To stay competitive, companies – and indeed countries –need to adopt sustainable development practices, and systems, products and services developed by Thermax Ltd help industries achieve better resource productivity. Chairperson Meher Pudumjee discusses the company’s extensive CSR efforts, its pioneering energy management solutions, and the challenges facing large-scale renewable energy uptake.
Could you tell us about the CSR initiatives conducted by Thermax and what drives them?
Thermax Foundation supports education predominantly in our city. We have a strong group of very dedicated and capable trainers who train municipal teachers in classroom management, as also a change in mindset. We are one of the supporters of two very credible as also incredible NGOs, called Akanksha and Teach For India. We have just embarked on a journey of “collective action” along with other corporates, NGO partners and the local government, to try and help enhance the quality of education across all municipal schools in Pune, by working within the system.
We do a lot of work within municipal schools in Pune. In our experience, we have noticed that the brightness and spark within our kids is just amazing. If only they had the opportunity, they would be very successful. Poverty/necessity is the mother of invention. These children have the energy and drive that many other children lack. They are thirsty for knowledge. You would be amazed by their approach and way of thinking based on the questions they ask and how they interact with each other. I have kids that age and rarely do I hear them talk this way. These are kids from broken families, sometimes their fathers’ alcoholics or in jail, their mothers being the only breadwinners. They don’t speak a word of English, yet they are keen that their children attend English-medium schools. There is no help or support from the household or society. They live in slums, where there is invariably sexual abuse and crime. And in spite of those conditions, they thrive.
We had four kids last year who received scholarships into the United World College (UWC). One has gone to Armenia, one to Italy, and two are in Pune. Five others have got scholarships to the Azim Premji University. We need many more… and therefore getting quality education right in this country is critical.
Do you believe that Indian companies spend enough time on CSR?
No. Unfortunately I think many companies consider that employing people fulfills their social responsibility. There are many rich Indians who do philanthropy. However, our Indian philanthropy is perhaps the highest towards religion and temples; some of them do social work. I do not believe in this 2% mandatory CSR. I believe it is impossible to make philanthropy or compassion mandatory. But at the same time, people have started to think about what they can do to make a change. I do believe that there are many companies that are looking at it in a serious manner today, much more than a couple of years ago.
The problem is that presently, in order to tick the box, companies are only thinking short term. They want to be seen as helping as many NGOs as possible, so the money is spread across many NGOs and for a year, after which they want to support others.
Social change takes a very long time. If you are getting involved in social work, do not expect results overnight. Measure the inputs every so often, but measure the output and outcome over a period of time. In most cases, it helps to have a commitment of at least 3-5 years, with very objective measures in place. Committing to one year in most cases is purely to satisfy the 2% and is of no use – it’s a waste of money and does not help the NGO and the cause it is working towards. I guess, being very new to India, it will take some time.
Do you believe that India’s caste system influences the way CSR is being conducted in this country?
Yes I do. Often, people want to do good for their own community, their own caste. This is very ingrained in the Indian psyche. There are some people who are agnostic. At our Foundation, we target the economically underprivileged – irrespective of caste, religion, region, etc. Unfortunately, our country still operates on reservations for SC, ST, OBC, rather than the economically underprivileged, irrespective of caste. I am sure it will change over time, but it will take a while.
How must India act to build a more inclusive society in which wealth is more fairly distributed?
India is very polarized. I believe it begins with quality education, which is why our Foundation decided to focus on education. We strongly believe that education gives you the “power of choice”. It’s the first step towards inclusiveness in India. Education is a means to an end; it is education combined with skilling and employability/entrepreneurship that makes society work.
Simultaneously, we need a vibrant economy to pull those people in and create the demand for jobs. Today we are enhancing the demand, but we lack the supply. There are still too many people without jobs and too many jobs without people. It is very ironic!
I will give you an example. We started a vocational skill center in Pune with a capacity of 60 people per batch. We were skilling them through an NGO. At the end of the program we were guaranteeing them employment. We were training them for about 6 weeks in order to work in a retail store or the hospitality sector. Although completely free, not once did we get more than 20 people in any of the batches during the two years. In fact, we had dropouts, and by the time we finished the course, we had less than 15 people left in a batch. Therefore, we had to close this center at the end of two years, despite the fact that skilling is a big mission for our country.
