According to KPMG, India is set to become the third largest construction market in the world by 2025 with a size of $1 trillion, thanks to ramped up activity in the roads, buildings, irrigation, urban infrastructure and railways. India has the second largest road network across the world at 4.7 million km. This road network transports more than 60 per cent of all goods in the country and 85 per cent of India’s total passenger traffic. Road transportation has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country. The Indian roads carry almost 90 per cent of the country’s passenger traffic and around 65 per cent of its freight. In India sales of automobiles and movement of freight by roads is growing at a rapid rate. Cognizant of the need to create an adequate road network to cater to the increased traffic and movement of goods, Government of India has set earmarked 20 per cent of the investment of US$ 1 trillion reserved for infrastructure during the 12th Five-Year Plan (201217) to develop the country’s roads.
A Sustained Growth
India Ratings and Research (Ind-Ra) has maintained a stable outlook on the construction sector for FY18, driven by the expectation that the slow but steady increase in revenue and improvement in EBITDA margins seen during FY16 and 1HFY17 will continue in FY18. The sector is likely to witness a gradual improvement in credit metrics. The sector has seen improvement in liquidity position, with a significant improvement in cash flow from operations (CFO) in FY16, although it continued to remain negative. Liquidity is likely to improve further, with CFO improving over FY17-FY18 to reach near-zero levels. A positive CFO is imperative for the sector to fund its working capital, as bank credit growth to the sector plunged over FY16-FY17. However, maintaining improvement in cash flows over the medium term would depend on a prudent accumulation of orders.
India is on the verge of witnessing a sustained growth in infrastructure build up. The construction industry has been witness to a strong growth wave powered by large spends on housing, road, ports, water supply, and airport development. The construction sector has registered double-digit growth during the last few years and its share as a percentage of GDP has increased considerably as compared to the last decade. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017), which is double of that in the Eleventh five-year plan.
In the Union budget 2017-2018, released on 1st February 2017. In regards to the Government’s aim of the ‘Housing for All by 2022’, the Finance Minister in his Budget speech proposed to give ‘infrastructure’ status to affordable housing. Banks can now lend money to affordable housing projects under infrastructure category this move is expected to boost the volume of construction activity across the country. Other highlights from the Budget that will boost the Construction Sector:
- Pace of roads construction has increa-sed to 133 km per day against 73 km in 2011-14
- 2,000 kms of coastal roads identified for construction and development
Talking about construction equipment, Asia-Pacific is projected to register the highest growth in the heavy construction equipment market from 2016 to 2021 with India projected to be the fastest-growing market in the region. Overall volumes of construction equipment have increased to a four year high with 41.5% growth accounting to 52,100 units in 2016 compared to 36,800 units in 2015. With the Indian Government’s target of investing about $377 billion in infrastructure by 2019, the construction equipment market is expected to witness a high growth in this period.
India under Prime Minister Narendra Modi has accelerated its roads and highways projects by taking pace of highways development at 30km/day in May 2017, ac-cording to a report in The Financial Express.
Initial two years of Modi government had seen a gradual increase in the highways construction activity. The roads construction sector has entered into a higher growth trajectory in recent months.”As against 22.3 km per day in the last financial year, the pace of building highways has accelerated to 30 Km/day-mark in May, 2017,” the FE report said. In the first two months of 2017-18 fiscal year, the average roads construction stands at 26.6 km/day, that is much higher than the 19.26 km/day clocked in the same period last fiscal. “It, however, still falls short of the ministry’s ambitious 41 km/day target for the entire 2017-18 fiscal,” the report added. The report cites road transport ministry sources as saying that a total of 1,627 km highways have been built in the first two months of this fiscal: 1,176 km by ministry itself and state PWDs. Besides, a 435 km by NHAI and the balance 16 km by and National Highways and Infrastructure Development Corporation (NHIDCL).
The Union Minister of State for Road, Transport and Shipping has stated that the Government aims to boost corporate investment in roads and shipping sector, along with introducing business-friendly strategies that will balance profitability with effective project execution.
Some of the key investments and developments in the Indian roads sector are as follows:
- The National Highways and Infrastructure Development Corporation (NHIDCL) has been awarded a contract to build five all-weather access tunnels worth ` 23,000 crore (US$ 3.57 billion) in Jammu and Kashmir by 2024.
- Abertis Infraestructuras SA, a Spanish infrastructure firm, has agreed to buy two toll road assets in operation in South India from Macquarie Group for ` 1,000 crore(US$ 150 million) to scale up its presence in India.
In the Union Budget 2017-18, the Government of India has allotted ` 64,000 crore (US$ 9.55 billion) to NHAI for roads and highways and ` 27,000 crore (US$ 4.03 billion) for PMGSY.
