GST for the transportation sector

 

GST for the transportation sector and the commercial vehicle industry will dial significant changes.

Story by: V G Ramakrishnan

GST would have rolled out by now, not relenting to the rising clamour for deferring it by a few months from a wide range of industries, and the banking sector. Apart from the deadline to implement GST, much has been discussed about its impact from the product taxation point of view; from the inflation point of view, and from the GDP growth perspective among others. The transition to the new tax regime under GST is likely to have a neutral or slightly positive impact on the commercial vehicle industry. Primary benefit would accrue from the removal of cascading taxes. Experts from diverse fields are of the opinion that GST in its current form does not differ much from the tax it will replace in terms of complexity, the number of tax slabs, and the huge burden of increased paper work.

With close to 60 per cent of the GDP contributed by the service sector, India in 2017 is largely a service driven economy. Manufacturing accounts for 25 per cent of the GDP. With GST simplifying a multitude of taxes on manufactured goods, compliance burden has increased significantly on the services sector, including the transportation sector. If the existing system requires service providers to pay service tax at a flat rate and file returns twice a year, under GST, the number of forms that are required to be filled increases to 37 in a year. This will lead to an increase in the compliance costs. Service organisations that operate in multiple states will have to register in each state that they operate in. This would be necessitated by the complex structuring of GST into Central GST and State GST. Many believe that GST is VAT 2.0 with improvements thrown in for good measure.

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GST, there is no doubt, is a game changer. Whatever may be its shortcomings as of current, it is a game changer since it creates a single market with uniform tax rates across the country. This singular change has the potential to have a wide ranging impact on the transportation sector. It also has the potential to have a wide ranging impact on transport companies and truck manufacturers for years to come. GST is not the largest transformative tax legislation to either transform or disrupt the Indian economy. For the transportation and commercial vehicle industry, GST is expected to bring about a significant change. Changes that would broadly focus on the following factors: sales volume, segmental shifts, ancilliary businesses transitioning to the organised side, and OEMs developing strong positions and revenue streams. Changes would also broadly focus on factors such as the transformation and consolidation of the transportation industry. If and how the purchasing power of large fleet operators can be increased, and the impact on brand pofitability among others.

Warehouse transformation

The imminent change GST will drive is the redesign of warehouse network. Historically companies operated warehouses in various states to avoid multiple taxation. These warehouses were in many cases sub-optimally designed. They were used only to add additional costs across the supply chain, both in-bound and out-bound. With GST doing away with the need to maintain warehouses across states, manufacturers are quickly reorganising warehouse locations by shutting down sub-optimal facilities and consolidating into larger spaced facilities. In many cases organisations are cutting down the number of warehouses they have had by more than half, or by one third of their original network strength. Companies in high velocity inventory turns sectors may still continue to operate with many warehouses since their requirement is demand driven than being tax policy driven. The outcome of such rationalisation is expected to result in lesser yet larger warehouses that are markedly automated.

While it is likely that many companies will actively create or enhance warehouse closer to the manufacturing location as this will increase their ability to stock and service low volume products and improve efficiency, the impact of this reformation in warehouse network will impact transporter route plans, frequency of routes and vehicle tonnage requirement. As more goods are transported to larger stock holding warehouses, transporters will require higher tonnage trucks since the probability of corporates transforming to full load trucks over partial loads will be high. This trend is expected to increase demand for higher tonnage trucks in the next two-to-three years. Commercial vehicle manufacturers can expect a further acceleration of growth in the segments above 25-tonnes.

New routes will emerge as companies relocate warehouses to lower cost locations; locations with larger land availability. Market access and costs in balance will also play a role. This change will over time lead to the creation of a hub and spoke model. Markets particularly in East and parts of North India (like Punjab, Haryana, Himachal Pradesh, J&K and Delhi) are likely to move faster in creation of hub and spoke models. Over the long term, vehicles with less than two-tonnes will predominantly serve last mile connectivity. Vehicles in the four and 10-tonne segment (LCVs and some ICVs) will serve as a connection between the hub and spoke. Vehicles over 25-tonnes will serve as a connection between manufacturing locations and the hub.

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Since the transportation industry operates on the basis of growth by tonnage, higher economic growth may not necessarily translate into higher volume growth for truck manufacturers. Segmental shift to higher tonnage will be evident over the medium and short term as the market adjusts to a structural change. From a freight stand point, demand for larger trucks could push freight rates up, and until the market reaches a balance. As the size of trucks increases, ticket size of trucks will grow. The ability of transporters to invest in business will rise too. While service debt could affect fleet acquisition plans, it coupled with the implementation of Bharat Stage IV emission norms will increase vehicle prices significantly. It is fairly established that the cost of BSIV upgrade will be significantly higher (as a per centage of the product cost) in lower tonnage vehicles compared to higher tonnage vehicles. The combined factors of emission upgrade and GST could churn the transport segments. One possible scenario that may emerge is of large transporters increasing their grip on first mile. Medium-sized operators could operate predominately in the hub to spoke segment, and small and individual truckers operate the spoke and last mile based on their financial capability. Transporters could increase their focus on niche segments, which require particular vehicle type to optimise the balance sheet.

Supply chain and vendors

GST is expected to drive changes in the business model across sectors. The transportation sector will have to evolve quickly. Two aspects of GST, chosen as examples, provide an indication of the changes that will sweep the transportation sector. First, the score system – similar to credit rating scores provided for each registered entity, will reflect an entity’s adherence to tax system, process and procedure. Corporates and companies can choose who to contract transportation based on the scores. As GST works on the principle of input tax credit, only those vendors and supply chain partners that file returns, will attract business. Transporters will have to maintain clean books of accounts and refrain from tax avoidance to avoid the risk of losing business. Companies and corporates looking for input tax credits will choose vendors that adhere to the new tax regime. GST is ushering in an era where market will regulate tax payment practices. Second, is the e-way bills. e-way bills will have an impact on the way transporters function. In this regard, GST is creating a digital foot print of each transaction and transport. Every e-way bill will have a certain period of validity. Transporters would be required to complete the delivery within the stated period. This will act as a huge deterrent for transporters, market load operators and small transporters in particular, against delay in delivering the cargo. A new e-way bill (from the consigner) will have to be generated beyond the validity period. Transporters will need to evolve their business practices. GST will call for a change of mind-set.

