Effective Import Substitution in India- A case study in Heavy Earth Moving Machinery

The government of India is reportedly contemplating the introduction of an incentive scheme similar to the production linked incentive (PLI) for heavy earth moving machinery (HEMM) and underground mining equipment.

The scheme shall be implemented over a period of five years, and would be designed to bolster the largely unexplored under-ground coal mining in the country. At present, Coal India imports high-capacity machinery for its mining operations, including electric rope shovels, hydraulic shovels, dumpers, crawler dozers, drills, motor graders, and front-end loaders.

The cost of these machines is around Rs 35 billion, with an additional Rs 10 billion spent on customs duties, as previously reported by the government. The scheme size may be anywhere between Rs 8000 Crore to Rs 12000 Crore.

Last year, Coal India led a committee to boost domestic production of heavy machinery and mining equipment. The committee recommended standardizing equipment to enhance manufacturing for mine operators and contractors.

One of the projects we just concluded with a construction equipment OEM makes a strong case for an effective import substitution of critical hydraulic components which helped the client with ~25% bottom line savings and a reduction of ~30% in time to procure these components. The client, one of the leaders in hydraulic excavators was experiencing an acute shortage of hydraulic tube assemblies following supply chain slippages owing to the middle east situation followed with challenges at customs. As a China plus one strategy they had a roadmap to developing an alternate vendor eco system for these critical components in India which was accelerated due to the situation. Hydraulic tube assemblies involve 3 main components apart from the cylinder assembly itself. 

Hydraulic tube assemblies are a conduit to high pressure fluids which makes it a critical functional component of an excavator

1. Stainless steel / carbon steel tube assembly forms of the longer conduit for high pressure fluids traversing through its entire length along its various bends and curves. The vendor needed to have critical expertise in hydraulic tube bending and finishing operations. Finding the right vendor for this was the challenge which we managed to circumvent. 

2. The next component was the flange which forms the bridge connection between the metal tube and the hose pipe. These set of vendors were relatively more in number given India's foray into casting for a long time and the eco system around it. The critical operation here was to identify a vendor for tig welding the end fitting to the hydraulic tube assembly as most field failures occurs at this weak point. TIG welding, or Tungsten Inert Gas welding, is often regarded as the most challenging welding technique to master. It demands considerable skill and control since the welder has to manually feed a filler rod and sustain the arc while handling the torch. TIG welding is commonly employed for delicate materials and necessitates meticulous control over the weld bead to achieve superior-quality welds. 

3. Finishing it up was the third component which was the hydraulic hose pipe suppliers which was again not a big challenge in the Indian eco system. We wanted to top it off by trying to find vendors at more proximity to the assembly location to additionally save on logistics and time. 

From the day of the brief received by the client Muwork Solutions took 2 months to deliver the first set of the end-to-end system after a few iterations. We executed and end to end managed delivery for our client spanning identification of the vendors, selection based on different criteria set by the client and us, hand holding the onboarding process on behalf of our client as per their requirements, getting the vendors readied up for the development activity, managing the supply of raw materials for the vendors, streamlining the vendors ERP systems to be aligned for this delivery and throughout the engagement giving a transparent view to the client of where things are at any point in time through our platform and our key accounts team. The client was able to achieve significant savings on bottom line and timelines to make sure their China plus one strategy for the hydraulic tube kits is taken care of. We are a proud associate and a delivery partner to make sure consistency and reliability over time is taken care of and bring in transparency along with predictability to the sourcing team of our client. We will continue this series of effective import substitution as a segment in our journey of Muwork solutions as we move ahead. Do follow us for more such updates.