Ifs and buts of Make in India

“Made in Germany, Made in Italy, Made in China… almost every other country’s product is now available in India. Thanks to Indian passion for international makes and preference for ‘everything foreign’. Yet standing tall in this largely supplier-driven market are the Made in India products in the cleaning segment that have evolved against stiff competition to meet the demand for products made outside India. Mohana M discusses consumer trends, challenges and competence of products manufactured in India in the wake of the Make in India mission of the Indian government.”

India has its unique consumer pattern. Demand for cleaning products of “international-make at Indian prices” or “Indian-make of international quality” has seen many global players and Indian manufacturers burn their fingers while establishing themselves in the cleaning industry. Broadly, consumers could be categorised into “those who want superior quality products for which they rely on products manufactured in Europe and those who want cheap quality products at lower prices for which they rely on China,” says Anjana Vij, Director & CEO of Kibble Enterprises, one of the leading manufacturers and exporter of cleaning tools.

“Yes, imported goods have always fascinated Indians,” says Nadeem Siddiqui, CEO, Altret Industries Pvt. Ltd, Gujarat-based manufacturer of cleaning chemicals. “But in the case of hygiene and cleaning chemicals, there is a difference in the consumption pattern. In India, it is only top 20-25% consumers are being catered by MNCs through imported products, while, the remaining 75% market is handled by Indian companies or local manufacturer,” states Nadeem.

Another factor governing Indian preferences is the availability of cheap labour against investing in mechanised cleaning, observes Varun Karthikeyan, MD-Roots Multiclean Ltd, one of the pioneers of cleaning equipment manufacturers in India. “Initially, it was an uphill task to sell the concept, let alone the product.”

Categorising further, facility service companies form a major part of the consumer segment, followed by commercial spaces and industrial establishments.

Manufacture of Made in India

Meeting the demand of two extreme sets of consumer preferences, Indian manufacturers have either evolved indigenously through R&D or through technology tie up with international companies. There are producers who import certain parts & components and assemble products besides a few who have set up manufacturing facilities in China and are importing to India.

Some of the market forces that have been working against the local manufacturers and are discouraging international manufacturers in setting shop in India are far and wide.

Costing & Chinese factor

“Brand conscious buyers are few but the market is extremely price sensitive. This means the client is quite willing to compromise on quality, unless she/he is informed of the long terms cost benefits. A lot of time actually goes in convincing the buyer of the merits of higher quality which can sometimes mean a higher price,” laments Samarth Bhatia, ASM-Cleaning Equipment, Santoni Electric Co. Pvt. Ltd., one of the oldest and leading cleaning equipment manufacturers in India.

The influence of Chinese cost factor has had a cascading affect not just on the consumer preferences but on the manufacturing end too. “Chinese products are all over the world and we face stiff competition over price. However, we are able to compete with superior quality products at affordable prices for the Indian customer,” adds Naresh Chauhan, Director-KC Green Revolution Pvt. Ltd, a Delhi-based exporter of waste receptacles.

“Due to low volumes, manufacturers are forced to use more conventional skill-intensive techniques, which may not convert into a quality product if the relevant skilled labour is not available. Some of parts cost could turn higher,” explains Samarth.

“However, the availability of basic raw materials in abundance, like plastics, aluminium, steel, rubber, etc., and the high level of skill in terms of mold development and product designing makes India a suitable manufacturing hub. As far as production costs are concerned, it is much cheaper here than in Europe or even China for that matter,” adds Debtosh Chatterjee, CEO & MD, CCASPL, a Kolkata-based facility services provider.

When it comes to products like gloves and tools, the equations in manufacturing differ. Explains Philip C Jacob, Director-Kurian Abraham Pvt. Ltd, India’s largest latex concentrate processor & latex gloves producer “As far as gloves manufacturing is concerned, it is a challenge competing against cheap imported gloves coming in from China, Sri Lanka and Malaysia. The Indian market for household and industrial gloves is very price sensitive and not at all quality conscious. As a result, a lot of low quality and B grade gloves are being imported into India. And sadly, the end consumers seem just fine with the lower quality product as long as the price is met.