Organisational change

The prime objective of GST is to bring more and more transactions under the tax net; to increase transparency and compliance. The threshold for companies to register for GST has been lowered to Rupees-two million per annum as compared to Rs.10 million per annum limit in the past. Companies that were exempt from tax will now come under the tax net. This has the risk of making their products more expensive, and less competitive, as compared to the products produced by large-size organisations. The economy on the whole, is likely to get more organised. With increase in competition, smaller sized organisations are likely to ‘professionalise’ their operations, and grow to scale or exit. This trend is expected to play out among transporters as well. Transporters are also expected to engage in business transactions with vendors that are organised. This will enable them to benefit from input tax credit. While the current practice of consigners paying the tax on transportation will continue under GST, transporters that provide additional services will eventually charge GST and take credit for many input items like lubes, insurance, and tyres among others. Some of the services offered by roadside service providers like tyre retreading, repairs and maintenance are to come under the GST net. They will thus move up the value chain as GST compliant enterprises. The velocity of this movement will increase after the government brings petroleum products under GST. With increasing complexity in trucks, truck manufacturers can look at an increase in maintenance contracts, increase in the quantity of vehicles serviced, and at authorised service points.

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Transformation long-haul

GST transformation is about change in money (tax reform), matter (business process, model) and mind (compliance). Rather than an overnight transformation, it will take time. Evidence of change will emerge only in the next 24 to 36 months. Any expectation of a quick change will lead to expectation mismatch and disappointment. GST entails a long-haul. It entails a long-haul journey for the transportation and commercial vehicle industry to realise the benefits. With GST the transportation sector and truck makers are embarking on a journey that will lead to a significant improvement in productivity, cost efficiency and growth.

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V G Ramakrishnan is the Managing Director and Partner of Avanteum Advisors.

Impact of GST on CVS

GST would have come into play by the time this copy will hit the stands. Turning India into a unified common market, albeit with four slabs, GST for CVs effectively translates into a tax bracket of 28 per cent for trucks, not fitted with lifting or handling equipment, of the type used in factories, warehouses, dock areas or airports for short distance transport of goods; tractors of the type used on railway station platforms; part of the foregoing vehicles, including people movers for the transport of ten or more persons including the driver, and motor vehicles for the transport of goods (other than refrigerated motor vehicles). The 28 per cent GST tax slab also applies to tanks and other armoured fighting vehicles, whether or not fitted with weapons, and parts of such vehicles. Trailers and semi-trailers; other vehicles not mechanically propelled; parts thereof (other than self-loading or self-unloading trailers for agricultural purposes and hand propelled vehicles (hand carts, rickshaws and the like for example) fall under the same slab as well. Fork-lift trucks other than work trucks fitted with lifting or handling equipment also come under its ambit. Special Purpose Vehicles (SPVs) like breakdown lorries, crane lorries, fire fighting vehicles, concrete-mixer lorries, road sweeper lorries, spraying lorries, mobile workshops and mobile radio logical units have also been classified under the 28 per cent slab rate. Cranes (including cable cranes; mobile lifting frames, straddle carriers and work trucks fitted with a crane) have been slotted into the 18 per cent GST tax bracket. Tractors (except road tractors for semi-trailers of engine capacity more than 1800 cc) have been slotted in the 12 per cent tax slab. Agricultural tractors are claimed to have been slotted in the 18 per cent tax slab. The 12 per cent slab also applies to electrically operated vehicles. Biodiesel and mixtures thereof, not containing or containing less than 70 per cent by weight of petroleum oils and oils obtained from bituminous minerals are slated to be levied with 18 per cent GST. This slab will also apply to refrigerated motor vehicles. Pneumatic tyres, of rubber used in buses or lorries, will be charged at 28 per cent. These include retreaded or used tyres, flaps and inner tubes.

 

Impact of GST on CVS

Transforming the CV industry

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At the India Sustainability Leadership Summit 2017, circular economies and sustainable development goals were stressed upon.

Story by: Ashish Bhatia

Organised by Frost & Sullivan and TERI – The Energy and Resources Institute, the Indian Sustainability Leadership Summit 2017, held at Mumbai recently, delved upon Circular Economies and Sustainable Development goals (SDGs). Drawing attention to business models, tools, technologies, solutions and approaches, a part of the summit were the ‘Sustainability 4.0 Awards’, which acknowledged the agents of change. Aimed at encouraging the adoption of sustainable development practices in organisations, and to recognise the efforts of front runners, 19 awards, under the three heads of leaders, challengers and believers, were presented to deserving companies. Reliance Industries won the Sustainable Corporate of the Year Award. Tata Motors won the Safety Excellence Award, and Mahindra won the Sustainable Factory of the Year award for their engine manufacturing plant at Igatpuri, near Nashik . Henkel Adhesive Technologies India won the (Large Business) Leaders Award.

Circular economies and newer business models

Encompassing circular economies and new business models, the first session looked at how businesses are achieving SDGs. Defining circular economy as an alternative to a traditional linear-economy (make, use, dispose) where resources are used for as long as possible, and maximum value is extracted from them, the panelists touched upon recovering, and regenerating products and materials, at the end of their service life. With SDGs at the core, the session looked at how SDGs, spearheaded by the United Nations, have come to build upon the principles agreed under Resolution A/RES/66/288, known popularly as ‘The Future We Want’. It is a non-binding document released as a result of Rio+20 Conference held in 2012 at Rio de Janeiro, Brazil. The 17 SDGs, covering economic, social development and environmental protection, provide an opportunity for engagement. They also provide for a new type of partnership to address global challenges. With the inaugural session touching upon how business leadership transforms the future of business, and designs future development pathways apart from measuring business values and sharing the imperatives to achieve SDGs, the session saw panelists point at the 2030 Agenda for Sustainable Development. It is a set of 17 global goals with 169 targets between them.

