After taking a heavy beating, the road building equipment sector looks to be on the path to recovery
The road building equipment sector witnessed a bumpy ride in the past few years. But with the country planning to construct number of new roads and bridges and rebuild the old ones, the road looks smooth ahead. The construction plan has also thrown open new opportunities for construction equipment manufacturers.
ACE Update provides a detailed analysis on road building equipment sector. The report highlights performance during last fiscal, key challenges, outlook for current fiscal, expectation from the new government etc.
Financial Year 2013-14 The construction equipment and machinery industry has been hit by slow economic growth in last few years. Demand for construction equipment and machinery suffered a slump as investment in construction slowed.
“The demand for the road building equipment sector was sluggish in 2013 due to the slow pace of infrastructure investments, weak business confidence, and continued environment and regulatory issues. The 20-km a day road building program from the UPA government entered its fifth year without much success. It was estimated that road projects worth 1 lakh crore were stalled at various stages of implementation,” says Ajay Shankar, Country Manager, Caterpillar India.
According to Tushar Mehendale, Managing Director, Electromech, “The last few years have been quite interesting for the Indian equipment industry. On account of the infamous policy paralysis, the growth of the capital goods industry was affected. In the last fiscal, the order finalisation was being delayed due to uncertainty surrounding several factors.”However, Amit Gossain, EVP – Marketing, Business Development and Corporate Affairs, JCB India Ltd opines, “Road construction equipment segment is showing steady improvement year on year. Supported by Pradhan Mantri Gram Sadak Yojana (PMGSY) and other smaller district roads as well as road maintenance, the road construction sector continues to do comparatively well as opposed to other sectors that are facing the stress of economic slowdown.”
Challenges and solutionsRoad building equipment sector had been seriously affected by the economic crisis in last few years, but recently some movement in the demand for road building equipment has been witnessed in the market. Some of the projects which were stalled seem to be getting back on track.
Mr Mehendale says, “Overall the Indian economy continued limping into the start of 2013. The capacity utilisations at several factories were at record low levels. Furthermore, the scenario on the infrastructure projects front was also not promising as a lot of projects continued to be stuck in regulatory imbroglio. As a result of this, the market size shrunk quite dramatically in 2013 and this had a direct implication on the business generation possibilities.”
He adds, “But lately, customers have started discussions on expansion plans which had been shelved for a long time. As a result, there is a definite buildup of action in the industry. Our reading of the market is that the economy is slowly turning around, fuelled by the advent of a stable growth oriented government at the centre.”
Talking about challenges Mr Gossain says, “The current pace at which the road projects are taking off is relatively slow due to multiple reasons such as lack of coordination between central, state and local agencies, policy delays, financing issues, land acquisition issues, environment clearance issues etc. Supreme Courts ruling to de-link environmental approvals from forest clearances will definitely help in kick starting several roads and highways projects.”
Mr Shankar says, “The demand from road construction projects appeared promising given NHAI’s ambitious expansion plans. However, difficulties in achieving financial closure, land acquisition and issues related to environment and forest clearance continued to hamper progress.”
InnovationWith urbansiation, demand for infrastructure and cut throat competition in the market, innovation has become an important part of construction equipment sector. Companies are regularly innovating and manufacturing equipment that meet their clients’ requirements.
JCB`s wide array of construction equipment ranging from backhoe loaders to excavators to compactors is extensively used in road projects across India. “JCB offers the finest road compaction equipment (VMT115, VMT860 and VMT330). VMT 330 Tandem Roller is a latest addition to the portfolio. VMT 330 Tandem Roller is a highly versatile compactor with high compaction forces,” informs Mr Gossain. VMT 330 Tandem Roller is ideal for compaction in restricted spaces as this has got high kerb clearance – rural and township roads, highway side shoulders, canal lining, service roads and trench compaction.
Caterpillars Cat 320D Series 2 hydraulic excavator is a versatile machine in its size class. It is configured in a way that is suitable for all applications.
ElectroMech Gantry cranes meet the specific requirements for road building with utmost efficiency and reliability. These cranes are available from SWL 2MT to 250MT in varying spans, traverses, lifts and speeds depending on the clients requirements. “Our Gantry cranes are typically used in bridge building – in casting yards where the segments are cast as well as for laying the segments itself,” Mr Mehendale says.
