Birla says gas price rising in India when it's falling in the US

Kumar Mangalam Birla, chairman of the A V Birla group, thinks the US is now a better destination than India for investments in manufacturing.

For, energy prices in India are going up at a time when they are falling in the US, he said in a veiled reference to the government’s decision on Thursday to double the price of natural gas to $8.4 per million metric British thermal units (mmBtu) from April 2014.

The gas price hike is likely to raise the power bill of fertiliser companies by Rs 8,000 crore.

This makes the US an attractive destination for investing in industries such as fertilisers, said Birla.

‘’The US is an interesting place to invest in manufacturing. Shale gas mining has truly turned into an inflection point in the US, probably one of the most important economic turning points that one can witness in one’s lifetime. With the cost of energy in US falling significantly, manufacturing has turned competitive. In contrast, manufacturing has turned difficult in India. If you are putting up a fertiliser plant in India vis-a-vis in the US, challenges are different,” Birla said.

Birla’s stance on the manufacturing sector in India contrasts with his optimism about banking.

He exuded confidence that group firm Aditya Birla Nuvo Ltd (ABNL) will likely bag a banking licence in spite of the stringent norms set for aspirants by the RBI.

“I don’t see any reason why we will not get a banking licence,” he said.

ABNL, the holding company of Aditya Birla Financial Services, however, is yet to formally apply for a banking licence, but has been saying it will do so before the July 1 deadline as its board has already approved the proposal.

“I think India is hugely under-banked and for the country to grow at 8%, we need much more credit delivery and banks. It makes a good business proposition,” Birla told reporters on the sidelines of an event in Kolkata.

Like in manufacturing, Birla said the group will continue to suffer some pain in its retail foray. Aditya Birla Retail Ltd runs More, a modern retail chain. Birla has also recently acquired the Pantaloon chain from the Kishore Biyani-led Future Group.

“In retail we are quite far away from where we wanted to be. The business is tough with thin margins but every month we are getting better,” Birla said.