Chairing the session, G S Gill, Distinguished Advisor, TERI, touched upon the various aspects considered while embedding SDGs into an organisation. Expressed Dr. Jaco Cilliers, Country Director, UNDP in India, that the mistrust between the private sector, public sector and the think tanks has lead to sustainability that is hardly effective. Mentioned Rajiv Ranjan Mishra, Managing Director – India, CLP Power India, “The Government should help by pricing resources correctly.” Averred Randal Newton, Vice President – Enterprise Engineering, Ingersoll Rand, “The need is to achieve a few goals over the short to medium term as the key to achieve SDGs. There is a need to achieve 50 per cent reduction in greenhouse effect by 2020.” “An investment in the region of USD five million is required to make the products efficient,” he mentioned. Newton referred to a market study by China Energy Service Company (ESCO), which mentions the need to generate new business models which are sustainable. He also touched upon the world’s largest manufacturer of small-wheel, zero-emission electric vehicles – Club Car. It is a Ingersoll Rand brand, and is claimed to offer a cleaner, quieter alternative to fossil-fuel propelled vehicles. Namita Vikas, Group President and Global Head – Climate Strategy and Responsible Banking, Yes Bank Ltd., spoke about the need to invest USD seven-to-eight million to mitigate climate change. “There is a need for green bonds to invest in circular economies. There is also a need to leverage the funds, to bring about an interesting subvention for environmental projects and advocate climate literacy,” she said. Rajiv Ranjan Mishra mentioned that there is a need to price resources at their true price. “There is a dire need to stay away from excessive government interference or subsidiaries,” he quipped.

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Commercial ‘normal’ and competitiveness

The plenary session looked at sustainability to dial a commercial ‘normal’ and competitiveness. Touching upon sustainable leadership through aspects like responsible financing, manufacturing, green infrastructure and development, the session saw panelists delve upon aspects like demand aggregation for greener products as well. Ajay Shankar, Former Secretary, Department of Industrial Promotion and Policy, Ministry of Commerce & Industry, Government of India, and Distinguished Fellow – TERI, reiterated the need for ESCO model. He termed the model as a profitable investment, and stressed upon the frugal use of resources during manufacture. Shankar stated that the stakeholders ought to look at sun-rise sectors like hydrogen fuel production. Echoing Shankar’s sentiment about ESCO, Aalok A Deshmukh, Head – Energy Efficiency, Global Operations, Schneider Electric, called for it to be made a Key Performance Indicator (KPI) at leading organisations across industry verticals. Dilip N. Kulkarni, President Agri-Food Division at Jain Irrigation Systems Ltd., stressed upon nurturing energy as a third crop. “The nexus between energy, water and food will help to mitigate climate change,” he opined.

Drawing attention to Indian Railways, Shivendra Mohan, Executive Director, Environment Directorate, Railways Board, Ministry of Railways, stated that railways has achieved 10 to 12 per cent gain in traction energy. “There is a scope for additional 20 per cent improvement in fuel efficiency with the help of optimised driving assistance and a better payload to tare ratio,” he said. A further 15 to 20 per cent can be saved over a five year period by setting up a 1 kMW solar plant and a 170 MW wind plant, averred Mohan. Advocating the need to use alternative fuels in railways, Mohan drew attention to bio-fuels posing a limitation. Highlighting the fact that 20 per cent of freight running has been substituted by alternative fuels like CNG, Mohan explained, “In furnaces, LNG is being used. Apart from initiatives like water recycling, at Indian Railways, we are developing water bodies, and adopting green certification (ISO 14001/1SO 15001) across our manufacturing facilities and workshops.”

Smart sustainable businesses

The first of the two practitioner sessions delved upon technology and solutions for a smart, sustainable business. Touching upon risk management at three levels – oversight and governance, business and strategic risk management, and day-to-day risk management, Rakesh Agarwal, Vice President, at Reliance Industries, spoke on the subject of integrated risk management framework. He called upon the need for businesses to meet legislative requirements and implement, manage and foster voluntary initiatives at the corporate level. Terms like lean structure, internal crowd sourcing, use of shared resources and Industry Revolution 4.0 also found a mention in his speech. During the waste water treatment and recycling at manufacturing plants session, Dr. Mrityunjay Chaubey, Global Vice President – Environment and Sustainability, UPL, mentioned the need to adapt new ways to treat waste. He stressed on to primary, secondary, and tertiary sludge treatment.

Drawing immense interest, the second session touched upon high efficiency solar heating and power technologies against the backdrop of NITI Aayog’s statement about encouraging electric vehicles. Siddharth Malik, Managing Director, Megawatt Solutions, expressed that the future lay in efficient energy solutions. He drew attention to the MWS Smart Tree developed by his company. In comparison to a conventional solar panel, the MWS Smart Tree is an aesthetic alternative said Malik. Each tree, he explained, contains a trunk, and configurable branches of various capacities. S.N Rao, Chief Technology Officer, OMC Power, spoke about micro-grid technology. Ashok Chawla, Chairman, TERI, stressed upon the need to think in the forward direction. Stressing upon a bright future, he expressed optimism. Stating that the challenge is in building a sustainable model, Chawla said, the need is to mainstream it.

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International Tractors: Bullish about Growth

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International Tractors is banking on growth by providing ergonomically advanced products that best suit the needs of the farmers.