“Secondly, there seems to be a large unorganised market where the gloves are being traded wherein transaction are made without bills evading taxes that are levied on these products. Again this keeps the prices of these gloves lower than what we can offer.”

“The duty and insurance alone comes up to 30%, freight cost is another 10-15% in addition to other clearance charges. In all, a total of approximately 40-45% additional cost makes the product extremely expensive. Secondly the importer has to procure goods in high quantity to reduce freight cost for which there is also need to stock up for a longer period,” adds Anjana.

Adding to this, Samarth says that considering the cost in the form of customs/import duty, there will certainly be some cost reduction in the basic cost of the product when you make in India.

It could be the other way too, says Nadeem. “Sometimes due to taxation and instability in raw material rate, homemade high quality product would be costlier than import from Europe. In case of business in bulk import could work out to be cheaper than local manufacturing.”

“To source any material from Europe is expensive. Very few people do so. India has numerous trade agreements with ASEAN countries and Sri Lanka, where there are duty rebates. Importers take advantage of this,” says Philip.

“Even if we produce high quality products comparable to European standards, our costs will be much lower than those manufactured in Europe,” explains Samir Sabu, Director, Soma Specialities Pvt. Ltd., an indigenous single disc scrubbers manufacturer. “This is due to two reasons: Frugal Indian Engineering and lower labour costs in India. However, our costs can be brought down further if we can increase automation of our production processes and production volumes like the Chinese companies can. “But the larger Indian manufacturers also have to charge additional taxes to their customers which makes their products more expensive,” he adds.

The Indian buyer’s conception that one should only pay for international or “imported” material, also adversely affects margin levels, Vinay Ruparel, Director-Innovision Hygiene, points out.

“If there are no proper margins, manufacturers do not get to enough spend money on R&D, which is most essential to stay ahead of competition. Moreover, margins are necessary for any company to reserve X% of its turnover for improvisation.”

Cost of labour is one main aspect of difference between Europe and India. Further to that, “Generally, when we compare apple to apple, we find a huge difference in costs. Our cost can be anywhere between ½ to 1/6 the costs of European machines. This is particularly true of products oriented towards industrial high performance, high durability levels,” says Samarth.

Timely Delivery

The time factor in product and spare delivery is crucial in this industry, especially in the service segment where a delay of even a single day lapse entails heavy penalty.

“Serving customers much faster and timely supply of required machines and spare parts, is always possible being a manufacturer,” asserts Varun. In case of international products, the spare parts are expensive and are not stocked. “There is a waiting period involved for the parts to get shipped from abroad,” says Varun.

“Yes, there is no waiting period of 45-60 days between order placed and delivery. There is no custom duties, no payment terms and there is no need to buy as per MOQ of overseas manufacturers with Indiamade products. One can buy any requirement at any point of time from the Indian manufacturers,” says Naresh.

“Customers with even basic technical knowledge will have more confidence in Indian engineering than on exorbitantly priced international products. In fact, customers feel better to buy an Indian product as it would be easier to get after-sales services and cheaper parts. They have realised that with deliveries of foreign spare products can sometimes take months leading to longer period of breakdown of their machines,” asserts Samir.

Customisation & Understanding

If we look back on the heavy investments made by both the government and the private sector in purchasing European cleaning products, one would agree that the selection of products and lack of customisation to suit Indian cleaning requirement have led to most of these products landing in the backyard. Indian roads, for that matter, are not of international quality or standards, nor are the road-cleaning machines manufactured abroad customised to run on such roads. Over and above, lack of awareness on the kind of product and its application has often led to wrong choice of machine.

When it comes to India-made products, there is a lot of scope for customisation to suit customer needs. “High satisfaction rates from clients using our products is a direct result of customising the product for the application in hand. Further, being the developer of the product, when we help the client troubleshoot, there is a better chance of arriving at the root cause of the problem and providing a sustainable solution,” explains Samarth.

