Gujarat Ambuja Cement, now controlled by Swiss cement giant Holcim, has always been a bit of a standout in the industry. In a business plagued by high logistics costs, GACL, as it’s popularly known, regularly outperforms the industry by turning logistics, the bete noir of manufacturing India, into a source of competitive advantage.
A widely respected finance professional who is known to be close to the founding Neotia family, Anil Singhvi, managing director of GACL, has now taken on a wider role at the company, which has integrated its operations with another Holcim company, ACC.
“As long as you don’t ask me about the cement industry I am happy,” were Singhvi’s opening remarks in a wide-ranging conversation with Mint’s Yassir A. Pitalwalla and Shilpa Shree. Excerpts:
How do you see the importance of the Union Budget changing?
My personal view is that the Union Budget is a good revenue model for the media, which is seeing an explosion of sorts. Whether it’s good for any industry or not, it’s certainly good for the media business.
But one has to rise above the smaller tinkering in the Budget. Why can’t we have a policy and a quarterly review like the Reserve Bank of India has for its monetary policy?
We also need a five-year tax policy with a half-yearly review. Can you really plan your business based on yearly changes in tax policy? I would like it very much if you had these two policies and then the FM to have a one-page Budget speech saying there’s nothing new for me to report apart from progress on the policy and finish with Jai Hind rather than 70-pages with shayri in Urdu or otherwise.
What does the government need to do to maintain sustained economic growth over the medium term?
India is becoming the centre stage of the world. So a Budget speech cannot be made to please 2-3% of our population. Sustained growth is important and we cannot sacrifice growth. After three years of high growth in the economy we need a policy for sustained growth and should not be bogged down by inflation even though we should be concerned about it.
The government is panicking over inflation and sacrificing growth instead. It’s like the CEO who worries about a quarter’s result instead of the performance over a three-five year period. The quarterly results syndrome that’s affected corporates is seeping into the Budget.
Supply constraints and very poor logistics infrastructure compounded by our inability to send goods into mandis at the right time are behind the inflation.
The Supreme Court’s decision not to allow overloading of trucks too has contributed to this. The vehicles used for transporting goods need to be rerated under the Motor Vehicles Act. Instead the transport system is being underutilized. No economy can survive a situation of underutilized transport infrastructure that has high variable and capital costs. In fact with road conditions improving, the load they can carry should be increased not reduced. Empty trucks have more accidents than fully loaded ones and there’s no empirical evidence to the contrary.
What do you think the government and private sector can do keeping in mind that 700 million Indians still survive on lessthan $2 per day?
Nutritious food for all, education, health and housing should be the primary role of the government rather than tinkering with schemes here and there.
We have a dichotomy in India, of not being able to get talented people and still having high unemployment. We are one of the few countries where retaining people is tough and salary bills are shooting up because we don’t have enough educated people. We have not put in place a correct education system to train people for employment.
The effective tax rate for corporates in India is 45%. We hope Chidambaram wants corporates to work for shareholders as well, apart from the government.
There’s such a huge amount of work to be got away with, as income-tax officers sit in judgement on fringe benefit tax issues; telling corporates what is business related expenditure. I am all for the government removing exemptions on income tax and simultaneously bringing down the corporate tax rate to 25%.
It really pains me that Infosys and Wipro don’t pay taxes and yet want the tax holiday extended by another 10 years. How can you have TCS and Wipro and Infy not paying taxes when you and me as ordinary citizens pay taxes?
What do you think the government can do to help India become the manufacturing and services hub of the world?
We should have trust. Currently there’s a deficit of trust between the government and industry.
If we all believe that India and China will provide growth to the world economy over the next 5-10 years, does it make sense to exhaust our ammunition by buying assets in lower growth economies. By implication if we do this, Indian corporate growth will fall to 2-3% per annum and Indian markets valuations will replicate those in mature markets as price earnings to growth will fall. So acquiring assets abroad should not be a fashion statement.
Good times are the most dangerous, as the biggest mistakes are committed during them. Your judgement is often clouded by the feel-good factor and you feel you can afford to make a big mistake.