Story by:

Anirudh Raheja

International Tractors Limited (ITL), which manufactures and markets Sonalika brand of tractors, reported a robust 19.6 per cent increase in sales at 81531 units in FY2016-17, the highest sale of tractors to be ever recorded in the history of the company. In comparison, tractor sales in India grew 18 per cent in FY2016-17, recording a sale of 582844 units according to the Tractor Manufacturers Association. In FY2015-16, 493764 tractors were sold. Increasing the market share from 11.9 per cent to 12.3 per cent, domestic sales of ITL grew 18 per cent, at 69290 units. Exports registered a growth of 29.3 per cent at 12241 units in last fiscal. Bullish about growth, and keen to provide ergonomically advanced products (tractors) that best suit the needs of farmers, ITL has commissioned a fully integrated tractor plant at Hoshiarpur, Punjab. Spread over an area of 85 acres, the new plant is located adjacent to the existing plant. With a capacity to produce two lakh tractors per annum, the new plant will elevate the total manufacturing capacity of ITL to three-lakh units. The existing plant has the capacity to make one-lakh tractors per annum. Fueled by an investment of Rs.800 crores, the new plant is fully equipped to roll out tractors ranging from 20 hp to 120 hp in a takt time of two minutes. Engineered to produce tractors up to 180 hp according to Amrit Singh Mittal, Vice Chairman, ITL, the new plant will support the company’s move to higher capacity tractors, and exports. “Ninety-nine per cent of the tractors sold in India may amount to a power output of less than 60 hp, we are confident that the tractor industry will soon graduate to higher hp engines,” he said. Stressing upon a modern approach, Mittal averred that mechanisation in agriculture is rising. On the account of exports, claimed a source close to the company, that plans are being drawn to export one-lakh tractors. These would be produced at the old plant.

Tracing its roots to 1969 when it manufactured its first farm equipment (thresher), ITL in an effort to enhance its technical capabilities entered into a joint venture with Renault Agriculture, France, and Class Tractors, Germany, in 2000. This was 14 years after ITL produced the first tractor in 1996. The company began producing engines in-house in 2001. By 2005, the company grew up to become the fourth largest manufacturer of tractors in India. It tied up with Japanese diesel engine specialist Yanmar. The new plant, by leveraging technology, and the experience the company has gained over the years, will contribute to the endeavour to produce a good number of aggregates in-house. Aggregates like engine, chassis, sheet metal parts, differential and transmission.

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Operations

The new plant will hike ITL’s capacity to produce tractors to 300 from the current capacity to produce 225 tractors per shift. ITL at present runs two eight-hour shifts. When the demand increases, a shift is extended to 10-12 hours, said Mittal. In an effort maintain a competitive edge in what is termed as the biggest tractor market in the world, third shift is also pressed into service if the need arises. ITL manufactures an entire range of engines – from 20 hp to 110 hp, at the plant. The engine plant has an installed capacity of 500 engines per day, and has been engineered such that it will play an importat role in ITL’s endeavour to develop engines of different capacities. There are 24 engine test beds. With the current emission compliance standards for tractors being BSIIIA, ITL’s Sonalika brand of tractors have been affected with the Supreme Court order to stop sale as well as the register BSIII vehicles from April 01, 2017. In many parts of India. RTOs not wanting to attract contempt of court, are said to refuse registration of tractors that complying with BSIIIA emission regulations. This is despite the emission standards for tractors being different from what the trucks and buses follow. Informed Raman Mittal, Executive Director, ITL, that the (tractor manufacturers) association is making the required presentations, and is hoping that business is not significantly affected.

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Producing two, three and four cylinder engines, in naturally aspirated and common rail turbo-diesel guise, the engine plant of ITL has over 23 production stages. Particular attention is paid to the quality of manufacture from the initial stage. Averred Amrit Singh Mittal, “India is a price sensitive market. It is important therefore that we develop fuel efficient products.” Post deregulation, price of diesel has been rising. In the wake of that, the company is working on a completely new series of tractors that are stylish, ergonomically sorted and comfortable. ITL, in a bid to address the exacting needs of the Indian market, developed a 35 hp DI35Rx Sikander tractor recently. Powering the tractor is a three-cylinder unit that generates a torque of 157 Nm peak torque. Transmission is a constant mesh design with six forward and six reverse gears. For superior fuel efficiency, the hydraulic pump of the tractor can be disengaged from the engine when not in use. “This reflects on our understanding of the Indian market,” quipped Mittal. He pointed at the four tractors his company launched in October last year. “These tractors have beeen designed and engineered for potato farming, and are equipped with adjustable track width, a hydraulic system that was specially developed, and have a compact turning radius to help them maneouvre in the field without damaging the crop,” opined Mittal. Pramod Rajan, Head, R&D, ITL, expressed, “We are developing a six-cylinder 120hp engine for tractors. Production of this engine will begin later this year. The engine will find application in big tractors the company exports. The 120 hp engine platform will be leveraged to produce higher capacity engines mentioned Rajan. A 200 hp engine is on the anvil too. If this will provide a glimpse of ITL’s plans for the future, the 120 hp tractor, informed Rajan, will be equipped with a 24+24 transmission, and offer a massive 4,500 kg lifting capacity. Of the opinion that a tractor should transform into a status symbol, Rajan revealed that engines above 50 hp are being equipped with common-rail technology. The change in emission standards for engine above 50 hp is said to be a reason for this. The other is perhaps, the rising sale of tractors in the 40 to 50 hp range. In the last five years, most tractors sold in India are in the 40 to 50 hp range.

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Tractor transmission

If the engine assembly makes for an interesting insight at the ITL plant, the transmission line adds to the knowledge of tractor manufacture. Found on the line are transmission cases, gears, shafts, clutch plates, and more. Multi-speed transmissions are produced with a 12+12 speed range. To maintain consistency, the company manufactures four wheel drive axles in-house. Stating that the shift to 50-60 hp tractors in India is likely to happen faster than expected, Rajan revealed that they are working on an eight forward and two reverse speed transmission. It will be upgraded to 12 forward and 12 reverse gearbox, and introduced in the 60 hp segment followed by the 40-50 hp segment as well. ITL is also working on 30 hp tractors with hydrostatic transmission. The company plans to export them to Europe and US.

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For tractors to withstand tough working conditions, ITL’s gear shop manufactures between 250 and 400 different components. The facility has a capacity to manufacture 1.5 million parts per annum. A total of 112 machines including 22 gear hobbing machines and 12 gear shaving machines have been installed. Also, a part are a Seal Quench Furnace (SQF), induction hardening and pit type furnace. A modern metallurgical lab has been set up. It contains Leco Spectrometer and a Micro Hardness Tester from USA among other test equipment. A Japanese spectrometer is used to ensure the quality of spur, bevel and helical gears is right.