“Again, the products can be designed and built to suit our working conditions. The level of professionalism of the operator is gradually increasing and until it reaches global standards, we may have to factor in high durability as one of the key requirements,” he adds.

“Besides, customisation, Made in India products have an added advantage as there are not many innovations internationally which get introduced in the country,” observes Debtosh. Moreover, indigenously manufactured products are much simpler and better understood. “In fact, better knowledge of products translates into a genuine ability to recommend products to clients based on the application,” emphasises Samarth.

“The lead time is relatively shorter to make a product. Having our own plantations from where we source the latex also helps in controlling the quality aspects right from the conception stages of production,” adds Philip.

Manufacturing & Durability

At the outset, there is not much of a difference in the process when it comes to making dustbins whether it is Made in China or Made in India, says Naresh. “The process is either injection molding or rotational molding. However, we make bins thicker and stronger with increased durability and strength unlike Made in China low-cost light-weight bins.

“This is in keeping with the Indian consumer behaviour, as the housekeeping team engaged in handling receptacles lack knowledge and training. There is a lot of rough handling which light-weight products will not survive. We make dustbins to suit Indian consumers,” explains Naresh.

“During our first phase of manufacturing we started with high quality products competing European market in India. We successfully convinced our clients of Indian made ‘quality’ products. In the second phase we produced medium quality products better than the cheaper products coming from China, facing pricing issues as China has mass production because of which they are easily able to provide extremely low prices,” added Anjana.

Lack of Government incentives

There are no specific incentives or encouraging policies specific to cleaning equipment as they fall in the same category as any other machinery, says Varun. Nonetheless, cleaning products, categorised in the manufacturing segment by the government, do not, in general, benefit from the incentive schemes.

“For example, the government offers relaxation to SME sector on application of Green or BSI or equivalent certificates. It is well known that such certificates or its equivalent are highly priced and all corporate/Government sector want the said certificate to execute any incentive order,” laments Nadeem.

“There are no cluster schemes from the government’s side at present in this sector – if these are made available, they can encourage investments. Skilled labour to manufacture these machines is not particularly attracted to this sector – this is a direct result of low volumes, and low level of support from the government,” adds Samarth.

“The government needs to draft a critical process strategy and plan, which will enable manufacturer to undertake and grow their business to international standards. I believe the way UNDP managed to eliminate CFC gas to protect environment by promoting new technology and granting aids to manufacturer to upgrade, the government can also plan some benefits for the manufacturers to help them grow. Furthermore, providing a platform to showcase Indian products in international market can also help Indian suppliers invest and make similar government policies. It is discouraging that the government does not even recognise our field of activities as an
industry,” complains Anjana.

Appreciating a point on Government incentives, Naresh states that there is an incentive of about 0.5 to 2% on exports. “If you make and sell in India there is no incentive, unless it is exported. This is a good initiative by the government to encourage the manufacturing system in India and we look forward for more such kind of schemes from the Modi Government.”

However, the government can come up with many schemes which can encourage investors. “For example, a capital subsidy scheme may be introduced to enable the cleaning industry to modernise itself to compete with international manufacturers. Cleaning machines can also be allowed to be classified under “Pollution Control Equipment” so that VAT benefits and other exemptions may be possible,” says Varun.

Under the Make in India mission launched by the Government, Varun suggests that the government could “consider levying excise duty at a concessional rate for the domestic sales since cleaning segment is an upcoming industry and it will help the machines to be more affordable to the end customer. Subsidies for capital investments could help companies to invest more in the cleaning industry. More incentives in the form of reimbursement of export promotion related expenditures will boost exports and earn foreign exchange for the country. The government could also in turn increase the duty drawback rates as a special case for the cleaning industry. Other aspects for buyers of cleaning equipment like concessional rate of interest from banks and hike in depreciation rates can all be considered to boost the industry indirectly.”

