Trends

Stepping Up

Indian-National-HighwaysINJECTIONS of reform are a sign of growing urgency for development in the life of a nation. At the beginning of 2017, India’s road elephant, was ambling lazily on the growth highway relatively unmindful of its intended destination and targets, anticipating a shot of much needed GST.

Now midway into the year, with the Goods and Services Tax regime beginning to flow into its bloodstream – also coupled with the need to keep up pace with the Chinese economic dragon which overtook it long ago – the pachyderm has picked up pace, and seems to be breaking into a semblance of a run.
On the roads and highways accomplishment front, however, it is not yet the 42 km per day run promised originally.

To be fair however there has been progressive improvement. In a political scenario where comparison of work with the previous government has now become the norm, it is easy to see that the NDA has stolen a march over the UPA. Things have come a long way from three years ago, a period when road and highway construction projects could not gather pace with as many as 400 projects stonewalled due to problems related to land acquisition, environment and forest clearances, recalcitrant contractors and bank non-performing assets piling up.

According to data released by the Roads and Highways Ministry the work order for highway expansion has shot up by 122 per cent during the first three years of the Narendra Modi government with the pace of construction going up by 25 per cent.

In 2016-17, 23 km of roads were constructed per day, up from 16.6 km a day in 2015-16.

With the acceleration in award of works to road builders – over 11,000 km on an average in the past three years as against only 5,000 during the UPA’s corresponding period of reign — the view obtaining now among construction sector watchers is that this could translate into improved road construction achievement by April 2019 when the nation faces its next parliamentary election. For the current financial year, the government has set the target of awarding at least 30 per cent of highway projects on public private partnership (PPP) against last year’s 17 per cent projects. The overall target is to increase the national highways length to two lakh kilometres.

The introduction of 100 per cent Foreign Direct Investment in the Roads and Highway sector has come as a shot in the arm for the nation – greater access to capital to fund infrastructure and construction technology requirements is a much needed booster shot. According to industry estimates, with more overseas players entering the fray, investment in road projects is expected to double to Rs 9.8 trillion over the next five years. FDI will provide the required push to the primary market while boosting secondary market opportunities. For Indian project owners working primarily on an asset aggregation platform the availability of foreign capital comes as a godsend. It affords them a chance to take advantage of the technological excellence of international firms and to adopt global best practices in infrastructure development.

It is being expected that the ministry will be in a position to achieve more than 30 km of highway construction per day. That optimistic view is bolstered by the Motilal Oswal Report which suggests a pickup in project momentum. In the Union Budget 2017-18, the Centre has allotted Rs 64,000 crore to the NHAI for roads and highways and Rs 27,000 crore for the Pradhan Mantri Gram Sadak Yojana, a programme focused on rural roads. In May the maiden masala bond issue of the National Highways Authority of India received a strong response at the London Stock Exchange from investors, attracting bids worth over Rs 3,000 crore. Through the issue the agency aims to raise Rs 5,000 crore which will be used for India's infrastructure projects. There are also plans to set up logistics parks across the nation to aid the industrial flagship project ‘Make in India’ to subtract costs and to promote bio-fuels and electric vehicles. The current thrust areas of the roads ministry largely includes the states in the arc of the Himalayas like Uttarakhand and extends to the Northeast. In the final analysis based on the state of projects the total road-spend will be a whopping Rs 6 lakh crore!

As is his wont, Nitin Gadkari, Union Minister for Road Transport, Highways and Shipping, is given to maintain that the government will achieve 40 km road construction target by the end of March 2018. This when the NHAI could achieve only about 4,500-5,000km of road projects awards as on 31st March 2016-17 against the earlier plan of 15,000 km.

In conversation with this writer at a conference in Mumbai the lawmaker explained the road mission thus, “If the targets seem higher it is mainly on account of the government’s ambitions for national development and growth. It is a reflection of our commitment to historical transformation.”

 

Inroads Abroad

The ambitious streak is not limited to domestic projects. In early June the government was examining a proposal to launch a dedicated international subsidiary of the National Highways Authority of India (NHAI) to take up joint ventures for road construction in neighbouring countries like Iran, Nepal, Bhutan, Bangladesh, Myanmar and Sri Lanka. It is pointed out that the subsidiary NHAI International could be in the form of a special purpose vehicle (SPV) which will collaborate with foreign companies to bag international projects. The move is based on positive feedback from Sri Lanka with Colombo agreeing to allot a couple of road projects in the north of that country as also Iran with which India is collaborating in the development of Chabahar Port. The road and highway construction projects include tunnels, over-bridges and roadside amenities.

Further with an eye on the encirclement by China, India is working on a slew of linkages – road and bridge projects to improve connectivity with Bangladesh, Nepal and Myanmar. These strategic projects by the state-run National Highways and Infrastructure Development Corp. Ltd (NHIDCL) include a bridge on the Feni river in Tripura, which will connect Agaratala with Bangladesh’s Chittagong port and a bridge over the river Mechi which will link Bhadrapur in Nepal with Galgalia in Bihar. Other projects include a 300 km road network in Nepal’s Terai region. Another road network is being built to connect Aizawl in Mizoram with Kaladan in Myanmar and Imphal in Manipur with Tamu, also in Myanmar. India will invest Rs6,168 crore for widening and upgrading the 351 km road between Aizawl and Tuipang in Mizoram which is part of the Kaladan Multimodal Transit project, which will connect Kolkata with the Sittwe port in Myanmar, and then further to Mizoram by river and road. All these projects are part of the Great Asian Highway project, a 141,000 km road network connecting 32 Asian countries.