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R&D and manufacturing

Employing 200 engineers and 100 technicians, ITL R&D is at the core of numerous initiatives the company is taking. Out of the 200 engineers, 120 engineers are engaged in design projects that will materialise in the future. They are closely supported by 50 product testing engineers. Crucial to the smooth functioning of the world’s largest integrated tractor manufacturing plant with world-class technologies, ITL R&D, according to Rajan, is playing an important role in the design and development of aggregates. The cathodic electro-coating pre-treatment facility has a dip tank of 70,000 litre capacity. The paint shop technology ensures up to 95 per cent paint utilisation, and is manned by six robots. While the sheet metal parts are produced at the press shop, most plastic parts are also made in-house. The company has 26 machines including 19 presses of up to 400 tonne capacity; two laser machines (sourced from Prima, Italy), and three injection moulding machines. To manufacture in-house dies for press tools, sheet metal parts and injection modules, 35 machines work in tandem. The desired level of accuracy is maintained by ITL with 167 special purpose machines and 57 CNC machining centers sourced from Mazak, Japan. To achieve a competitive takt time, castings at the plant are transferred through under pit conveyors. The final assembly line is structured such that every unit undergoes a number of tests. These include a roller test, hydraulic test and a vibration test. To ensure optimal product quality, the company employs quality management systems like Pokayoke.

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Exporting tractors to 80 countries, ITL is developing products that will comply with the stage IV emission norms. These would be aimed primarily at the export markets of Europe and US. ITL is also working on telematics. Testing of a telematics platform, according to Rajan, is on. The results will determine the time to market. Rajan is of the opinion that it will still take some time before the tractor market warms up to the prospect of using telematics. Costs, he said, are a barrier. Looking at expanding its reach in the domestic, and overseas markets, ITL is banking on ergonomically advanced, robust and efficient tractors. Apart from an assembly unit in Cameroon, Africa, the company is setting up a unit in China. A cost sensitive market according to Raman Mittal, the unit at China – expected to be operational at the end of this fiscal – will open up new avenues for the company. With Yanmar agreeing to buy Blackstone Equity Investors’ shares in ITL for Rs.1,600 crores, Yanmar’s holding in the company is set to rise to 30 per cent. This is expected to boost outsourcing. Mittal is keen to see his company export one lakh units. “Out of the one lakh units, 50,000 units will be manufactured for our partner Yanmar’s outsourcing commitments. The remaining 50,000 will be sold independently under the Sonalika brand,” said Mittal.

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Pramod Rajan, Head, Research and Development, International Tractors Limited

Q. What role is the R&D playing in the company’s growth?

A. We have a team of 200 engineers and 100 technicians. Of these, there are 120 design engineers. Supporting them are 50 engineers that carry out testing. Playing an important role, the R&D carries out numerous tasks including design, development, and testing. For example, work is being carried out on a 120 hp engine that will go into production later this year. In India, BS IIIA emission norms apply to agricultural products. So, we are working on the engine for it to meet these norms, and offer superior efficiency. The R&D plays an important role in the design and development of aggregates. With aggregate manufacture and assembly carried out in one plant, we also play a role in developing skin panels. Final processing of 50 per cent parts is done in-house. It is the child parts that are procured from outside.

Q. What new projects are you working on?

A. We are currently focusing on two things – fuel efficiency and performance. We want to improve the fuel efficiency of our product portfolio. Diesel prices have started moving north. Indian customers are very price sensitive, and it is therefore essential that we offer fuel efficient products. Our products are known to be robust, stylish and comfortable. We want to ensure that our products exceed their requirements. With rural markets warming up to new things, expectations are rising. This is making it necessary that we look at styling and comfort in the case of tractors. We will soon launch a completely new series of tractors for the domestic market. These will highlight comfort and styling. We feel that the tractor should be a status symbol.

Q. What role is the R&D playing in exports?

A. We export tractors to Europe and US. For these markets we developed StageIV compliant engines that will go into production in the last quarter of this fiscal. In India, we believe that BSIV emission norms for tractors will come only in 2020. The cost of technology at this point will be very high. We expect an emission norms shift in the category above 50 hp.

Q. How soon could telematics become a standard fitment on tractors?

A. We have already put telematics systems on our test tractors. We have the system ready for customers, and offer to those who demand it. We have not marketed it because cost of having a telematics system is high. The perceived value for customer is not high. It may be not be a standard fitment solution for now therefore, and will be offered only on demand. It is true that the competition is already offering telematics systems on their machines. The cost of telematics, in India, is still on the higher side. Telematics is used by fleet operators. For an individual owner to use a mobile phone makes more sense since it is cheaper. Owning a phone costs no more than Rs.200. Servicing a telematics system every month will cost more that Rs.500 per month. Customer therefore is still reluctant to pay.

Q. What new could ITL offer next year?

A. One of the plan is to shift tractors in the 60 to 120 hp range to common-rail technology. The 120 hp tractor is equipped with a six-cylinder engine. It is aimed at the African market where the land size is huge. This engine can be elevated to produce 200 hp. As per the demand, we will slowly move forward. In India, where the land mass is not as big. We will go up to 75 and 90 hp tractors at the most. For special applications, some government tenders are calling for 100 and 110 hp machines. These would be used for clearing snow, and will account for a very small volume. We do not produce hydrostatic transmissions for India. For Europe and US, we are looking at hydrostatic transmission for less than 30 hp. This transmission could be aimed at the hobby farming segment.

Q. Which do you think are the fast emerging segments in India?

A. In the last five years, the maximum tractors that are being sold are in the range of 40 to 50 hp. In 2011, there was an emission norms change for tractors above 50hp. As far as the tractor industry is concerned, a shift is likely to take place from 40 to 50 hp, and to 50-60 hp. A shift beyond that looks difficult. Tractors in the 40-50 hp range account for 30 per cent of the market. We are currently selling eight forward and two reverse speed transmissions. We are working on 12 forward and 12 reverse gears transmission. This will be offered on 60 hp machines, and later on in the 40-50 hp segment tractors.

