their India visit and they had successful business meeting with Amogh Consultant and concluded with Agency Agreement. Amogh and Sebotech mutually co-coordinating quite comfortably and bidding for client requirement. As per my discussion, they have more than 40 helideck live inquiries for Sebotech. JHM Co Ltd also requested for Indian Local agent and one Indian agent shown Interest in their Metallic Expansion joints. Their business communication is been started and very soon agency agreement will be signed as well. Regarding UAE market, Petrogulf works closely with ADNOC group of companies and represents many International principals for vendor registration/Inquiry generation as well. Their name has been suggested to Interested Korean Supplier companies and Wookwang Tech, Higen Motors And E&S Tec agreed to sign the Agency Agreement as well. Agency Agreement-2015 Company Name Korean Company Name Item Description Remarks Amogh Consultant, India Sebotech Helideck Solution, Material Handling Agency Agreement Kanoo Group, UAE Wookwang Tech Ltd Distribution Transfer Monitoring System Agency Agreement Page 126 KPMC Annual Report-2015 Petrogulf, UAE Higen Motors Induction Motors Agency Agreement Petrogulf, UAE E&S Tec Co., Ltd. Electric Heat Tracer Agency Agreement 5.2.5 Used Machinery Market Research It's a great initiation start new venture Korea Machine Auction(KOMAX) under joint power of MOTIE & KOAMI. Regarding this I also made primary and secondary research to understand the Indian market about used machinery. Regarding this one Korean Delegation also visited India to understand market review and interested buyers and their meeting been organized by KOTRA. Finding: 1. Used machinery is highly unorganized sector (as per Used machinery Importer, used machine tools industry its around 10 Million USD). 2. Importers presently focusing on European countries to import second hand machinery. 3. Most of the imported Industry machinery are: Lathe Machines, Milling, Drilling, Metal Cutting, CNC machines, Boring Machines, Sheet Metal Machines etc. 4. Government is working to ban imports of machinery which is more than five years old but it's not been implemented yet. 5. UMEX India(www.umexindia.com) hosted used machinery Exhibition in Mumbai in 13-15 September 2015 and next year it will be organized in New Delhi in August 2016. Nearly 224 Leading Exhibitors from 13 Countries-Belarus, China, Germany, France, India, Italy, Poland, Russia, Spain, Switzerland, UAE, UK & USA participated Page 127 KPMC Annual Report-2015 in the show. Preowned Machines from various sectors like Earthmoving, Construction, Robotics, Metal Tools, etc. 5.2.6 India Visit of CEO(KOMAX) Recently, I had meeting Mr. YU Tak-CEO(KOMAX) during his visit to India in December. Updated him about the current Indian market and recent import guidelines from Indian Govt. for used machinery. KOMAX is very much serious to sign an agreement with local companies to provide after sales(A/S) support to Korean Used machinery in India and they requested to support in finding the most prominent company in Mumbai/Chennai territory. Page 128 KPMC Annual Report-2015 5.3 Event participation 5.3.1 Re-Invest India Summit Location: New Delhi Period: 15th~17th Feb 2015 Chief Guest: Prime Minister of India Activity: Re-Invest India 2015 summit was organized in New Delhi and inaugurated by prime Minister Mr. Modi. This exhibition primary focused on Renewable energy sector and many international exhibitors participated in the event. Green Energy Commitments worth 266000 MW were received during the conference. 2800 delegates from 42 countries participated in the event. At present, renewable energy contributes over 6 percent of the total power generated in India. Union government is planning to double its share to 12 percent with an investment of 100 billion US dollar over the next four-five years. Page 129 KPMC Annual Report-2015 5.3.2 EEPC Golden Jubilee Event Period: 3rd September 2015 Location: New Delhi Chief Guest: President of India Activity: The event was organized by EEPC on their Golden Jubilee celebration and invited many prestigious exporters to award them on their remarkable contribution. 5.4 KOMAF 2017- India as partner country Regarding KOMAF 2015 event, I was closely following up with EEPC to participate in the event but due to their famous IESS show, they somehow could not able to join the event. Page 130 KPMC Annual Report-2015 EEPC is willing to visit Korea in next early month to discuss more about KOMAF 2017 partnership proposal and they are very much serious to make an effort to represent India as a partner country. 