India is moving ahead with its plans of accessing transnational multi-modal connectivity to articulate its role in the proposed transportation architecture in the region and beyond. It has been instrumental in implementing the Rs 5,000 crore India-Myanmar-Thailand Trilateral Highway, which will run from Moreh in Manipur to Mae Sot in Thailand via Myanmar. The 1,400 km long highway to start soon will link the country with Southeast Asia by land, which would give a boost to trade, business, health, education and tourism among the countries.

Since the government could not meet its target of awarding 25,000 km of road projects last fiscal there is now a large pipeline of road projects to be awarded under the hybrid annuity model (HAM) and engineering, procurement and construction (EPC) models. Meanwhile the toll-operate-transfer (TOT) model for leasing operational highway assets to private players for maintenance and toll collection which was approved last year by the Union cabinet has elicited interest from several international funds. For instance, Spanish infrastructure firm Abertis Infraestructuras SA entered the fray in 2016 buying toll road assets in South India from the Macquarie Group.

It was said initially that monetisation of public-funded highway projects could result in funds in the range of Rs 80,000 to Rs 1 lakh crore. With the bidding of the first batch of highways to soon begin, the government is hopeful of raising the money to be reinvested in building new highways. Market feedback indicates that certain institutional investors from outside the country have long-term investment appetite and are keen to participate in operational highway projects with stable toll revenue outlook. Since several investors – these include the Canadian Pension Fund, Abu Dhabi Investment Fund and some from the US, Europe and Singapore – have at meetings facilitated by Morgan Stanley and Brookfield Asset Management, expressed interest in buying various national highway projects identified by the government for monetisation, the Ministry of Roads and Highways has been working to formulate a model concession agreement for its projects to suit the former’s requirements.

The government has been encouraging and facilitating private sector investment and participation in the roads sector through various policy measures and incentives. This has led to growing interest of global infrastructure firms in the roads and highways sector. A fresh infusion of capital and increased access to innovative construction technology will help speed up development,” says Bajrang Kumar Choudhary, Managing Director, Bharat Road Networks Limited, a leading BOT operator promoted by SREI Infrastructure Finance. The company is associated with the development, operation and maintenance of national and state highway projects in states like Uttar Pradesh, Kerala, Haryana, Madhya Pradesh, Maharashtra and Odisha.

Companies are keenly eyeing project tie ups with foreign firms in a bid to participate in road projects both under the new toll-operate-transfer and HAM models. A case in point being the road toll management company MEP Infrastructure Developers Ltd which is parleying with South Korean, Chinese and Japanese infrastructure companies to form joint ventures for road projects under HAM in India. The firm is planning to bid for about 6,500 km of road projects under HAM has over the past year won six projects along with the Indian unit of its Spanish joint venture partner Sanjose India Infrastructure and Construction Pvt. Ltd. Jayant Mhaiskar, Managing Director, MEP Infrastructure Developers Ltd, explained, “Partnership with overseas infrastructure firms will give MEP a foot in the door of the Indian roads market.

 

Technology Transformers

With global best practices coming into vogue, particularly in the last 15 years or so, it has to be said that there has been appreciable improvement in terms of the quality of roads being laid. Modern roads with high levels of logistic efficiencies and superior transportation standards are becoming the new normal. Aided by increased understanding and usage of Highway Construction Technology, which finds reflection in projects from beginning to end in terms of planning, design, construction, delivery and operation, roads, bridges and tunnels are increasingly becoming more efficient and safer for movement of people and goods.

Now with clear directives being issued by the ministry to constructors for a consolidated approach to existing projects, adherence to strict implementation timelines, stringent monitoring of work on rural roads, and enhanced use of technologies to ramp of road building, India looks to be on actions stations on the roads and highways front.

To ensure efficient execution of all projects and to minimise external dependence reputed contractors like GMR, HCC, L&T and IL&FS are known to deploy state of the art machinery and employ specialists divisions for tunneling, formwork, readymix concrete, asphalt, rock processing or precast. But very obviously considering the scale of the operations required to be accomplished across the nation more needs to be done to achieve the twin objectives of timely and qualitative completion of road projects.

Very obviously the answer lies in a next generation leap in areas like quality control, quality assurance, usage of alternate materials for soil-stabilisation, recycling of pavement materials, pavement preservation and cost-effective treatments to overcome poor performance of roads. Highway construction also takes into account factors such as current and expected traffic flows of the future -- currently slow average speeds on the highways due to high road density and non-availability of access-control measures allows cargo laden trucks to travel only 225-250 km per hour. There are then elements like geometric design of intersections and interchanges, pavement thickness and maintenance to be considered. Increasing demand to raise speed levels and quality of construction has led to use of innovative, cost saving and speed enhancing techniques. Firms like GMR took the early lead in introducing technologies for construction and maintenance of roads, highways, bridges and tunnels. These included solar lighting for highways and advanced tolling system with Electronic Toll Collection. Despite these introductions Indian roads are still regarded as lagging behind western countries owing to codes that have been in existence for far too long and also due to recalcitrance to change.

“Advanced technological solutions and equipment and change in existing operational methodologies are required to achieve high growth targets in the roads and highways segment,” says Ankineedu Maganti, Managing Director, Soma Enterprise Ltd.