Q. Does the rising use of plastics in tractors hint at the need to light weight?

A. There is a requirement for light weighting of tractors. Especially in the rice producing belts in South India. We will introduce products in that segment with our partner Yanmar in the 40-50 hp segment.

Harita, IIT-M develop Intelliseat

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The Intelliseat developed by Harita Seating in association with IIT-M aims at minimising accidents by detecting driver fatigue.

Story & Photos:

Bhargav TS

In order to reduce road accidents due to driver fatigue, Harita Seating Systems Limited (HSSL), and the Indian Institute of Technology, Madras (IIT-M), have developed ‘Intelliseat’, an Internet of Things (IoT) device that monitors the performance and behaviour of the driver. To develop Intelliseat, HSSL joined hands with IITM two years ago. Operating independently, and capable of providing vehicle information like vehicle location, Intelliseat can be used for driver training and fleet risk evaluation as well. Capable of influencing fleet insurance and ownership costs, Intelliseat is expected to present Harita Seating a unique advantage.

Specialising in the manufacture of truck and tractor seats, the improvement of automotive seating system, particularly for the driver, has been a priority at HSSL. The company found out during its interaction with drivers and other industry stakeholders that professional drivers spend most of their time behind the wheel, and experience considerable fatigue. In case of people carriers, drivers experience more fatigue than the passengers experience. On an average, a truck or bus is driven for 10 hours a day. The drivers sometime tend to drive continuously, causing fatigue and leading to an accident. Developed as a performance monitoring tool, Intelliseat is engineered to detect fatigue. It will subsequently warn the driver, and signal him to take a break. This, in turn, would eliminate the possibility of an accident. Expressed AG Giridharan, President, HSSL, “Improvement of an automotive seating system, particularly that of the driver, is important to us.”

Developed at the Rehabilitation Bioengineering Group, Department of Engineering Design, IIT Madras, Intelliseat, according to Prof. Venkatesh Balasubramanian, Department of Engineering Design, IIT Madras, was developed over a span of two years. A team from Harita and IIT Madras translated the conceptual work in the lab to a viable solution that can be productionised and applied. Expected to make roads safer, and have an impact on driver benchmarking (training) and fleet insurance, Intelliseat, developed to operate independent of any other system in the vehicle, can be used for in-vehicle information and tracking. Capable of being used for driver training and fleet risk evaluation, Intelliseat starts functioning as soon as the driver occupies it. The sensors detect his or her presence, and send a warning signal if there is a movement. When the sensor senses minor fatigue, the driver is notified with a red signal on the dashboard. When the system senses a moderate fatigue, a chime goes of. If the situation goes out of control and the driver is close to dozing off, the Intelliseat vibrates. This makes a compelling reason for the driver to stop.

According to Prof. Bhaskar Ramamurthi, Director, IIT Madras, India has an unconscionably high rate of traffic accidents, and technologies that can reduce accidents due to driver fatigue are sorely needed. Tested in South India, Intelliseat will soon began testing in other parts of the country. Taking into account driver performance and behaviour, which is greatly influenced by physical and cognitive factors, Intelliseat, according to Ramamurthi, will elevate safety. The system’s contribution would be to curb accidents by understanding driver behaviour, fatigue, and performance slippage. Appropriate intervention to avoid road accident looks like the best remedy.

Said C N Prasad, Director, HSSL, “It has always been the endeavour of Harita Seating to develop cost-effective technologies, which are relevant to the immediate Indian context. The joint development opportunity with IIT Madras for the Intelliseat showcases the results of such an endeavour. I hope that this innovation will lead to safer roads and reduce the risk of accidents due to driver fatigue.”

Suppling seats to Ashok Leyland, Daimler India Commercial Vehicles, John Deere, M&M, Mercedes-Benz Buses, AMW, New Holland, TAFE, Tata Marcopolo and Tata Motors, HSSL has six plants in India. The mother plant is in Hosur. The other plants of the company are at Pune, Jamshedpur, Dharwad, Chennai and Pantnagar.

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With the National Crime Research Bureau (NCRB, 2016) report put this number of road accidents to 464,674 cases in India in 2015 (a detailed study of accidents by researchers had them attribute 40 per cent deaths to human error, which often translates into driver fatigue), the Harita Intelliseat looks like an innovation that will provide the right solution to curb accidents in India that happen due to driver fatigue.

Mahindra MPower for cutting edge transport management

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The third edition of Mahindra MPower summit stressed on cutting edge transport management.

Story by:

Anirudh Raheja

Demonetisation affected the transport industry. It brought about a disruptive change, and led the transport industry to embark on a challenging ride that would last for a few months. The third edition of Mahindra MPower Summit held at IIM Ahmedbad recently reflected on this and many other developments in an effort to attain cutting edge transport management techniques that would help to tackle challenges, either disruptive or constructive in nature. Organised by the Mahindra Truck and Bus Division, the summit focused upon developing a docket for industry veterans and further professionalise their businesses. The summit included a course that would facilitate faster decision making.

Following in the footsteps of the earlier MPower editions, starting 2014, the summit provided transporters an insight into various aspects of the ecosystem that they may have overlooked. With many transport enterprises being family owned business, the broad agenda of the summit turned out a course that will facilitate faster decision making and tackling of challenges in areas like succession planning, family business managemnent, and attracting investments in challenging times.

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With GST scheduled for July 2017, the summit sought to highlight the challenges the transport industry will face. Nalin Mehta, Managing Director & CEO, Mahindra Trucks & Buses Limited, drew attention to the digitisation the industry is witnessing. “This is accompanied by disruptive practices, and will make for an interesting time to do business. A big implication of GST will be on the logistics industry, and how it operates. There is a need to stay alert and gear-up for any challenges that may arise,” he mentioned. Pointing at the CV industry’s progress in migrating to BSVI emission norms by 2020, Mehta averred that there is a need to address the legal aspects as well. “Apart from load aggregation and the mushrooming of internet-based models, the way the industry used to work until now, and will need to work henceforth will be different,” he said.