Further he adds, “Three ElectroMech Gantry cranes cover the handling requirements of this entire project. A 60/12MT gantry crane is used to construct the flyover. A 12MT auxiliary hook of this crane is used to install and dismantle all supporting structure for the flyover and the concrete structures. This also ensures that the workers have easy access to the entire structure of the flyover. The main hook with SWL 60MT is used to lift the precast concrete blocks and place them precisely on the top of the support pillar.” Technology solutions and safety featuresAs mentioned earlier, country is planning to construct number of new roads and bridges all over. And with these construction plans the question arises, are companies well-equipped technologically to take up these road projects? Technology and safety features are some of the important factors in the field of construction equipment industry.“All of our cranes come equipped as a standard with redundant safety electric limit switches as well as mechanical barriers to ensure that the hook path does not stray dangerously out of the intended work envelope. Overloading protection is standard in our ABUS range of cranes. The safety brakes used on the cranes are rated for one million operations on full load and ensure a lifetime of worry free duty,” says Mr Mehendale. “Not only do our end products incorporate all safety features, but our people are also extremely safety conscious when working on the shop floor while manufacturing cranes as well as when working at the site and erecting the cranes.”
Cat 320D2 is a robust machine capable of working in all kinds of applications. Some of the advantages of the Cat 320D2 are that the field-proven C7.1 engine that is designed for ease of service and can work efficiently at altitudes up to 4,000 meters (13,120 feet). Cat 320D2 is capable of reducing the fuel consumption up to 15 per cent in heavy-duty applications. It is easy on fuel’ and ‘hard on dirt’ and comes with a smaller and high-efficiency pilot pump and newly designed main pump that boasts hydraulic efficiency by 3 per cent.
JCB VM115 is equipped with dual anti-vibration isolation system which reduces the vibration, thus making it more comfortable for the operator to operate the machine. This machine also has 3 point pre-loaded anti- vibration pads which also minimises the effect of vibration.
Outlook for current fiscalAccording to industry reports, earlier this year the government had given its consent for reviving stalled highway projects, providing better connectivity and restoring highways. After taking a heavy beating, the Indian economy looks to be on the path to recovery.
Recently, about 7,200 kms of state roads were accorded national highway status with adequate funding for upkeep of roads. Furthermore, it was stated that there would be adequate funds available for improvement of the remaining existing national highway network of 21,271 kms. The National Highway Authority of India plans to award 6,000 kms of road projects in 2014-2015 with a combined net worth of ` 55,000 crore. Commenting on his outlook for current fiscal Mr Shankar says, “We believe the formation of a new Government will provide the much needed impetus to the economy and this sector.”
Mr Mehendale says, “We are seeing an increase in the levels of enquiries from different industry sectors. Infrastructure construction industry which was very dormant is now waking up again and quick delivery orders are becoming a norm once again. Apart from this, our in-house expertise of crafting solutions and customising equipment ensures that we can cater to any customer requirement. We definitely foresee some momentum in demand in the upcoming months and are eagerly looking forward to it. New government s priorityThe government is responsible to promote growth, and the overall well-being of a country. India is battling economy issues which had seen weakened infrastructure. Companies dealing in construction equipment expect the new government to form a simplified framework, taxation system, resume stalled infrastructure projects, etc.
Mr Shankar observes, “One of the foremost matters on the new governments agenda should be to make best use of its first 100-day period after assuming office. Procedural and structural reforms should be implemented to expedite environment clearances which are a lengthy and complicated procedure in India.”
He further added, “An institutional and simplified framework with measurable outcomes should be provided for PPP. Increase in foreign domestic investment in insurance and banking sectors and reduction of interest rates by 150 – 200 base points are some of the issues the new government should work on a priority.
Mr Mehendale points out, “The government of India needs to push ahead relentlessly with large scale infrastructure projects that will change the face of the country. Commerce will be easier and much more efficient. Efficient and simple taxation systems like GST need to be implemented on top most priority.” He also suggests that incentives should be given in terms of easy land availability and clearances for projects above a certain size. This will boost foreign investment in the country and Indian industry can emerge as major industrial force on the global stage.
“The new Government’s primary agenda should be to de-bottleneck stalled infrastructure projects on ground and increase investments in the sector. It should firstly create a regulatory body to carry out active monitoring and to streamline end-to-end coordination. Secondly, implementing the Goods and Service Tax should also be on the agenda for the Government in-charge. It will give the necessary boost to country’s economy by breaking tax barriers between states and integrating India through a uniform tax rate. This will boost investor confidence and help in increasing domestic as well as overseas investments in India,” Mr Gossain concludes.
Amit Gossain, EVP – Marketing, Business Development and Corporate Affairs, JCB India LtdSupreme Court’s ruling to de-link environmental approvals from forest clearances will definitely help in kick starting several roads and highways projects
Ajay Shankar, Country Manager, Caterpillar One of the foremost matters on the new government’s agenda should be to make best use of its first 100-day period after assuming office
Tushar Mehendale, Managing Director, ElectromechOur reading of the market is that the economy is slowly turning around, fuelled by the advent of a stable growth oriented govt. at the centre