Ergo, India’s emerging roads and highways landscape present a huge growth opportunity for technology providers. Global Road Technology, an Australian firm which has set up base in Pune, provides disruptive, and mine management technologies to create better and safer roads. Ben James, Chief Executive Officer, GRT, says, “The road sector in India is in desperate need of new technologies. Not only to improve speed and quality, but also to introduce more environmentally friendly construction techniques to cut down on quarrying, transportation of materials and use of water and fuel. Overall the fundamentals of the roads and highways space continue to present a major opportunity and we are investing accordingly.”

 

Equipment Push

It is not difficult at present to view the roads and highways sector as the bread and butter source for most construction equipment manufacturers. Even for digger giant JCB, which has positioned itself as a one stop shop for all equipment required for India’s infrastructure needs, there is no denying that it is the roads and highways sector which drives business volumes. Jasmeet Singh, Head, Corporate Communications and External Relations, JCB India Limited, explains, “When we look at the development around us it is clear that it is predominantly riding on the shoulders of the roads and highways. Essentially that means not just for us individually as a company, but even from the construction equipment industry perspective, the road and highways sector becomes a very important parameter of growth. As of now it is absolutely without doubt the star, the No 1 contributor.”
Spurred by the huge business prospects from the road sector, Volvo CE recently launched the midsized P6820C tracked paver. Powered by Volvo’s D6E COM IIIA/EPA Tier 3 engine, the paver is considerably more powerful than its predecessor, while providing lower fuel consumption and less noise. Dimitrov Krishnan, Vice President and Head, Volvo CE India, dilating on the reasons for the product’s launch, says, “We are seeing more interest in equipment at the lower end of the scale as construction of smaller roads in more rural areas gathers pace. This reflects a maturing of the road network in India with many major routes now well into development, requiring work on the byways which will feed the arterial roads.”
Schwing Stetter India, one of the country’s leading concrete equipment manufacturers, recently partnered with GOMACO Corporation to secure sales and service rights for the latter’s range of concrete paving products across the country. The company plans to target $10million in sales in India during its first year of association on the strength of the government’s roads and highways development drive. Anand Sundaresan, Chairman, Schwing Stetter Sales and Services Pvt. Ltd. said, “This is a great opportunity for concreting all the roads in the country. We are pleased to join the world leader in this space.”

Assuredly more such progressive partnerships will be needed to be formed as India looks to implement its road targets of 30 or 40 km or even higher per day. As Vivekanand Vanmeeganathan, Country Head & Managing Director, Caterpillar India observes, “There will be a growing requirement for players in the construction sector who can provide 360 degree solutions.”

Looks like the injection called reform could prove to be a big draw as India’s road builders’ step up the momentum of their work. The pachyderm’s lazy trot could soon metamorphose into a happy run.

Roads: Vital Stats

· India has a road network of over 4,689,842 km, the second largest in the world.
· National highways account for only two per cent of total road network but transport more than 40 per cent traffic.
· In 2016-17, 23 km of roads were constructed per day, up from 16.6 km a day in 2015-16.
· Roads space is forecasted to grow at CAGR of 36 per cent during 2016-2025.
· The overall target is to increase the national highways length to two lakh km.
· Out of 73 roads to be constructed along the 4,057 km-long India-China border only 21 ready.
· Investment in road projects is expected to double to Rs 9.8 trillion over the next five years.
· 2017-18 budget allocation: Rs 64,000 cr to NHAI for roads and highways; Rs 27,000 cr for PMGSY
· Total expected spending on road projects – Rs 6 lakh crore
· Road construction target by the end of March 2018 – 40 plus km

 

Slaying The Road Dragon

As the Chinese People’s Liberation Army nibbles away at India’s frontier’s posing a grave threat to security, there is increasing concern in the portals of power about the slow pace of road infrastructure work. The Indian government programme to construct border roads has not made much headway with completion deadlines being regularly revised.
Notwithstanding the recent commissioning of the 9.2 km long Bhupen Hazarika Setu on the Brahmaputra to be followed by the construction of a 2,000-kilometer highway in Arunachal Pradesh at a cost of $6 billion, infrastructure development on the Indian side seen as a fillip for speedy armed deployment along the northeastern border, is largely perceived as laggard and not keeping pace with the strides of the aggressive neighbour.
Consider the following: work for 73 roads along the 4,057 km-long India-China border were sanctioned by the UPA government in 2005 with a 2012 date of completion, but only 21 of them are ready. The targets have now been revised by the NDA to 2020.
Now with Beijing upping its infrastructure ante close to India’s Chicken’s Neck, this doesn’t go well with national security concerns. A serious review of how to quickly address the deficit is now taking place among the minders in New Delhi. Admittedly, the attention paid to border roads over the years by the Border Roads Organisation has been lopsided and riddled with many challenges including poor execution and monitoring, lack of expertise and resources, shortage of road construction and tunneling equipment for mountainous terrain, hurdles in the form of environmental and labour laws.

At present work is being carried out by three agencies: the Defence Ministry, with 33 staff roads under its wing has only completed 9; the Indo-Tibetan Border Police (ITBP) with 27 roads has barely completed five, while the China Study Group with 13 roads has only managed seven.

In recent years road development authorities have made several briefings to the Parliamentary Standing Committee on Defence, which share their concerns at the niggardly inadequate pace of work.