“Providing subsidies on capital investment needed on production equipment, tooling costs, dyes, moulds, will help raise manufacturing standards to world-class levels, and also improve the methods of quality inspection,” adds Samarth.

“As of now, the laws act as hindrance to those companies who are doing well. In fact, a lot of international manufacturers have shown interest in at least producing some of their fast selling models locally. But there is a need for government help in terms of better infrastructure and superior technical assistance. While there is no denying that things have improved in the past few years, but we are still lagging behind when compared to developed countries,” adds Samir.

In fact, there should be a financial package available for the product development or design stage, says Debtosh.

“India has an added advantage of being the largest manufacturer of plastic, cotton, aluminium and steel which are the raw material for making cleaning tools and equipment. Our skills of engineering and easy availability of manpower are also plus points. Unless Indian made cleaning tools and equipment are not promoted in the world market, we cannot create acceptance for our products. Even Pakistan has become a serious player in cleaning market as a large supplier of cotton mops and dusters,” he adds.

India has a lot to offer to the world. “From brushes made in plastic to eco-friendly coir, from polyester microfiber to cotton microfiber… The pollution caused by worn out plastic brush, polyester duster disposed in the landfill is seldom highlighted. India has the strength of natural fibre-made products, which is major shift from using plastic, aluminium and steel to jute, bamboo, coir and cotton. Not to forget, imports contributes to depreciating rupee value; manufacturing creates employment,” adds Anjana.

Suggesting methods to promote and encourage India-made products, Nadeem says, “Under Swachh Bharat initiatives, the government should make it mandatory for agencies to purchase certain percentage of cleaning & hygiene chemicals from Indian manufacturers.”

Emphasising further, Vinay says, “Our government needs to impose regulations with respect to maintaining hygiene in public places especially in washrooms. Monitoring air quality in closed public places and installing auto sanitisers in public toilets should be be made mandatory by the government. Strict rules and incentives from the authorities will give a boost to the cleanliness mission and usage of cleaning products.”

In conclusion, as the Modi government has set out with Make Clean India, Make in India and Make India Digital missions, the cleaning industry, even though makes a vital contribution, it is yet to make an impact in sync with the developments.

It is important to consider hard core facts that setting up a manufacturing plant that could produce highest quality products at par with ‘Made in Germany’ is a costly affair, as majority of the technologies & machine parts for the installation are usually imported. Further, lack of infrastructure, forces manufacturers to walk an extra mile while ensuring water, electricity and other necessities are met. This escalates the production costs.

Over the past decade, there has been an uncertainty over the demand-supply curve, be it globally or locally. It would thus be conducive to opt for an exclusive ‘Make in India’ brand based on the economy of scope rather than the Make in China based on the economy of scale. Any exclusive move by the government in favour of the cleaning industry will be the ultimate game changer, as the cleaning Industry can in some way or the other connect each and every industry. Having said so, it is time Indian manufacturers gear up to meet the global production standards and tap the opportunity to manufacture ‘International products at Indian Price’ in India.

End-User Perspective

Facility Services companies, one of the major consumers of cleaning products, have their own preferences largely governed by factors like cost and brand. S. Madan Kumar, Associate Director – Facilities Management, Travel & Hospitality, Dr Reddy’s Laboratories, Hyderabad and Deepak Uppal, Executive Director, Vatika Hotels Pvt. Ltd, New Delhi share their views

S. Madan Kumar: Service providers would always be cost conscious while picking up consumables, but it again depends on the agreement they are having with the client. Few clients who have budget constraints, just expect cleaning to be done without bothering about the standard or the products. In such case, service providers pick products at low price instead of worrying about the lifecycle of the fittings or floorings or the interiors of the client’s property.

Nowadays most of the big clients like, Dr. Reddy’s, Wipro, Cognizant, Microsoft, Amazon, BACS, Ford or Cipla are particular about the life of their property and are about the cleaning standards and consumables. Hence, the client influence plays a major role when service providers pick cleaning products and fix budgets accordingly.

