Mumbai, March 22 Amid concerns over a surge in import bills due to rising commodity prices in the wake of the Middle East conflict, Larsen & Toubro is hoping that the government will continue with its capital expenditure, even if it means a widening of the fiscal deficit.
The engineering, procurement, and construction major believes that the government should borrow more if needed to continue with capital expenditure, a senior official has said.
"The import bill will increase due to rising oil and gas prices. The government will need to manage this. They may temporarily increase the deficit, or they may borrow more," Deputy Managing Director Subramanian Sarma told reporters over the weekend.
"Overall, our fiscal situation is quite good... we have enough flexibility so that we don't compromise on capital for infrastructure," Sarma added.
He also noted that India has been able to curtail its fiscal deficit after the impact of the Covid pandemic.
Spending on infrastructure is necessary to achieve the goals of Viksit Bharat 2047, Sarma said.
Even the US, which, along with Israel, started the conflict by attacking Iran, leading to subsequent retaliations and the hardening of commodity prices, is aware of the challenges and is implementing strategies to prevent oil prices from skyrocketing.
The ongoing crisis will lead to a re-evaluation of our dependence on oil and gas for energy needs, and will highlight the problems caused by the Strait of Hormuz, Sarma said, adding that this may lead to faster adoption of non-fossil fuel sources such as green hydrogen and renewable energy.
L&T expects thermal power to remain the mainstay of energy needs, and is trying to capitalize on other opportunities that will arise through the transition to newer energy sources, Sarma said.
Its green hydrogen production is doing well, and the company has increased its capacity from 0.5 MW to 4 MW, Sarma said, adding that its current manufacturing capacity is 250 MW per year. About 95 MW of capacity will be used at a facility in Panipat being built for Indian Oil Corporation, he said.
At Kandla in Gujarat, where it is establishing a green hydrogen plant, the first of the six phases will be built at an investment of USD 1.5-2 billion, he said.
Regarding nuclear power, the company is in discussions with technology providers for partnerships, and believes that the government will build pressurized heavy water reactors, while the private sector will handle the small and modular reactors.
L&T will be ready for all the nuclear energy projects as tenders start coming, Sarma said, noting that the changes brought about by the passage of the SHAKTI Bill will help the sector.
As part of its diversification efforts, it is also looking at expanding into new geographies, including Indonesia and Australia, and is also in talks with oil companies in Africa, he said.