Larsen & Toubro and ReNew Power on Thursday signed an agreement to tap $2 billion green hydrogen business opportunities in two years in India and the neighbouring countries. SN Subrahmanyan, CEO & MD, and Subramanian Sarma, Wholetime Director & Senior Executive Vice President (Energy), L&T, in conversation with ET NOW.
What I would love to understand from you is does L&T or the rest of the industry who are getting into the green hydrogen business, need incentives from the government? Is this a business that has the ROI that will justify the investments?
Subramanian Sarma: It is a very interesting question because it is kind of a chicken and egg story here. For the economies to work, the demand has to grow and for the demand to pick up, there has to be some enabling policies. Today, every country and every organization will have to start the green hydrogen journey. This will help in initial demand creation. Every country and every company will have to bear some amount of premium or cost to enable this transition.
Therefore each of these projects — though Green Hydrogen may be more expensive than the other alternate resources — will find its place and its own standalone viability and then over a period of time, it has to compete with the other alternate resources which will happen as the demand picks up.
To cut a long story short, the kind of support we will need from the government is more with respect to creating demand and launching that transition process and each of the projects.
We have already started to see that in some countries. Private equity fund managers are talking about reallocating more towards green hydrogen. Is your partnership with ReNew exclusive? Are you going to be on the hunt for other partners and is it only for India?
SN Subrahmanyan: We are an 82-year old organization. We are not known to change partners very often. We believe in the firm way of institutional relationships. So once we sign up with somebody, that lasts for a very long time and that is how it has been.
ReNew’s Sumant Sinha himself is a professional. He was an executive like us. He started this venture and he has come a long way and he has established one of the largest bases on renewable power in the country. He has got a fine balance sheet. His PAT recently was an enormous success.
From our point of view, it combines the engineering, BPC manufacturing and the experiences of L&T including our strong balance sheet with the spirit and entrepreneurism and the capability of Sumant Sinha in the renewable space. It is a partnership which will last its mile and we intend to take it forward.
I am sure both the organizations will work together to bring about a change in India’s green landscape, provide alternative fuel and make mutually beneficial moves from the organisation’s point of view and our stakeholders point of view.