New ways of working

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Delving upon the various industry trends that are prevalent. Members of Mahindra Trucks & Buses Limited, and IIM-A faculties aired their views in front of the 22 participants – veteran transporters and their prodigies, from 11 cities. A healthy exchange of ideas and practices ensued as the summit got underway. If the 22 participants represented logistics companies that have a collective turnover of Rs.1100 crore, the brain storming session as part of the summit saw the presence of five transport excellence award winners. The faculties provided valuable inputs and insights into the way the transport industry operates, and should operate to ensure agility and efficiency. The faculties highlighted a need for better synergies even as they touched upon various topics connected with the way the transport industry conducts business. The two-day summit delved upon topics like current macro economic scenario, the effect of GST, value creation in trucking industry, re-inventing family owned business, inventing new business models, and more.

Emphasising on upgrading transporter skills, V. G. Ramakrishnan, Managing Director, Avanteum Advisors, drew attention to the shrinking manufacturing base in India. Despite this, the freight movement increased by 4.5 per cent in last three years, he stated. Stressing upon transport by road continuing to dominate with over 60 per cent share of the overall transportation in the country, Ramakrishnan averred, “Freight movement through road will be complemented with the implementation of GST. It will lead to the removal of check points, better road infrastructure and faster turn around times.” He cautioned that there was a need to work on other areas like fleet upgradation to reap the most benefit. Stating that CVs have become costlier because of the implementation of the BSIV emission norms, Ramakrishnan opined, “Freight rates have not kept pace with diesel rates due to which profitability continues to be under pressure. With GST coming in, there will be a rapid shift towards higher tonnage vehicles. The scarcity of skilled drivers could be compensated for to an extent by the deployment of new technologies in CVs.”

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Academic outlook

Former Dean of IIM-A, and now the director of IIM-Bangalore, Professor G. Raghuram, through video conferencing, highlighted the significance of road transport sector in India. He drew attention to a report by National Transport Development Policy Committee, which expects freight traffic to reach 13118 billion tonnes per km (BTKM) by year FY2032. The report expects rail and road transport to enjoy an equal share of traffic by FY2032. This, said Raghuram, is significant when one considers the current situation where road share is almost 65 per cent at 1986 billion net tonne kilometer (btkm) out of the total 3056 bktm of roads India has. Stating that India has already crossed 100 thousand kilometers in national highways, which is just two per cent of total road network in India, carrying 40 per cent of the traffic, Raghuram averred, “This will get more boost with all weather roads under Pradhan Mantri Gram Sadak Yojana.” Road network is still dominated by rural roads by over 60 per cent, he added.

Terming practices like overloading as induced, and representative of front-line immaturity, Raghuram described that only 10 per cent of the truck owners in India have more than 20 trucks. “Professionalisation of the transport sector is very important. The more organised the road transport is, the better it be will be for logistics framework to improve. This will in-turn improve the transport industry,” he explained. Conducting a discussion on challenges faced by the transporters, Prof. Debjit Roy encouraged the participants to think of amicable solutions that could help resolve the various problems they face.

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Deploying technology

Touching upon the technical aspects of trucking, Dr. Venkat Srinivas, Principal Chief Engineer and Head – Product Development, Mahindra Trucks & Buses Limited, through video conferencing, delved upon the technological trends in CVs in India. Growing urbanisation, he said, will induce the much needed momentum in the refinement of the hub and spoke transportation model in India. This will in-turn, lead to a move to higher tonnage vehicles that will call for the employment of sophisticated technologies,” averred Dr. Srinivas. Highlighting emerging CV trends in India, including the rising awareness for safety and connectivity, prognostics, and policy regulations, Dr. Srinivas called upon the participants to think what it could mean to each and every industry segment. Also, what it could mean to move from BS IV to BS VI emission norms.

Rising use of telematics

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With electronic content in CVs rising, the use of telematics is growing too.

Story by:

Ashish Bhatia

Every CV maker in India is offering telematics. With the move to BSIV, many have turned it into a standard offering. If this constitutes a part of the organised market for telematics, and OE bit in particular, there is a big chunk of aftermarket offerings that are serving CV operators too. A small chunk of unorganised players include fly-by-night operators that have earned the telematics industry a bad name. As fleet operators in India learn to leverage telematics to up the efficiency of their business, its use is moving beyond track and trace.

Globally, telematics trucking solutions are classified into three types – embedded, portable and independent (often smartphone-based). Embedded solutions include a telematics console that is functionally hardwired into the CV, and serves as a connection provider. Embedded solutions offer a range of vehicle management features, and facilitate the integration of multiple features. Portable solutions comprise of detachable devices like Personal Digital Assistant (PDA) and a Portable Navigation Device (PND). Rugged computers that maintain contact with the vehicle also come under portable solutions. Also, a part of low cost solutions, detachable devices collect information and synchronise it with other devices (typically a tablet or phone) through medias like Bluetooth or Wi-Fi. These are classified as independent solutions. Internet and Global Positioning System (GPS) enabled phones have become a powerful tool too. As per the report, ‘Global Connected Truck Telematics Outlook 2017’, by Frost & Sullivan, the growth of internet and GPS enabled solutions has come to incorporate additional value chain participants such as content providers, application providers (for applications like distracted driving), and wireless providers. Another report, ‘Telematics in India: Trends and Opportunities’, by Roland Berger, pegs the global vehicle telematics market at US$ 39 billion. It estimates CV telematics market in India to grow at a rate of 25 per cent per annum.

