CII: 470-bn Mumbai metro project has great investment opportunities
There is a sense of urgency today in the usage of construction equipment. Our industry today stands at $ 4 billion, and is poised to grow to $ 15 billion in the next decade.
The challenge and opportunities in furthering the infrastructure in the country today was discussed at length at the Conference on Infrastructure Projects in India, organised by the Indian Earthmoving & Construction Industry Association Limited (IECIAL), which is affiliated to the Confederation of Indian Industry (CII). The focus of the conference was on business opportunities and financing in this sector, and key local and international players put forth their views.
Ranaveer Sinha, Chairman, IECIAL, and MD, Telco Construction Equipment Col Ltd, said that with $1 trillion to be spent on the development of infrastructure in the country in the next Five Year Plan, it was imperative that infrastructure be actually advanced at a rapid pace. “There is a sense of urgency today in the usage of construction equipment. Our industry today stands at $ 4 billion, and is poised to grow to $ 15 billion in the next decade.
Our GDP having an uncanny resemblance to China only means that this is a time of great opportunity for component manufactures too. We are on the threshold of the times faced by the auto industry, when India became a hunting ground for the world auto component industry. This can be the sourcing ground for hydraulics and earthmoving equipments. However, we ought to develop regulations for conducting ethical business practices, while at the same time, the government ought to put restrictions on the import of second-hand equipment. The other challenge is of skilled manpower, while we also have to develop ways to counter the environment bogey, which acts as a stumbling block,” he elaborated.
David Philips, MD, Off-Highway Research, showed the correlation in the infrastructure projects and investments thereof, between China and India. Off-Highway Research is a credible industry analyst for earthmoving and construction equipment industry. He said that although the equipment sales in both the US and Europe had peaked in 2005 and 2007 respectively, it was unlikely that they would see such sales numbers again. He revealed, “China alone accounted for 66 per cent of the global sales of construction equipments in 2010, and its production capacity is projected to surge to 425,000 units in 2012. If India has to see an equivalent growth rate at par with China, then it will have to focus on long term growth of crawler excavators and wheeler loaders. However, one can be assured that Indian construction equipment sales will exceed 5 per cent over the next five years, and hence we have to be watchful of our steps in this period.”
GR Madan, Director – MRTS, Mumbai Metropolitan Region Development Authority (MMRDA), gave a bird's eye view of the Mumbai metro rail project. He explained the transport and its infrastructure crisis in Mumbai, and made his case for the need of the metro project. “This will be the biggest project based on a PPP model, and the first phase of the project will soon see its successful completion. In all, the nine corridors of the metro rail which will cover 146.5 kms, and will cost Rs 470 billion. This hence offers the industry a vibrant scope for investment, what with 13 million Mumbaikars using public transport,” Madan said, inviting industry stalwarts to explore investment options.
Kevin Thieneman, Chairman, Caterpillar India, articulated that the fractured systems were being a roadblock for India. “Any customer would prefer to look overseas for components, as they are giving 50 per cent better efficiency. So it is essential that this industry be foresighted in improving the overall environment of the industry. The onus of training the equipment operators is on us. There has been a lot written about infrastructure deficits but we now need to work on solving them,” he said.
In a concise manner, Steve Filipov, President – Developing Market and Strategic Accounts, Terex Corporation, gave the three essential focus areas of the industry. “We ought to focus on promoting safety for the workers as well as for attracting investment; we have to find ways and means to improve upon the inappropriate business practices prevailing in the industry today; and we have to ensure that the government sees the need for investment in infrastructure. It is ironic that the US hasn't seen any infrastructure investment since the 1970s, and there are lessons from such international examples for us to learn,” he said.
Glenville da Silva, Vice Chairman, IECIAL, and VP, Volvo India, explained how the spend on infrastructure in the country was likely to go up to $ 1 trillion over the next five years. “The focus areas for infrastructure development will continue to be on roads, railway and urban works, and the power sector,” he said. Ravi Shreehari, Associate VP and Head – Business Development, IL&FS Transportation Networks, anticipated investments of $ 492 billion, with the National Highway Development Project (NHDP) alone bringing in an investment of $ 54.1 billion by 2012. “The government-set target of completing 20 kms of road in a day is twice more than the current rate of road completion of 9 km/day. Hence, we have to work towards the key success drivers of understanding contract capacity, financing capability and the government machinery. The challenges towards achieving these goals are the lack of a nationwide database of contractors, cumbersome tax and legal issues, complicated issues with operations, and the lack of skilled staff. This has to be seen in the light of the fact that road projects are sanctioned with political interests, instead of economic interests,” he said.
The discussion on industry perspectives on environment and safety for sustainable infrastructure development saw industry stalwarts agreeing that work conditions at infrastructure development sites were still unsafe. While 56 per cent of accidents were due to people falling from a great height, cave-ins caused 71 of accidents for the period 2003-2010. Employment in construction had reached 75 million in 2010, unskilled labour constituted 55 per cent of this number. So, the simplest ways to ensure reduced fatality at the workplace were awareness, proper equipment and training. Discussions about emissions and regulations brought to fore the understanding that the next emission reduction would be targetted towards carbon dioxide and ultra low sulphur fuel.
Get Free Daily Trading Ideas on your phone...Click Here!