Some of the recent developments are as follows:
The Cabinet Committee on Economic Affairs, Government of India, has approved the development of 19 kms long four laning from Pandoh Bypass end to Takoli section of National Highway (NH) -21 in Himachal Pradesh, which is estimated to cost ` 2,775.93 crore (US$ 430.27 million).
The Road Transport & Highways Ministry has invested around ` 3.17 trillion (US$ 47.55 billion), while the Shipping Ministry has invested around ` 80,000 crore (US$ 12.0 billion) in the past two and a half years for building world class highways and shipping infrastructure in the country.
Move Towards Economically Viable & Eco-Friendly Road Construction
Most of the technology leaders like Case, Caterpillar, Hitachi, Ingersoll-Rand, JCB, John Deere, Joy Mining equipment, Escort Komatsu, Lieberr, Poclain, Terex, Volvo are present in India as joint venture companies, or have set up their own manufacturing facilities (or marketing companies).
With the advancements in the field of road construction technology, the construction of rehabilitated roads, which support environment providing long durability to road infrastructure, is required utilizing alternative materials, industrial and construction wastes and by products, facilitating road travel, travelers comfort and safety together with cost effectiveness and sustainable development. Go green movement is gaining strength with increased global warming and climate changes. Going green in transportation projects implies environment friendly construction of roads with the availability of alternative materials and the unique question of disposal of non-decaying waste posing a problem for environmental protection. With increased industrialization and growth of population with increasing quantities of waste world over together with increased demand for traditional road construction materials such as bitumen, cement, aggregate etc, the question is of sustainable development. With advances in science and technology, the use of non-decaying materials such as Plastic, Blast furnace slag, Fly ash, Scrap tyres, Mine wastes, Marble dust etc, offer an economically viable and sustainable alternative towards increasing demand for better road construction. In this way these materials can be utilized in an eco friendly way, providing solutions to their disposal with a commitment towards development of infra.
Green road construction technology aims at low cost road construction, offering employment opportunities to the masses generating income at the disposal of the people involved thus improving the standard of living of the community at large. The technology also leads to appropriate and optimum resources utilization enhancing the country’s potential to grow faster by eliminating the possibility of resource erosion (depletion), it also provides an opportunity to employ alternatives which are cheaper, easily available and are eco friendly. The need of the hour is to develop and accept the designs and technology which is environment friendly and economical feasible adding an edge to Road construction with lower cost and less maintenance.
The fast-changing and varied requirements of a developing nation. It is no longer enough to create one machine and expect to suit the needs of all. Buyers have become more educated and demanding in terms of wanting machines suited to the kind of work and environment that they work in. The biggest example of this is the motor grader of international brands being obsolete for use in the construction of narrow rural roads due to its size despite the technology being more advanced and quality of machines being superior. There is no doubt that customisation is now key when it comes to the world of development. Customisations have to be in sync with the market and the on-ground realities for making the most of it.
‘For most developed countries, there is only one single language that is used for communication across the country. But with a country like India where there is no unifying language and different language is spoken in every district and state, it becomes counter productive to have all instructions about the machine in a single language. This simple customisation helps interact better with the operator. Machine Abuse And Fuel Theft Are Major issue across the country. Uncertified operators tend to work the machines inappropriately. Simple software customisations help keep a log of the machine’s data for future reference. It also helps keep track of the machine’s numbers in terms of efficiency and fuel consumption. The customised software help run troubleshooting and diagnostic measures to ensure safety and efficacy of the machines’, . believes Sachin Nijhawan Vice President and Business Head, Mahindra Construction Equipment. He further explains, ‘Internet of things is becoming increasingly popular with construction equipment too. This kind of technology integrated with the machine lets the operator get a Fuel Efficient machines from Mahindra better picture of the job site anyhow to get it done best and fastest. The software has been developed to bring down the time required to get a certain job at hand done. Small customisations go a long way with a developing nation on the fast track’.
IOT is taking the edge
The Internet of Things (IoT) is one of the hottest topics in the construction sector, and with good reason. It influences the interaction of technological, economic, social, societal, and individual changes. IOT is being implemented in construction for data gratification and safeguarding of products.
JCB India offer an in-built Compaction Meter in its range of Compactors. A Compaction Meter enables the operator to exactly know the number of passes required to achieve the desired compaction density and thus avoids over or under compaction of the layers. This leads to uniform compaction density and savings in fuel as well as in time. In order to make compaction operation as efficient as possible, the JCB COMPATRONIC systems can be fitted to JCB116 as an option. The accelerator sensor measures the reaction from the ground and provides feedback. JCB COMPATRONIC system displays the relative compaction value, warning lamp for jump operation and LED display for vibratory frequency. This system also looks for weak compaction areas which helps in determining the reduction in number of passes & avoid over compaction.
The JCB116 comes with an advanced telematics technology the JCB Livelink. This state-of-the-art technology enables users to get SMS alerts on their mobile phones or smart devices regarding service alerts, operations and security of their machines. The information is available in real time regarding the health of the machine including engines and gives vital information to the customer in terms of number of hours the machine has been operational, service intervals, fuel levels, malfunctions if any, etc.