5.5 UAE Activity 5.5.1 UAE Vendor registration UAE EPC COMPANIES CCC Woosung Valve Co, Taewon, GSA Co, Tongil, Korea Coupling, Vitzrao, TMC, Daewon Cable, Jungwoo, Hitrol, Keonsae, Jin Heung, Seoul Machinery, Juchan, HKC 15 Kanoo Group Daeho Korea Co., Ltd., DJF Co, Duclean, E Wha Corpn, E&S Tec, Enertork, Eunha, Flowtech, Gtops, Hankuk Fiber, Hi- Sten Co, Hitelfi Co, Hitrol Co, Jin Heung M/C, Juchan Corpn, Kukil Inntot, Samicktech, Youngnam Metal, Yulwon 19 Daewon Cables, Hyosung Corpn, Soosung Valves 3 Al-Hassan ACE Valves, Daewon Cables, Donkang, Greentech, Hyunwoo, Keonsae, Soosung Valve, Unicon, UniLok, Woosung Valve, YT Valves 11 Petrofac Whasung Systech Co. Ltd,Sangjee Engineering, Iljin, DB Engineering, JS Technos, GTI Solution, Dong O Flang, Welliv Corp, taewon Co, Design JNK, Trivia Co, Global Leader,Shilla Fire, HKR, Megaflexon, KimChang Lee, KCL Valve, Air tax, FDC Co, Winnet 21, Kolon Engg, The Korean Methodist, Daejoo, Parker Korea, Yulim Engg, Young & Partner, GTC Technos, ACE plantec, ABB Ltd, Dongkuk Steel, Dong A, Doftech Co, Endress + Houser, Gloazure Co, Goodin, HTC Corpn, Hoerbiger, Hylok, Hwasung fastner, Inno Plant, Invensys, Kyeam tech, KPC Corpn, Krohne, Keystone Valve, KFF Co, Kookjae Intl, Myoung Jin, MOV Ltd, Nambuk Electric, Namhae Electric, PMT Korea, Peace Piping, Panasia tech, Pentair Thermal, Pana Korea, Sewon Q&tech, Samwoo tech, Total Engg, welcreon kangwon, Woojin, Yooshin E&I, Young Poong Precision, Yokogawa Electric 65 GASCO Page 131 KPMC Annual Report-2015 5.5.2 UAE EPC Business with South Korea UAE EPC Business with Korea in 2015 EPC Company Business Value Korean Co Item Project Name 850,000 US$ TK Corpn Closed Drain System, Reduced Sales Gas Water Content, Expand LP Projects Saudi Aramco 300,000 US$ SK Bend/TK Corpn Ruwais Terminal LNG Project, GASCO 50,000 US$ PK Valves Valves Closed Drain Sysytem, Saudi ARAMCO CCC, Abu Dhabi 427,947 US$ Namsung Corpn Steel Structure Laffan Refinery Ph-II Petrofac, UAE 650 Million US$ Confidentials Confidentials Confidentials Target Construction, Abu Dhabi Page 132 KPMC Annual Report-2015 6 India, South Korea business treaty In May 2015, India and South Korea inked seven agreements, including on avoidance of double taxation and formalizing consultations between National Security Councils of the two nations, to boost bilateral ties. The agreements were signed after Prime Minister Narendra Modi held talks with South Korean President Ms. Park Geun-hye. The India-South Korea Double Taxation Avoidance Convention signed in 1985 has been revised with a view to avoiding the burden of double taxation on taxpayers in the two countries. Page 133 KPMC Annual Report-2015 The two nations also agreed to cooperate in audio-visual co-production. The agreement in this regard is being signed under the provisions of IndiaSouth Korea Comprehensive Economic Partnership Agreement (CEPA) and would enable co-production of films, animation and broadcasting programmes. The pact would enable opportunities for collaboration between Indian and Korean film industries, and facilitate collaboration and exchange. The two nations also signed an MOU for cooperation between the National Security Council Secretariat of India and the Office of National Security of South Korea. This would formalise consultations between National Security Councils of the two countries in a number of areas. Another MOU was signed between the Ministry of Power and the Ministry of Trade, Industry and Energy of South Korea on cooperation in the field of electric power development and new energy industries. The agreement envisages cooperation in areas such as renewable energy, smart grids and power information and technology, transmission and distribution of electric power, energy efficiency and storage system. Page 134 KPMC Annual Report-2015 The two nations also signed an MoU to strengthen and encourage cooperation on youth matters through participation in events and activities through exchanges, international conferences, seminars, youth camps, festivals etc. The two sides also signed Framework of Cooperation (FOC) in the Field of Road Transport and Highways. The FOC envisages cooperation in areas including road policies, design and construction, road operation, road management and safety, intelligent transport systems and electronic toll collection systems. The MoU on cooperation between the two countries in the fields of maritime transport and logistics including through sharing of technologies, information and experiences, the training of seafarers, exchange of experts and port operations etc was also signed. ~~00~~ Page 135
