Doing business in India – exploring opportunity for North Sea companies

The UK used to be known as the colonial power in India. However, today, the power is all with the rapidly expanding Indian economy.

A veritable powerhouse of a nation, India is expected to grow its economy by at least 7-8% a year for the next 10 years, a level of growth the UK is unlikely to ever see again.

Against this background, companies that are proactive are in a good position to take advantage of the situation and help guide future policy. Traditionally, India has been very inward-looking, but current and growing demands on energy and infrastructure mean that this great country is opening up to overseas investors, particularly in the oil and gas sector.

However, the Indian national oil and gas companies are also looking for opportunities overseas to invest to satisfy the growth in demand.

The interesting thing about the current economy in India is that, with so much inward investment to the country there is a lot of competition for employees across a wide variety of industries.

While there is no shortage of people who are willing to work – indeed, the work ethic in India is amazing – there is a problem with sourcing appropriately qualified and skilled staff, particularly in a sector like oil and gas; an issue UK operators will also identify with. The Delhi government has done a tremendous job over the last 40 years raising literacy levels from 28% of the population to about 65%. Investment in universities has also followed, but unfortunately not quickly enough to meet the needs of business.

That said, there are a large number of highly qualified people working in India, but they are very much in demand. As a result, there is a definite fight for resource, with a large staff turnover as people move from job to job.

What surprises many overseas companies is where the competition for educated employees comes from. In India, many university graduates work in call centres in jobs that most UK firms would not see as requiring a degree, such is the demand for trained individuals.

This is where UK firms can bring an advantage; the level of English spoken across the country and by graduates is very good, the problem is gaining appropriate skills in the industry.

The recent IPO (initial public offering) in India by Cairn Energy, setting up an Indian-listed company, highlights the way UK companies can be used to bring the right skills to India and be a success.

The Cairn business is now run by Indian nationals rather than UK expatriates, as previously.

One of the main issues with working in India is the sheer level of bureaucracy involved. The saying goes that the Indian government learned about red tape from Britain, and in many cases, this is true.

A lot of the systems are now very old-fashioned and, while there are some similarities with the UK, even today, having local advisers who understand the varying legal and reporting requirements at local, regional and national government levels is a vital first start for anyone wishing to do business on the Indian sub-continent.

In respect to oil and gas, a growing business for India, expectation is that this country will need expert help from outside partners to help develop fields and extract resource as well as build pipeline infrastructure.

This means that Indian companies are beginning to open themselves up to outside investors and partners as they try to bring in the experience they need.

A lot of the red tape does not necessarily consider how to deal with these outside investors and partners, therefore new practice is being established all the time and those who are in early have a chance to shape the future for everyone else.

This is especially important when we take into account the Indian government’s new exploration licensing policy (NELP).

It is not by accident that some majors have not been granted exploration licences; instead, the government prefers to keep control within a group of smaller, Indian national companies.

However, these companies still need help. They need experts and partners that can really deliver change for them and a quick return.

India is already one of the largest energy consumers in Asia and is committed to developing its own oil and gas resources.

But it currently imports about three-quarters of its oil needs, and this is set to rise to 85% if nothing is done. The pressure to perform is certainly being applied.

As a result of the growth and development in oil and gas, there is also high demand for service companies. This is an area where local firms have no expertise and require resources to be bought in. It is also clear that when it comes to future licence grants, it will be an easier process for those that have already invested in India.

It is rare for there to be an opportunity to make an impact in such a powerful economy as India, but that is the situation in this case. Companies making an early entry to the market, investing and supporting local business and, importantly, training staff, will be in a position to set out a roadmap for the development of the oil and gas industry in India.

Moira Lawrence is audit director at Ernst & Young, Aberdeen