In Pharma industries, there are approved SOPs in all the operations and in housekeeping too, which no one can deviate unless there is a revision in the SOP. In practice, before creating any SOP, the client organizations test the best approved products in the market (99% international brands only) before they use in their shop floor for the first time.

International brands are already tested and approved by most of the Pharma giants across world. Hence anyone starting operations in a new facility, would not be interested in trying for a new local product; instead would utilize approved international brands to test if the products are suitable to their conditions, to decide the dilution ratio and frequency, and to finally prepare the SOP and approve the cleaning procedure.

Once the SOP is done, for any change in the product or procedure, it has to go through a stringent and multi-testing process, which is very tough and time consuming. Hence, most of the clients would want to go with the existing approved international brands only irrespective of the country of manufacture, instead of going with the new local products. Service providers can’t change the product, without approval from the client.

We have many Indian manufacturer for cleaning products in the market, but many are not considered by most of the clients for the following reasons:

Tools & tackles: We can get local products at one-fourth or half the rate of international products, but there is huge difference in quality. For example, a local dry mop stick available from 25 to 60% lesser cost do not last for more than three to four months, unlike international products that are in good working condition even after 18 months of utilization.

Chemicals: Most of the properties are going for EMS and Green building certifications, requiring ‘Green seal’ chemicals (environment friendly chemicals) instead of traditional acid based chemicals. Schevaran is manufacturing Green seal chemicals in India, but their chemicals are not recognized by either NTP or IRCA or OSHA.

Also we don’t have a single manufacturer in India, who can manufacturer all the cleaning products and supply required.

Service Providers would always be keen in supplying or utilizing Made in India products, but the availability of quality product and approval from clients are always a big question mark.

Expectations from service providers would be timely availability, cost effectiveness, certified products, variety of products for various utility, etc. At present, we don’t have all these combinations with Indian manufactures for cleaning products.

Cost-consciousness

Deepak Uppal: Although the level of professional competence of a large number of housekeeping/facility management companies has improved considerably, many companies/ contractors still lack proper knowledge of scientific cleaning. Their focus is mainly on minimising the overall cost by employing cheap labour and using general purpose cleaning chemicals/prod
ucts rather than specialised ones. Clients, on the other hand, lack of knowledge regarding available choices in cleaning materials and processes, which is an inherent disadvantage that indirectly impacts the business of service providers.

Studies have shown that consumers in “developed countries” tend to have a strong preference for products manufactured in their home country. In fact, they are willing to pay a premium price for such products over similar and significantly less expensive foreign goods. The key reason cited for such preference includes patriotism, desire to support domestic job market and a strong association between products manufactured in their home country and quality. In contrast, consumers in “developing countries” such as India, continue to exhibit a preference for international products, especially those manufactured in developed economies rather than domestic products.

Indian companies need to drastically revamp their brand in India and internationally too. India is a manufacturing hub and a shift in perception about the Make in India brand is the need of the hour. This needs to be addressed by branding “Brand India” and creating awareness of the India difference in manufacturing in a similar manner as the Japanese goods stand for “lean production” and Swiss goods for “precision”. A sustained effort to market the brands across key forums nationally and internally is required. Our industry should be encouraged to support and publicize the capability improvements that are being continually achieved by R&D and various product improvement programmes in the Indian cleaning material industry.

Many new international players have entered the Indian market. The use of professional grade cleaning chemicals has increased substantially, although it is still limited mainly to high end users in various segments like hotels, healthcare, commercial and residential segments.

Indian cleaning products industry is however burdened with the inherent disadvantage of low visibility while competing with the highly organized and vibrant global industry. The implications of ever evolving global industry landscape are very important and need to be considered for the “Make in India” brand to succeed.

The Indian industry needs to maintain its cost advantage in this competitive environment with both developing and developed countries. Other factors like infrastructure and those related to business environment, including operational ease need to be developed besides creation of quality awareness regarding Indian cleaning materials, play a significant role.