Minding the gap, profitably

Minding the gap, profitably

Today’s Mint has an interesting story about how sales of diesel generators have fallen by 30-50% thus far in 2010-11 (compared with a year ago). Executives in companies that make such generators attribute the decline to fewer purchases by telcos to power their cellular towers—because they aren’t putting up as many towers as they used to and are instead, sharing them with other telcos in an effort to reduce operating costs. Analysts say this is only to be expected in an industry which they believe is in a phase of consolidation.

The story is interesting not because it is about the turn in the fortunes of an entire industry, but because it could presage the fate of the business should India get its act on power generation and distribution right. From water to power to security, an entire gamut of business has sprung up in India to address gaps in infrastructure and utility services that many people in the so-called First World can take for granted. What happens to companies in these businesses if these gaps, where addressable, are actually addressed?

In the case of these generators (popularly called gensets), sales accelerated on the back of India’s mobile telecom boom that saw companies having to set up cellular towers in rural, even urban areas with patchy electricity supply. But what if India’s ambitious power generation and rural electrification programmes were a success?

To be sure, India’s poor progress on the infrastructure front should giving cheer to companies in businesses such as generators which can safely expect to be in business for many years to come. The country hasn’t met its power generation targets in the last two Five-year Plans, and will probably miss the target it has set for itself for the five-year period up to 2012. Still, studying the reaction of the generator makers to the slowdown in their own business (arising from consolidation in the telecom business) should be an interesting, if only, academic exercise.

Which businesses and companies would be affected if India were to get its act on infrastructure and utilities right? Which of them would be able to find alternative markets (or products) and stay in business? Which of them would simply go out of business?

Why is India unable to get its act right on infrastructure? Tell us at views@livemint.com