Matching our youth’s expectations with reality is something we really need to think about. Education is a part of that. Attitudes, mindset, moral values and expectations are critical pieces for all our youth across the board, so that we develop a more inclusive society.
Do you think that India is ready for renewable resources, especially due to the fact that they are more expensive and at times less reliable?
There is a skeptic who has written about the challenges to the 175GW plan in The Business Standard. The first challenge he spoke about was money; the amount of money needed to put up this 175GW. The second was about the grid and its capacity to accept this load. Only if the wind blows and only if the sun shines would we be able to generate the energy. This factor of unpredictability will creep into the grid and cause an imbalance. The important question is how much of an imbalance is it going to create, if by 2030 40% of our energy will come from renewable sources.
There is a lot of skepticism in the market as to whether the 175GW will actually happen. People are asking where the money and the technology are going to come from. Prices are coming down significantly. Sometimes I also wonder whether it is sustainable. Tariffs for PV-based solar energy have come down from 20 cents to 6 cents within a short period of three years. This is attributed mainly to China because of the amount of capacity that they have invested in photovoltaic (PV), and also due to technology changes. I am not sure if this is entirely sustainable; I am not sure how many corporates in solar are making money, other than a few venture funds.
Today, we still have a very low Plant Load Factor (PLF) in renewable energy; the world is also awaiting energy storage. How this will evolve in the future remains to be seen. Having said this, I have great faith in the human mind and potential and the incredible change we’ve seen in terms of technology innovation in just the last 10-15 years.
Considering the imperative to quickly develop India, do you believe the country is doing enough to help find solutions to the global climate change problem?
I think this whole debate has been an ‘East vs West’ or ‘developing vs developed nations’ argument. I personally feel that whatever has happened, happened for its own reasons. Our planet is not going to look back to see who was to blame before making a judgment. I think it is crucial to look at where we stand today, to be mature and to take the right decisions moving forward.
Having said this, I would like to mention that there are 400 million people in our country that are still without electricity. There are many people without food, electricity, or a roof over their heads. So this is something we must take into cognizance.
Presently I find it hard to believe that a country can be completely focused on renewables. India does have a lot of coal. With clean coal technologies and higher efficiencies, we may have to look at a balanced mix of both, to make sure that we can develop the country and provide everyone with power.
I do not think there is one answer to this question you are asking. There are too many variables to take into account. The Indian government today is cognizant of the fact that global warming, climate change is a reality. Otherwise, they would not have this great ambition of 175GW. But the right way forward, at least in the short term, will be to find the right mix, as also a huge focus on energy efficiency and demand side management.
Thermax is a role model in looking for alternative energy resources. About 30% of your energy use is from alternative sources of energy. Is that correct?
It is about 25-30%. I’m not sure Thermax is entirely a role model. However, we would like to grow faster in the alternative energy area. Nonetheless, the demand from many of our customers in the developing world, especially when oil is at $40 a barrel, is for coal. That is just simple economics – the payback has shifted, even though costs are down.
Africa for example is growing mainly on coal. With the climate change agreement now, financial institutions may not want to fund large coal-powered plants, which is ok, but Africa faces a similar issue as India, in that millions of people still do not have access to electricity. Companies that are investing in green technologies today are mainly those who have an altruistic mindset for green, rather than pure economics.
At Thermax, what are the projects you are specifically most proud of and what would you like to achieve in the near future?
Thermax has always been a company that has thought of all its stakeholders. It’s never been the shareholder at the cost of everyone else. It has always been about our employees, customers, business partners, society and the environment. That has been our philosophy. We have an excellent team of people starting with our MD and CEO Mr Unnikrishnan.
The company started 50 years ago with oil-fired boilers. If we were going to pollute, we had better clean up – that is how we started our air pollution business. Waste heat/excess steam from boilers could be used to generate cooling. That is how we started our absorption cooling division. Absorption chilling uses significantly less electricity as compared to electric chillers. It uses water as a refrigerant, which is harmless to the environment. Then went onto water treatment, chemicals and power EPC.
All along, our thinking has been along these lines, but I would also add that it made economic sense.
We have always looked at the environment as one of our key stakeholders. After I came in, I felt strongly about moving the company more and more towards alternate energy, the environment, and how we can use the sun and solar as a burner. Although we have a set up and have done some very interesting projects, hybridizing solar and rooftop solar PV, we are yet to see this business take off.