While that has assuredly led to matters being flagged, proposals to submit the task of building roads in mountainous terrain to private construction agencies instead of the Border Roads Organisation have been shot down on account of the huge disparity in the cost of construction — while the former offers a bill of Rs 6-7 crore per kilometre of road, the latter charges Rs 1.5-3 crore.
Very clearly India’s roads and highway minders need to first slay the internal devils stonewalling construction work on the borders. That should then allow the Indian Army to take on the Chinese dragon breathing down the Chicken’s Neck.


The Plastic Path

Tamil Nadu has shown the way for the country by using plastic trash to construct sustainable roads. The southern state has utilised a total of 1634.27 tonne of plastic waste to lay around 643.26 miles length of rural roads over the last five years. It is reported the movement to minimise plastic waste has gained strength with the help of groups engaged in collection, segregation, and shredding of plastic waste. The roads have been found to be perfectly safe and even much more durable than traditional roads. It takes 10 tonne of bitumen to construct a kilometre long road a width of 3.75m. In the case of polymer roads usage of a tonne of plastic and 9 tonne of bitumen leads to the saving of one tonne of bitumen amounting to about Rs 50,000.
Based on the technology, the country today has approximately 1 lakh km of plastic roads. The effective and low-cost technology has turned the harmful and toxic waste into a useful resource. The technology owes its existence to Prof R Vasudevan of the Department of Chemistry, Thiagarajar College of Engineering, Madurai. According to Vasudevan, plastic has good binding properties and roads constructed with such material are water-resistant, can withstand three times the load taken by normal roads and are longer lasting.

 

Terminal Push

Hyderabad AirportAs the country gets into action mode to raise infrastructure standards, here’s an update on the current status and future prospects of India’s aviation hubs.

There is a tale, perhaps apocryphal, of how a former bigwig in India’s Aviation Ministry, following a tour of the glitzy airport amenities at Singapore, expressed the fond hope of wanting airports across India, then reminiscent of grimy bus stations, to at least look ‘changa’ if not like Changi, the City State’s exemplary model of how international air terminals must aspire to look like…

HAPPILY enough in the wake of the new millennium, things have begun to happen at Ground Zero with the Government of India taking public ‘Lift kara de’ appeals for airport infrastructure very seriously.
That is manifest in the dramatic transformation witnessed over the past decade through brownfield airport developments at Mumbai and New Delhi and greenfield projects at Hyderabad and Bangalore.
Ergo, it is not without significance that all the four named Indian plane stations figured in the Skytrax Ranking of Top 100 airports of the World – the most prestigious accolades for the airport industry, and a global benchmark for airport excellence – in 2016.
Assuredly change is happening on the airports front, but the verdict from the experts is that for a country of the growing economic importance and sheer physical size like India, the available facilities are clearly niggardly. Indeed there is a universe of infrastructure deficit to be attended to beyond the partial, seemingly cosmetic, world of improvements.
“This is the decade of aviation. More than $6 billion has been invested in airport capacity over the last 10 years, but with current growth and focus on regional connectivity, more investments in new airports and augmentation of capacity at existing airports at metros is imperative and inevitable,” declares Dr S Vasudevan, Director - Aerospace & Defence and Global Lead - Airports, KPMG India.
As someone who knows his infrastructure onions – not to mention the accompanying tears – Vasudevan presents a very persuasive case for aviation minders to kickstart airport project works across the nation ASAP.
Consider the following. With air traffic growing at the rate of 24 per cent per annum, India continues to be the fastest growing civil aviation market in the world. At this rate of growth, India could well become the second largest aviation market in the world by 2026 after China.
Most leading airports in India - Delhi, Mumbai, Bangalore, Hyderabad, Chennai and Goa have seen an unprecedented growth in traffic in the last 3 years, the boom largely helped by consistently low fuel prices, growing per capita incomes and increasing propensity of a fast growing middle-class for domestic and international tourism.
The new National Civil Aviation Policy (2016) has also given fillip to the sector by liberalising bilateral air service agreements, promoting regional air connectivity, rationalising tax structures, easing regulatory norms and providing major incentives for encouraging private investment in airline and airport operations, all of which are expected to drive air traffic and overall industry growth even further in the next decade.
While all of that is good news for investors and developers, this growth has also created significant pressure for new passenger and cargo handling capacity at many airports. Take Mumbai, for example. With more than 46 million passengers having flown through it by March this year, Chhatrapati Shivaji International Airport (CSIA), surrounded by rash of slums at Dharavi, is easily the most constrained air facility in the world. Even at a conservative growth rate of 10 per cent per annum, CSIA would need additional capacity to handle more than 65 million passengers by 2021 and possibly more than a million tonnes of cargo, which will be very difficult to achieve in CSIA because of acute space constraints.
The urgency is further underscored by the fact that there has not been much movement on Mumbai’s second airport. The airport proposed to be developed at Navi Mumbai under the public-private partnership model, was approved by the Union Cabinet as early as July 2007. However, while the project has received all the major approvals required to commence work, it is doubtful if the airport will meet its operational deadline of December 2019 – “It is at least 4 years away,” predicts Vasudevan.
The dismal implementation record has only exacerbated functional pain with the forecast that air traffic will increase to a staggering 100 million passengers in 2035 from 35 million last year. The latest estimate of the project’s cost, courtesy the Civil Aviation Ministry, is $2.5 billion. This absence of planning and lack of decisiveness is not the case just with Maximum City. The Centre has not yet thought in terms of constructing a second air facility at Bangalore, Chennai, Kolkata and Hyderabad.
It is reported the master plan for the expansion of Delhi’s Indira Gandhi International Airport which involves building the fourth runway, construction of a new terminal and expansion of the existing ones is ready. However, the downside is that the airport is expected to be saturated by 2022-23 as it is expected to handle up to nine crore passengers by then. Incidentally it bears mention here that Bhiwadi in Rajasthan has been given site clearance for a second airport in the national capital region while even the Uttar Pradesh Government has proposed an alternative airport at Jewar.
That said, there has also been some forward movement. The Bangalore-based GMR Airports signed a concession agreement with the Goa Government to develop and operate greenfield airport project at Mopa in the north of the State. The first phase of the project is expected to be completed by financial year 2019-20. Meanwhile, work for the proposed airport at Purandhar near Pune has gained momentum after the Airports Authority of India (AAI) gave an in-principle nod for the site.
While it is not exactly a doomsday scenario yet, there is without doubt a terminal crisis slowly brewing out there. With 66.5 per cent of India’s total air traffic ascribed to six cities – Delhi, Mumbai, Bangalore, Chennai, Kolkata and Hyderabad – it is being projected that new airports would be needed by 2025-26 or even earlier.
Global aviation consultant CAPA in its India Aviation Outlook Report, 2017-18 offers the following critique, “Based on projected growth rates, most of the 40 largest airports in the country will exceed their design capacities within the next decade. However, it is a serious concern that there is no long-term vision for India’s airport capacity requirements. There will be unthinkable economic ramifications if air connectivity to India’s centres of commerce, industry and tourism is choked off due to airports being saturated.”

