Insight – Succeeding in India’s METS sector

India is one of Australia’s most valuable economic partners. The India Economic Strategy to 2035 states ‘there is no market over the next 20 years which offers more growth opportunities for Australian business than India.’

India is Australia’s 10th largest trading partner and fifth largest export destination. Australia’s two-way trade with India was worth more than A$29 billion in 2017–18. Our merchandise exports grew almost 8% to A$16.3 billion in the same period.[i] The largest export commodity was coal (mostly coking coal for steel production) with a value of A$9.9 billion.

With its large population and increasing demand for energy and resources, India offers significant potential for Australian exporters. India’s abundant reserves of natural resources, commitment to self-sufficiency and push to modernise its mining sector will drive increased partnerships with Australian mining equipment, technologies and services (METS) providers.

However, Australian METS suppliers require patience and an understanding of cultural practices, market dynamics and price sensitivities to be successful in India.

Working with state-owned enterprises

In India, the majority of prominent mining companies (especially coal mining companies) are state-owned enterprises. These government entities have fixed purchase rules. The number of approvals required increases with the value of the product or service sought.

Often committees based on technical know-how, finance, and research and development (R&D) will meet bi-monthly or quarterly to determine procurement specifications and progress. This often means it can take a long time for new projects and new equipment or services to be approved.

The tendering process

Purchases are pre-dominantly made through tenders. Tenders require both technical and financial bids. Technical bids must conform to specifications before financial bids are opened. Suppliers that deviate from this process will be disqualified.

R&D equipment is more likely to be procured through a direct procurement process. The diagram below illustrates the process for a non-tender purchase by Coal India Ltd (CIL), the world’s largest coal production company. During 2016–17, CIL produced 554.14 million tonnes of coal – around 82% of coal production in India.[ii]

Safety approval

For any new product to be used in mines, the mine developer and operator needs to obtain a safety certificate from the Directorate General of Mining Safety (DGMS). This can take anywhere between six months to four years depending on the equipment’s value and complexity. See the standard procedure for equipment approval and the estimated time required.

Working with private sector companies

It is relatively easier to work with private companies in India. However, approvals for new equipment still require certification from DGMS. India is a very price-sensitive market so suppliers must understand import duties to ensure a mutually beneficial outcome. Value-added products are considered costly and may not find buyers among price-conscious companies.

A joint venture with a reliable private distributor is an effective way to mitigate risk, understand market processes, and negotiate delivery times and price. A distributor can also provide ongoing market development support including after-sales service.

Training and skilling opportunities

As India endeavours to reach globally accepted standards of safety, the mining industry is open to both executive and workforce training. In-country training must meet local standards, including delivering courses in the regional language and ensuring a minimum number of participants from a particular local community.

Normally, state-owned mining enterprises will release Request for Proposals (RFP) to which training providers can reply. Austrade recommends that Australian training providers form an alliance with Indian training providers to present joint responses to these requests. Austrade has prepared an Indian transnational education opportunities report, which addresses various market entry strategies that Australian training providers can adopt to enter the Indian market.

The Australia-India Centre of Excellence in Mining Technology, which is managed by Austrade in conjunction with the Indian Institute of Technology (Indian School of Mines), also facilitates connections between Australian training providers and Indian partners and organisations.

Localisation

India is a diverse country, with 29 states and seven union territories, 22 official languages and innumerable dialects.

Local representation is essential to bridge communication gaps, speed up the sales process and provide Indian customers with in-market support.

Business culture

Understanding and respecting the business culture in India is important. One of the key things to note is the negotiation process. It is normal to expect some delay while negotiating with government organisations or state-owned agencies or companies. The final agreement requires the approval of multiple stakeholders and may take a long time. It is not uncommon to receive requests for further changes in price or any other contract terms after the final agreement is reached.

The concept of time or ‘being on time’ is also different in India. A delay of 15–30 minutes is considered acceptable for a meeting; however, as a visiting Australian business you are advised to always be on time.

In other business processes, deadlines are negotiable. For example, in between a mining lease being awarded and the actual work starting, there have been delays of years, as environmental clearance takes a lot of time. On open-cut mining projects, local communities are often at risk of displacement, and this can take a while to resolve.

Dispute resolution

Almost 81% of India’s workforce work in the ‘informal’ sector, untaxed and with poor registration.[iii] It is not uncommon to find workers employed in mine sites without proper contracts.

The dispute resolution process is lengthy in India. The Indian judiciary employs around 17,000 judges [iv] and, according to the latest estimates, has some 33 million cases pending.[v] Many take years to reach judgement. Arbitration is preferred but there is no supervising arbitration institution. International arbitration alternatives have emerged, such as the Singapore International Arbitration Centre, which has a marketing office in Mumbai but no branches in the country.

Australian METS successes in India

Australian METS providers have been successful in India, including Cooee Asia, GroundProbe and AAM.

Contact Us

Austrade has offices in six major hubs: Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore. We can assist Australian METS providers with market entry strategies; introductions to potential partners and business advice. For more information, email Austrade India.

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[i]  Department of Foreign Affairs and Trade, India Country Profile

[ii]  Coal India Limited, accessed 16 March 2019

[iii]  The Wire, 18 May 2018

[iv]  Hindu Business Line, 24 September 2018

[v]  Business Today, 28 June 2018