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Evolution of telematics in India

Telematics is said to have found its way to India in 2003. In 2008, Ashok Leyland introduced a GPS enabled telematics platform ‘Alert’, which was tailored to Indian operating conditions. ‘Alert’ bundled the latest telematics technologies then available through tie-ups with international technology providers, and by leveraging its in-house R&D. Two services, vehicle tracking and Passenger Information System (PIS), were offered. Employing an On Board Unit (OBU), ‘Alert’ provided location, speed, direction of travel, date and time on a second-to-second basis. The information was stored in memory and transmitted to a data centre for a prefixed time period, or on demand from the customer. The transmission took place on a General Packet Radio Service (GPRS) communication network, and a packet oriented mobile data service on 2G and 3G cellular communication system’s global system for mobile communications (GSM). Most public transport undertaking buses in India are telematics equipped. The root of this dates back to 2012 when the central government announced a plan to install tracking and fleet management services in 400,000 buses. Almost all state transport buses today feature a telematics-based intelligent transport system on-board. The electronic ticket vending machines found with ticket issuers are claimed to be GPS enabled. They facilitate the passage of information about the number of tickets sold as well as the location, route, and direction of travel from time to time.

In what is looked upon as a unique development in the area of cloud-based GPS system operation is the tie-up between Mahindra Electric and Bangalore-based Lithium. A fleet of Mahindra e2o electric cars operated by Lithium are claimed to be telematics enabled, and provide information about driver behaviour, vehicle charging pattern, etc. Mahindra has also partnered with cab aggregator Ola for a pilot e-taxi project at Nagpur. The success of this project will help replicate e-taxis in other parts of the country. It will also underline the successful use of telematics in the operation of radio taxis; electric and conventional. Ola, Uber, Meru, and other radio taxi operators have been leveraging telematics successfully. Telematics is at the root of their business. They are leveraging telematics to get information, track the vehicle, track driver behaviour, and conduct commerce. Radio taxi companies are invading new markets in the country by leveraging telematics. In response to the call for safety of women travelling in cabs, the government made it mandatory for taxis to feature a GPS, and a panic button.

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Market penetration and market potential

In commercial vehicles, despite the government push, the use of telematics has a long way to go. Claimed an industry source that it continues to be low in single truck operations because of the costs involved. Users continue to be big fleet operators and taxi companies. To drive telematics in CVs, the driving factors will be optimisation of fuel costs, safety and security. In India, the CV telematics market is expected to grow at 25 per cent per annum. Reports suggest that growth will be led by the aftermarket with entry-level solutions. By 2022, the telematics market for CVs in India should reach 1,383 units. In 2015, it was estimated to be 293 units strong. Of the total number of installed base units by 2022, 16 per cent would be fitted by OEMs. Expected to be structured such that (by 2022) 68 per cent will be entry-level, 31 per cent will be mid-tier, and a mere one per cent will be high-end. It is the cold-chain, courier and pharma industries that are expected to demand the use of telematics most. Demand is expected to come from across all regions of the country.

For the 20 players that are currently there in the domestic market, the top three are claimed to account for 60 per cent of the market share. Trimble is claimed to be a market leader with 30 per cent market share. Following close are Arya Omnitalk and CMC Technology.

Competition level in the Indian telematics industry are expected to intensify on the back of product extensions, technological advancements, and Mergers and Acquisitions (M&As). To remain competitive in the market, vendors will be required to not only develop new technologies but also keep abreast with the global trends. With impact on product portfolio inevitable, popular telematics solutions in India in the CV space, including Tata Fleetman, Volvo Dynafleet, Ashok Leyland i-Alert, Eicher Live, and BharatBenz Ormat, will continue to change; will continue to better in value and use-ability. With the need for connectivity and driver assistance expected to drive growth, the telematics market in India is set to grow into a sizeable chunk of software and hardware. To support advanced endeavours like ADAS sensors, which find use in driver drowsiness detection systems, parking assist systems, and lane departure warning systems, telematics is here to stay. It is set to influence driver assistance and related services, and will lead to the recording of various types of vehicle and driver data.

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Growth in telematics has turned the hardware part complex. This is influencing market growth. Growth in the hardware segment (on-board and off-board) is expected to be at a Compound Annual Growth Rate (CAGR) of 21 per cent till 2022. The services market (content providers and content aggregators) is expected to grow faster at 25 per cent CAGR.

Indian OEMs ‘engage’

It is no secret that Indian OEMs are leveraging telematics to understand customer needs. They want to address their need for customised service and support offerings. With the move up to BSIV, CV OEMs are claimed to be looking at leveraging telematics to learn about the behaviour of the vehicle, the driver, and what they would do to help their customers earn more. With customers successful, CV OEMs can be assured of brand loyalty. While factors like fuel adulteration, driver behaviour, etc., make for an interesting use of telematics, it is turning out be a constant source of learning for all those involved. The growing need for extended support and user-specific products like remote diagnostics, load detection and monitoring, and order management is turning telematics in a domain of full-service providers that can engage the entire value chain. Logistics companies, claimed an industry source, will be required to focus on business contracting and operation of core routes in a bid to maintain capacity, and cost flexibility. This would augur well to contract new business or face demand volatility.

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Promoting growth

Telematics users in India are finding wireless connectivity, remote diagnostics, navigation and anti-theft features useful. An interesting feature is the data collected by the telematics ‘black box’ to provide valuable insights into the functioning of a vehicle, and provide crucial service reminders. It would go a long way in promoting the growth of telematics in Indian CVs. The other feature, to understand the driver behaviour, will further enhance the popularity of telematics. Telematics will also have an influence on the insurance premium in the future. With GPS connectivity and navigation services gaining popularity on the back of increasing complexity of road network in cities, the availability of real-time traffic information, will pave the way for route-optimisation. A crucial feature that will popularise telematics will be the highly accurate fuel level information, which works even when the ignition is off.

Global Outlook

Against an expected growth of Indian telematics market at 25 per cent CAGR, the global telematics market is slated to grow at a CAGR of 18 per cent till 2022. Commercial vehicles are expected to account for nearly two third of the total share of the telematics market. The rest of the market will be shared by passenger vehicles, aircrafts, etc. With passenger vehicle demand expected to be fueled by significant usage by cab aggregators, telematics will find an opportunity to keep growing. The Asia Pacific market follows the Middle East market, and includes countries like Japan, China and India. By 2022, this market is expected to grab the lead, ably supported by a big jump in the use of telematics by commercial vehicle operators.