Action plan
Thankfully enough for India Inc looking to soar into an infrastructure growth orbit, it now looks like action stations. The urgency for movement on the planeport front couldn’t have come sooner in the year. It has found happy resonance in the Union Budget 2017 announcement with the government paving the way for monetisation of airport land.
While allowing private companies to manage and operate select airports in Tier II cities currently run by state-owned AAI under public-private partnerships, Union Finance Minister Arun Jaitley has spoken of reforms under which land utilisation in many of the AAI airports will now be allowed by changing existing regulations.
This move will open up portions of the 55,000 hectare of urban airport land available with the AAI for building multiplexes, shopping centres and convention centres and help generate additional revenues to be utilised to provide better facilities and reduce passenger charges.

Sidharath Kapur, President, GMR Airports Ltd, while lauding the move said, “The change of land use is excellent from the point of view of infrastructure deficit in the country. The reform will go a long way in improving the viability of the airports sector.”
What has transpired via the Union Budget announcement is only an extension of what the government has been quietly doing thus far. As part of its strategy to bolster aviation, the Centre has done an extensive city-by-city analysis of airport traffic projects which shows domestic air travel growing at 26.2 per cent last July. This robust growth in air traffic has caused capacity constraints and increasing congestion at the Indian airports and the problem appears large from the point of view of shortage of runway slots, parking bays and terminals.
It is easy to see that India has to get to work now since airport capacity constraints cannot be sorted out overnight with issues like land acquisition, securing approvals and clearances, not to mention design, construction and urban planning holding back project implementation. Experts are of the view that to meet air traffic growth of 10-20 per cent, airport capacity will have to be doubled across India over the next 10-15 years.

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A New Lease on Life

mining
Major reforms in government policy and mechanisation of Indian mines bode well for mining equipment OEMs, because last few years the mining sector was posting negative growth. Both these factors will give a new lease on life for equipment manufacturers, who were harshly impacted by a prolonged recession in the sector.

Early last year the government promulgated the Mines and Minerals (Development and Regulation) Amendment Ordinance, (MMDR), to bring about landmark reforms in India’s mining sector. The most important reform therein -- of open and transparent bidding for mining lease and concessions -- has opened up the sector, unleashing the latent potential of a sector mired in scams and sluggish growth till recently. Along with regularizing mining auction the Act also encourages modernization of Indian mines. Also India’s mineral and metal endowments are largely unmapped and unexplored, only about 13 percent of 575,000 square kilometers with geological potential in India has been explored in detail so far, with minimal private-sector involvement, according to the Federation of Indian Mineral Industries. The new mining ordinance will encourage further exploration activities to tap this largely untapped potential. While the Regulatory enablers are now in place, enablers on the demand side are also in place. Fuelled largely by the ‘Make in India’ campaign, growth of India’s manufacturing sector will turn demand for industrial commodities robust. And demand for coal from the power sector will fuel coal mining to fill the gap currently met by imported coal. The government has targeted an investment of a trillion rupees ($15 billion) over five years to double mining output and cut mineral imports. All these factors, of vast untapped reserves, the new MMDR, and mechanization of India’s mines, add up to a substantial market for mining equipment of all sorts. However, plenty of hurdles remain on the demand side for OEM suppliers, many of which can be removed by policy reforms.

 

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Making it Hydrophobic

WaterproofingAn insidious material, water has always been the bane of all construction materials, most of which will be destroyed by it given enough time. Now, as construction materials become more sophisticated, there are concomitant advances in waterproofing systems and methods, there is a shift from passive waterproofing to active waterproofing. And nanotechnology has opened up seminal possibilities of engineering hydrophobic construction materials and aggregates.