I remember during my father’s time in the early 1980s, he actually signed up to bring wind energy to India. He was a true visionary. But unfortunately at the time, the country was not ready (in terms of reforms, policies, technology and costs) and therefore, it did not work. The whole ecosystem has to be amenable to change. But he was thinking about it already in those days. We did not get into wind, because we found that in India the wind game had a lot to do with land acquisition, which was not our forte.
Thermax has been a pioneer in terms of converting waste to energy, in the form of heating, cooling or power – whether it be any biomass waste, distillery waste (spentwash) or waste heat.
We have done some very good projects in CHPC – combined heating power and cooling. In the cooling business, we have pioneered some very good work with heat pumps using geothermal energy; in our water and waste division, we are focusing on water recycling, since it is such a precious commodity. Our chemical business is geared mainly towards speciality resins that are used for bespoke applications.
So, overall, we are an engineering company focused on excellent project management and products, many of which find their use in niche applications.
You have turned Thermax into a global player. You have production facilities in Denmark, Germany and China
The company is focused on the international market, not just for sales and service, but also manufacturing our products, wherever it makes strategic sense.
As a group you are serving 75 countries. What have you learnt from your international expansion and what would you say to other aspiring Indian entrepreneurs?
We are very small in this sense. Our international activities account for approx. 30% of our turnover. We aim to enhance it to 50%. Both Denmark and Germany have come into our fold through the acquisition route.
The biggest success for Thermax has been the strategic fit of these acquisitions into the businesses. They became a success predominantly because the division itself felt the need for that company in its fold. It was not a push from the corporate office; neither is it involved in running the business – people at all levels are integrated and participating. We are yet to get a synergistic value from these acquisitions, which will happen over time.
Apart from Indonesia, which we have not yet started, we have a manufacturing plant that we started from scratch, in China. Unfortunately, it has not been the best of experiences. We started it about 5-6 years ago as a wholly owned foreign enterprise. We started it because 50% of the sales of vapor absorption chillers is in China, making it our biggest market. Unfortunately, China is now going through a downturn. The pie has shrunk, and there are many Chinese players who manufacture this product, who seem to have an advantage over us. Today, we are using it as a manufacturing base to export to the world. When we started, it had a significant cost advantage, whether it was labor or the purchase of raw materials. Today it has reversed. The cost advantage is no more and presently it is more expensive to manufacture there than in India.
How important is the US to Thermax?
We do not manufacture in the US, but have a sales and service arm for two of our products lines – vapor absorption chillers and ion exchange resins. It does not make sense manufacturing in the US; however, having a front end that works very close to the customer to develop new applications is what is required.
What is your opinion of Make in India and its importance for Thermax?
Bringing manufacturing from the present 15% to 25% of GDP is a very ambitious objective. I feel that India can position itself as a lower cost, high quality base, especially in the field of engineering because our engineering talent is great. We are the IT providers for the world, but we must look at what we can do in India. There is a huge amount of potential here.
Manufacturing on the other hand is a challenge, with land acquisition, large number of permissions to be taken, inflexible labor policies, inconsistent taxes and so on. We need to focus on significantly improving the ease of doing business in our country. Transparency and flexibility, along with fairness, are crucial when creating a friendly business environment. Proper infrastructure is key, corruption must be tackled and our youngsters must be provided with the appropriate skills.
However, I would say that we are genuinely trying to solve many pieces of this complex jigsaw puzzle. There is a lot of work to be done, but the outcome, if done diligently, could be significant.
How do you view the position of women in the society today?
India is a very complex country. Ironically, we have the richest and most literate people in the world, and yet we also have the poorest of poor. Similarly our country has many successful women at the helm of most of our banks; we had a woman as our Prime Minister, a lot of women in politics; and yet, the overall situation of women in Indian society has a long way to go.
In our own company, we have always been very keen to increase the number of women. But unless we have many more women in our colleges taking up engineering, combined with a change in some of our practices and policies in the manufacturing workplace, we will not be able to achieve this.
I also feel that women (especially mothers) need to invest in their boys – treating both sexes equally – not treating their sons as kings, who, as they grow up, forget how to lift a finger, how to respect women and treat them as equals.