Road Ministry to promote new technologies in highway projects
The road ministry has decided to implement a ‘Value Engineering Programme’ to promote new technologies and material in highway projects. The Ministry of Road Transport and Highways, has decided to implement a ‘Value Engineering Programme’ to promote the use of new technologies, materials and equipment in highways projects executed either under PPP mode or public funding mode.
The programme aims at using innovative technology, materials and equipment to reduce the cost of projects and make them more environment friendly. It will simultaneously ensure that the roads or bridges and other assets get constructed much faster, and are structurally stronger as well as more durable. The ministry has also reconstituted a nine-member experts’ panel for approving proposals for use of new technologies, material and equipment. The reconstituted panel is chaired by SR Tambe, former Secretary, PWD Maharashtra and co-chaired by Prof Ravi Sinha, IIT Mumbai.
The NPE (National Panel of Experts) will examine all technical matters involving the new technologies, materials and equipment referred to it by the concerned Engineers or concessionaires/ contractors. The NPE will also resolve the technical issues which arise as a result of difference in views between engineers and contractors regarding implementation, besides deciding about the need for field trials of any new or innovative technology/ materials/ equipment before its adoption.
‘Current road making machinery is dominated by imports and foreign manufacturer where the products are being made keeping in mind the needs of the developed worlds. Whilst in the developed world 60% of roads fall in our category of the multi lane express and state and national highway, they constitute only 6% of overall roads when it comes to India. The equipment currently available is too large and expensive hence grossly unutilized and non-viable for the most village and unsurfaced road projects which constitute 58% of total roads in developing countries like India’, says Sachin Nijhawan Vice President and Business Head, Mahindra Construction Equipment.
In India as elsewhere, the main element of road investment is civil works typically 95% of the road sector budget. The success of road sector investments therefore depends on the capacity and capability of the Indian road construction industry. However, even as the magnitude of works has gone up significantly in the last decade, the industry has not kept pace with this growth, as evidenced by the under-utilization of funds allocated to road projects 1 and perennial time and cost overruns on national and state highway projects 2. The industry is not yet geared up to meet the potential expanded volume of work on future road infrastructure projects. Furthermore, it faces evolving demands in the form of bigger projects involving more demanding technology and complex design, and requiring more sophisticated execution capabilities. At the same time, as it competes for skilled manpower with other booming sectors, the road industry faces increasing turnover of its experienced staff, dwindling appeal to fresh talent, and several other constraints in investment climate that inhibit its operations and attractiveness to firms, both domestic and foreign.
The transport infrastructure sector in India is expected to grow at 6.1 per cent in real terms in 2017 and grow at a Compounded Annual Growth Rate (CAGR) of 5.9 per cent through the year 2021, thereby becoming the fastest-expanding component of the country’s infrastructure sector.
‘Infrastructure sector is one of the core sectors of the Indian economy and thus, hold immense importance in the overall growth of the country. Government’s concerted efforts in the past three years through various policy reforms, programmes and budget announcements have played a key role in the revival of the Infrastructure sector and the Earthmoving & Construction Equipment (ECE) sector;, believes Jasmeet Singh, Head – Corporate Communications and External Relations, JCB India Ltd. He adds that this growth currently is primarily driven by the Roads and Highways closely followed by key sectors such as Railways, Irrigation, Mining, Affordable Housing etc. There is a requirement for building a world class road network in India, both in the urban and rural parts of the country. Significant allocation in successive budgets coupled with Government’s focused approach towards the sector has led to the considerable growth in the sector. However, sustained growth in this segment needs timely announcement and on-ground implementation of projects.
The construction of highways reached 8,142 km during FY 2016-17, with an all-time high average pace of 22.3 km per day. In the first two months of FY 2017-18, 1,627 km of highway was constructed at an average of 26.3 km per day.
Under the Pradhan Mantri Gram Sadak Yojana (PMGSY), 133-km roads per day in 2016-17 were constructed as against a 2011-14 average of 73-km per day. The government, through a series of initiatives, is working on policies to attract significant investor interest. The Indian government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE). The government has identified development of 2,000 km of coastal roads to improve the connectivity between ports and remote villages.
Sweden is interested in smart cities development in India and has put forward a Common Plan of Action for developing sustainable and environment-friendly public transport solutions and solid waste management for the smart cities under development. The Ambassador of Japan to India, Mr Kenji Hiramatsu, has conveyed Government of Japan’s inclination to invest and offer any other feasible support for various ongoing as well as upcoming development and infrastructure projects in the North-Eastern region of India.
The National Highways Authority of India (NHAI) plans to build 50,000 km of roads worth US$ 250 billion by 2022 as part of a long-term goal of doubling the length of the national highway network to 200,000 km.
References and Images:.
- Times of india