The demand for waterproofing systems and chemicals in India will likely increase by leaps and bounds in the near future. In keeping with the overall buoyant trend in the construction sector, this segment is poised to see robust demand. India's demand for housing is projected at 11 crore houses by 2022 according to KPMG. There is a huge wave of urban renovation and redevelopment projects in the housing and urban infra segments. Add to this the trillion dollar Budget to modernize India's infrastructure which will generate EPC projects in infra verticals like transport and power, and it all adds up to huge demand for waterproofing of all kinds of structures. According to 'India Construction Chemicals Market Forecast & Opportunities, 2018,' the Indian construction chemicals market is forecasted to witness exponential growth, especially in its admixtures segment in the next five years. The market revenue for the Indian construction chemicals market is expected to reach up to US $ 1.13 billion by the end of 2018. In 2012, the admixtures and waterproofing systems constituted over 60 per cent of the overall construction chemicals market in India. Major players include Pidilite Industries, BASF, Sika, McBauchemie, Fosroc, Chembond, Dow Corning, Chryso, Choksey Chemicals, Perma Construction Aids, Polygel India, Buildcore Chemicals, Bostik India, Nile Waterproofing Material Co, etc. The overall market is fairly consolidated but there is considerable fragmentation of individual products and application areas. There are a large number of global players operating in India. The top 7 players account for 50 per cent of the market; next 20 players 25 per cent and the remaining 25 per cent comprises of small and unorganized players. In the past there has been a considerable change in the market share of companies due to which medium-sized and regional manufacturers have gained considerable share of market. There are many other regional and smaller players as well. Approximately 300 companies are estimated to be operating in this segment.

Currently the Indian market is clocking a strong growth rate of 17 per cent per annum, where in the waterproofing segment has been clocking a CAGR of 9.2 per cent, which is projected to increase in the near future. FICCI predicts that the market size for construction chemicals has the potential to grow to Rs 5,000 crore over the next few years if the industry promotes itself professionally and increases the level of awareness in the construction industry. As per a knowledge paper by Tata Strategic Management Group, commissioned by FICCI, waterproofing chemicals is a major segment accounting for a 14 per cent share within the overall market for construction chemicals in India. The Indian construction chemical market has over 80 per cent business in new builds, which will increase demand for waterproofing in a major way. The size of this segment was estimated at Rs 500 crore in 2014.

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The Green Matrix


GreenEarthGlobeGlobal urban population is expected to grow from 47 per cent in 2000 to 70 per cent in 2050. Expansion of the built environment will destroy or disturb natural habitats on over 70 per cent of Earth’s land surface by 2032, driven by population growth and urbanization. If this trend continues, Earth as an habitat could be rendered uninhabitable by end of this 21st century itself. Therefore a paradigm shift is required in the concept of Green Buildings.

Due to its very nature of activity the Construction sector, has been among the most polluting sectors degrading the environment. Like mining it leaves a permanent trail of environmental destruction. Fortunately it is also among the best placed of all sectors to reverse rapid degradation of Mother Earth. And that awareness is evident in the new trend of eco friendly construction across the world. The entire construction industry -- from materials to methods to equipment, have now acquired a Green hue. And everybody wants a rub of that Green!

Green Parameters

  • Recyclable Materials
  • Renewable Energy
  • Water Conservation
  • Zero Discharge Habitats

The new buzz word in our sector is 'Eco-friendly' construction or Green Buildings. This is because there is now a paradigm shift in the way the concept of a building is defined, which is in an environmental context. The environmental concept of a building now encompasses 'embodied energy' in the building or its carbon footprint in terms of materials and construction processes. On occupancy and 'in use,' the next parameters are energy efficiency, water conservation, and its air quality. And the underlying denominator is the lifecycle of a structure, which means at the end of its lifecycle even in demolition it should be environmentally safe where in all materials can be recovered and recycled back into the construction cycle. It is important to recycle construction materials because buildings account for 20 per cent of global greenhouse gas emissions, that's 9 billion tons of carbon dioxide each year. Concrete, aluminum, and steel are among the materials with the highest embodied energy content and are also responsible for large quantities of CO2 emissions – for example, 9.8 million tons of CO2 are generated from the production of 76 million tons of finished concrete in the US. Existing building practices and technologies are inefficient and generate high levels of greenhouse gas pollution. For example, by using existing technologies, the EU could reduce emissions from the building sector by about 400 million tons of CO2. That’s more than the total EU greenhouse gas reduction commitment under the Kyoto accord.

Environmental Impact Assessment, or EIA, is the new Green Matrix to calculate the probable impact that a proposed project may have on the natural environment. A team of researchers from the Polytechnic University of Catalonia (UPC), in Spain has developed a method to evaluate the probable environmental impacts caused by a proposed project well in advance. With just the project data, the new method can calculate and predict up to 37 environmental impacts, which could help improve environmental management in the construction processes, the authors claim.

Although EIA is now a standard process in most projects at the initial concept and design stage, the construction company is often caught amidst conflicting priorities which take into account facade, console, ease of construction, maintenance expenditures, principal costs, etc. Amidst all these viability variables environmental impact is a very supplementary variable. Also, a few site control measures for the duration of construction can lessen the environmental impacts and also keep the neighbourhood at ease from annoyance at the construction site. Most importantly it is possible to amalgamate environmental considerations in the design process itself without incurring additional costs.

