“Contractors hold the key in executing EPC project”

“Contractors hold the key in executing EPC project”
“Indian EPC market has got plenty of opportunities. Recent economic reforms announced by government will further boost up the potential,” anticipates Dibyendu Ray, Associate Vice President (EPC), Sterling & Wilson
Please discuss the advantages of EPC, highlighting the cost and quality factors.The advantages of executing a project on EPC basis are many. In turnkey mode, the entire responsibility lies with the contractor who is accountable for ultimate performance of the project. All activities from engineering, procurement, pre-dispatch inspection, transportation, storage, insurance, erection, testing and commissioning, and handing over the plant to the owner of the project are handled only from a single contractor’s point. Since all equipment/systems are supplied and erected by a single party, it becomes easier to co-ordinate the overall project at every stage of execution. In this mode of execution, the owner can divert valuable resources on planning, engineering, and quality control and monitoring of the overall project, ensuring timely completion. On the other hand, the contractor endeavours to finish the project within the timeline to avoid any cost overruns on account of deployed resources. The quality of work, of course, is kept as of utmost importance in order to avoid any repetitive mistakes and to maintain the goodwill.
What are the standard terms and conditions of EPC as far as Indian market is concerned?So far, as Indian market is concerned for a relatively complex project, customer prefers to finalise a contract on lump sum price basis and keep some percentage of supply payment as retention till the plant is successfully commissioned and handed over. Most of the contracts also keep provisions of liquidated damages due to delay or non-performance if any. Transformers or automation systems sometimes customers expect an extended warranty period.
How do you see the potential and current status for EPC market in India?Indian market has got plenty of opportunities. Recent economic reforms announced by government will further boost up the potential. However, cash remains a problem at least temporarily with most of the OEMs and end users.
Tell us on the market size and your market share.We are a new entrant in EPC domain. We would like to spread our wings in all directions and wish to be reckoned as major player in the shortest possible time. In whatever areas we are presently operating, the market size is over Rs. 10,000 – 20,000 crore.
What are the prime challenges the EPC players in India are facing today? You may discuss issues such alleviating time and cost overruns, land acquisition, funding, skilled human resource, shortage of machinery and material, etc.We, the EPC contractors, are facing the major problem in fund availability with owners as major challenge. Realisation of the retention payments linked up with the completion of projects, commissioning and PG tests which at times are quite substantial (nearly 10 – 15 per cent of contract value) becomes a hurdle. This exposes the EPC companies to substantial risk and financial strain. In addition to the above, availability of skilled-human resources remains a major concern for us, particular in the areas of engineering and project management.
Could you discuss about your areas of specialisation? Please name some of the major projects executed by your company.Presently, we are focusing in transmission and distribution sectors, EBOPs in TPPs, and industrial power distribution and automation projects. We are executing several projects with major Indian customers, including SAIL, GAIL, NTPC, BHEL, PGCIL, MSETCL, KPCL, APTRANSCO, OPTCL, UPPTCL, HSIIDC, Aditya Birla Group, Gamesa, Ford Motors, ITC, EIL, Dasturco, TCE and Tata.
What is your current order booking?We are aiming at over Rs. 500 crore in the current fiscal.
What are your expansion plans?We would like to go four times in 3-year period.
Please share your comments on ‘EPC Contract Agreement’ document being formulated by the Government.The recent “EPC Contract Agreement” proposed by the Ministry of Road Transport & Highways relies on assigning the responsibility of investigations, design and construction to the contractor on lump sum price determined through competitive bidding. This is the fundamental principle of completing a project efficiently and within the stipulated time frame resulting in better quality and minimum cost overrun. We are already operating in this philosophy.
Mr. Dibyendu Ray,Associate Vice President (EPC)

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