 

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Shoring up Efficiencies

Ports_CBTProjected cargo traffic to be handled by Indian ports by 2021-22 is 1,695 million metric tonne, according to a report of the National Transport Development Policy Committee. 2,422 million metric tonnes of cargo handling capacity will be required in Indian ports by 2021-22. For this, additional cargo handling capacity of 901 million metric tonnes is required to be created in Indian Ports in the next 6 to 7 years. Port Projects involving investment of over US $ 10 billion have been identified for award during the next five years. New construction opportunities abound, but existing ports need to shore up their efficiencies to attract more business.

The government's port led development augurs well for Indian ports but it needs to focus more on multi modal connectivity of existing ports rather than focus on developing new green field ports because India's individual major and non-major ports on India's west coast and east coast are already saturated with port capacity and there's intense competition among them to attract business. Under the circumstances existing ports need a two pronged strategy to become competitive and attract more business. First is to improve their road and rail connectivity and access to logistics infrastructure. The other thrust should be on developing port real estate in the form of SEZs (Special Economic Zones), and logistics and distribution parks.

 

Multi-modal connectivity

Underlining the importance of port connectivity to logistics infrastructure like road and rail connectivity, Vijay Kalantri, Chairman & Managing Director, Dighi Port Ltd, says, "We are setting up the first private port in the public private space near Mumbai and also establishing a Special Economic Zone around the port with modern infrastructure. The port is equipped with state-of-the-art facilities and forms an integral part of the Delhi-Mumbai Industrial Corridor (DMIC) and will have access to the Delhi Freight Corridor (DFC). The company’s growth prospects hinges on sound infrastructure policy supported by pragmatic investment policy. The speedy infrastructure development in the country in terms of roads , railways , ports , power and telecommunications will provide the necessary impetus to Dighi Port and enable the company to improve the overall economy of the region. Dighi will thus become a key catalyst in the growth and development of a vast stretch of the region it serves." A deep water, all-weather green field port in the Raigad district of Maharashtra, Dighi Port recently signed a 50 year "Build, Own, Operate, Share & Transfer (BOOST)" Concession Agreement with the Maharashtra Maritime Board (MMB), and the Ministry of Railways has approved a Dighi Port – Roha Rail connectivity project whose implementation will be through a JV route between Rail Vikas Nigam Limited (RVNL) and Dighi Port Limited (DPL). The railway line will be constructed as a feeder route to the Dedicated Freight Corridor linking JN Port to Ludhiana. It will have provision for running of double stack container trains and heavy freight trains.

Adani Ports and Special Economic Zone Ltd, (APSEZ), India’s largest port developer and part of the Adani Group, is another example of focusing on port real estate. Last year it formally began development of India’s first ever international transshipment project in Vizhinjam, Kerala, which is expected to be completed within the stipulated time period of four years. The project will be Kerala’s first ever deep water container transshipment port. Gautam Adani, Chairman, Adani Group, says, “We are honored by the trust bestowed on us by the Government of Kerala. Developing India’s first international deepwater seaport project in a record time of just one thousand days is another opportunity for us to fulfill our commitment to Nation Building. Given Vizhinjam’s access to prominent international waterways, the project will be a significant catalyst in positioning India strategically as a global transshipment hub. It will also help us in accelerating our journey towards achieving our vision of annually handling 200 million tons of cargo by 2020.” APSEZ is the country’s largest port company with footprint across the Indian seashore. It has proven expertise in building, operating and maintaining world class port infrastructure. The company currently operates ports in Mundra, Hazira, Tuna-Tekra (Kandla) and Dahej, in Gujarat, Dhamra in Odisha, and operates specialized coal handling facilities in Mormugao in Goa, and Visakhapatnam in Andhra Pradesh. It is currently setting up a container terminal at Ennore in Tamil Nadu. Just to underline the potential of port real estate like transshipment hubs, currently more than one million TEUs (twenty-foot equivalent units) of Indian cargo gets transshipped annually through foreign ports, such as Colombo in nearby Sri Lanka.

Another major player in the private sector is Essar Ports, which is already running ports across India. “The company has achieved another quarter of consistently strong performance. We are quite bullish at the moment with a few of our projects expected to start operations during this year. There is significant opportunity for the Indian port sector to multiply capacity and traffic over the next few years, which is being further strengthened through the government’s focus on the ‘Make in India’ campaign. We are well positioned to capture the growth,” says Rajiv Agarwal, Managing Director, Essar Ports Limited.

 

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Breeding Innovation

tech

The Indian market for ECE is now poised to become the test bed for setting up global benchmarks in technology for construction equipment. With major global brands available in the market, customers have become very demanding on both fronts - cost and quality. This is breeding tough competition and OEMs have to offer cutting edge technology in order to survive. The new Thumb Rule is, 'if a machine thrives in the Indian market, it will sell well in the global market.' 

 

India is emerging the biggest market for construction equipment in the world. Consequently most global OEMs in all segments of Earthmoving Construction Equipment (ECE) are present in this market. On the manufacturing side, India has a fully developed manufacturing ecology which is backed by a well incubated manufacturing base comprising Tier II and Tier III vendors of ancillaries and components available for OEM companies. It has end-to-end expertise starting from design and development of products, to validating them, to expert manufacturing execution systems, to aftermarket services like MRO and spare parts supply which are fully automated in many of these OEMs. Also the new focus on timely project execution (loaded with stiff penalties for time and cost overruns) has prompted a shift in customer preference to the TCO concept while purchasing an equipment. And their new demands are automation to speed up work cycle times, remote monitoring of equipment to ensure minimum downtime, and MRO analytics to ensure optimum equipment lifecycle management. Manufacturers are offering their latest innovations, which range from GPS and telematics for remote monitoring and maintenance to smart controls for ease of handling machines and better operator control. The other important tech trend is fuel efficient green machines with low emissions. And above all this, the 'Customer is King' now, who now wants the best quality at a reasonable price. The new shift to Total Cost of Ownership (TCO) means now Indian clients are willing to pay a price for good quality products backed by efficient MRO and aftermarket services. All they want is ease of maintenance and minimum downtime to speed up their project execution. To provide these needs of EPC contractors, most major OEMs in India are providing innovative and distinguishing feature on their machines.

With global OEMs playing in the Indian market, some technology-driven product features have become standard, such as; remote access devices, automatic controls to maneuver machines, more efficient (Tier III) engines, and cabin air-conditioning. These are gaining popularity among customers. Some recent product launches in excavators and backhoe loaders feature several additional functionalities, including service enablers such as the capability to send problem logs by sms to the nearest service point, and downloading historical data regarding engine status, hydraulic systems, fuel consumption, and the expected life of critical components. There are already numerous examples of very smart machines that can produce incredible results from graders that can self level a runway perfectly based on data being fed from readers at the front the machine, processed and sent as instructions to the back of the machine before it reaches the same patch of ground, to agricultural machinery that can deliver precise amounts of fertilizer and pesticide to every square meter of a field based on satellite data and ground testing.
We review cutting edge technology offered by some global majors in India:

JCB's ecoMAX and Livelink are a robust fuel saving engine and advanced telematics, respectively. The ecoMAX engine is available in the range of 76hp to 175hp, and is environment-friendly with low noise and vibration. The Livelink operates on the SOS principle - Service, Operation and Security. Currently available in the variants of backhoe loader – 3DX Xtra, 3DX Super and 4DX, Livelink will change the way companies operate loaders.

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The Road to Prosperity

road prosperity 500

Road stocks are getting as bullish as the accelerated pace of road construction. And NHAI, along with its new buddy NHIDCL, are doing a splendid job. From road contractors to OMTs, all are revving up for the great road race. However, the road ahead is still full of potholes, and quite a few speed breakers on the operational and Policy front. And only clever fiscal juggling will keep contractors out of the Cash Flow vortex.

As India's trillion dollar budget begins to modernize its infrastructure to global standards, it's the road sector that will get maximum allocation of funds. And yet due to the sheer size of India's road network what is being allocated is not enough to modernize the entire network. Although the focus to achieve this should be on networking rural India which is a geographical challenge (especially in the North-East and other hill sates) it is the freight routes of commercial value which need to be modernized, widened, and upgraded. The government has targeted awarding 8,500 km per year over the next two years, of which 10,000 km of roads will be awarded in the current financial year. However, the most critical issue of funding these road projects needs to be looked into immediately. The government might have underestimated how much money is needed to build that many kilometers. Just planned road projects alone will cost $17 billion this year compared with a budget allocation of about $7 billion. To bridge this gap, the Road Ministry plans to raise a $7 billion loan. Also, the highways sector saw a 48 per cent increase in outlay at Rs 42,913 crore in the Union Budget 2015-16. The planned allocation for the Ministry of Road and Highways has increased significantly to Rs 42,913 crore for the year 2015-16, compared to Rs 28,881 crore allocated in 2014-15. For 2015-16, the increased provisions have been made for the development of national highways, including projects relating to expressways and six-laning of crowded stretches of Golden Quadrilateral and two-laning of highways works under National Highways Development Project. Despite doubling this budgetary allocation of funds, they are still far short of the total amount of funds required to finance road projects currently on the anvil. Therefore there's an urgent need to attract private equity in the road sector, and currently few road contractors have shown any interest in a sector plagued with stalled projects and pending arbitrations.

Building risk appetite
Right now the balance sheet of road contractors are weighed down with heavy debt, having posted their worst results in the last five years. Their finances are so strained that most of them have a liquidity crunch and severe cash-flow problems are making them averse to bidding for new projects, especially big-ticket projects. For example, Delhi's Eastern Peripheral Expressway is part of a six-lane ring-road for the Capital. The project was first mooted nine years ago but failed to attract private bidders. Unwilling to wait any longer, the Road Ministry now intends spending almost $1 billion building the 135 km loop.

To attract private equity in road construction, the government recently took a series of important measures. The Cabinet recently approved a policy that will provide private developers with a $470 million bailout in order to complete 16 highways. The government will also provide $3 billion in seed capital for a new infrastructure fund, with the hope of attracting up to $30 billion of private equity. Also in future, public tenders will only be launched after all approvals have been secured, eliminating major hurdles like environmental clearance and land acquisition which stalled many road projects in the past. But the most important is reform is that some rules have been eased for the private sector, and financially stressed companies will now be allowed to exit projects, unlocking scarce capital for new projects. But the most important reform needed to attract private equity in the road sector is tweaking the business model for EPC road contractors and minor fine tuning the BOT and OMT models to make them more lucrative for road contractors. In fact a clear and consistent policy on tolls needs to be put in place for the private sector to become more active by creating an environment where investors and lenders are assured of consistent returns on their investment.

Plenty of opportunities will be generated in road construction in the near future. According to available data the value of roads and bridges infrastructure in India is projected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY12–17, and is expected to touch $19.2 billion by 2017. The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the period FY09-14. For FY14, India’s Planning Commission provided an outlay of $6.9 billion for the roads segment.

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