One of the bugbears of the Indian infrastructure and construction space has been the snail's pace (in some cases, it was a standstill) of project clearances in the recent years. However, the government seems to have woken up, going by the latest spate of clearances given to several mega projects and putting environmental clearances on the fast track. Post this flurry of policy quick fixes, the moot question facing this sector is the real take off of projects at ground zero and thereby the cascading effect on the supply side of materials, equipment, technology, manpower etc. MANAS R BASTIA and SHRIYAL SETHUMADHAVAN dig in and present the opportunities across six key segments - Power, Airports, Metro, Railways, Real Estate and Roads - and present what's up for grabs.
Sensing the dire need to fast track key core sector projects, Prime Minister Dr Manmohan Singh had directed the creation of a group in June 2013 - Project Monitoring Group (PMG) - with a mandate to take up any project not focusing per se on any particular sector but with an investment of Rs 1,000 crore or more. As on January 15, 2014, Anil Swarup, Additional Secretary, Cabinet Secretariat and Head, Project Monitoring Group, avers, "Clearances relating to 135 projects entailing an investment of about Rs 4.25 lakh crore have been facilitated by the Cabinet Committee on Investment (CCI) or PMG."
With such high level intervention and other steps taken by the government such as relaxation in ECB norms, permitting relaxation for equity dilution in road sector projects, recent land acquisition and R&R bill, etc, faster execution of projects is expected. According to Indian Infrastructure Finance Company (IIFC), "Such committees not only help in removing bottlenecks and getting projects back on fast track but such commitment from the government towards the infrastructure sector instils confidence among stakeholders."
Joining the dots
Most of the projects cleared so far have been stuck on account of want of clearance on one front or the other. However, PMG has not been and will not be directly involved in the grant of approvals. It comes into picture only if a project gets stuck. Its mandate is to expedite the clearances and to facilitate resolution of such issues that are inhibiting smooth flow of clearances. CCI or PMG has also helped enable the last mile clearances so that the stuck investment could result in generation (power) or production or use of infrastructure (roads). "Now that these investments have 'got going'," informs Swarup, "there will be opportunities in terms of equipment supply (as in case of power and transmission projects), downstream projects (as in case of steel), etc.
On an overdrive
An analyses of the projects that have come up for consideration reveals that majority of their issues are related to environment and forest clearances, apart from land acquisition. As informed by Swarup, PMG has also created a platform for discussing each of the issues threadbare with the concerned ministries in the presence of the project proponents through periodic meetings and the discussions are followed up vigorously. There are more than 400 projects that have already been listed for consideration and the number is growing by the day. The above pie chart depicts sector-wise estimated investments worth Rs 2.57 lakh crore for 68 projects, wherein all issues are cleared.
Next in action
Once all the issues are resolved by CCI or PMG, what's next! Swarup replies, "An attempt is now being made to track the actual investment on the ground. On the basis of information received so far, actual investment of about Rs 3.17 lakh crore has already taken place."
One of the three most vital challenges faced by the infrastructure sector is lack of funds. As IIFC shares, "Lending decision is dependent on critical parameters such as availability of land, linkage of fuel supply (in case of power projects), rationality of traffic or revenue estimations, strength and performance of promoters, regulatory and environmental approvals and clearances, etc." While what is bankable and what is non-bankable remains a never-ending debate between financial institutions and the industry, amid these uncertainties, CW decided to dig deep and make 2014 a year of actionable opportunities - projects that have received environment clearance as well as projects in the process of tendering. Read on to leverage the 40 promising business opportunities of 2014 across six key sectors - Power, Airports, Metro, Railways, Real Estate, Roads.
PMG has resolved all issues in 94 projects from the power sector, entailing an investment of over Rs 3.80 lakh crore (out of 128 projects worth over Rs 4.30 lakh crore). This reflects the top priority given in clearing much troubled and delayed projects in this important sector.
Projects on track
NTPC, as the leading power producer of the country, has added more than 4,170 MW of capacity in 2012-13. This capacity addition is a part of the programme for adding 14,038 MW of new capacity during the Twelfth Five-Year Plan. According to Dr Arup Roy Choudhury, Chairman and Managing Director, NTPC, "For both the current and next fiscal, NTPC is taking special care to ensure adequate fuel availability for the power plants."
For Essar Power, the projects in pipeline for this year include commissioning of about 1,000 MW capacity across three of its units, which are mentioned in the adjacent table. This will take its capacity to 4,900 MW from the current 3,910 MW.
Challenges in project implementation
Several regulatory and value-chain related constraints are adding to the 'power struggle', by which project implementation remains in limbo. Dr Choudhury says, "There are problems of project implementation that applies both to power as well as coal mining sectors. The procedures have to be streamlined and the clearances need to be time-bound. Power projects cannot start initial work without these clearances. After all, the country needs coal and power and we cannot possibly defer all fresh projects."
On the challenges being faced, KVB Reddy, Executive Director, Essar Power observes, "The biggest challenge facing the industry today include delay in securing regulatory approvals. This in turn has impacted the progress of many projects, increasing project cost and putting at risk huge investments."PROJECT OPPORTUNITIES
Ironically, there is a problem of shortage amid plenty. Dr Choudhury opines, "Importing coal cannot be a long-term option. All out efforts have to be made to step up domestic production of coal by ramping up capacities of Coal India Ltd as well as big public sector companies with good record such as NTPC."
The country needs to have a dual strategy for adding 'power' to this sector by fast-tracking project implementation as well as taking adequate measures to have eco-compatible growth. Reddy concludes by calling upon the policy makers to put in place a quicker approval process that will help the sector.
AIRPORTS: STAGE IS SET
After telecom, India has witnessed a revolution of sorts in the inclusive growth of civil aviation in recent times. While on one hand rapid expansion of air transport network and opening up of the airport infrastructure to private sector have fuelled the growth of air traffic in the domestic sector, the government's liberal policy initiatives on the other, have added to higher inflow of foreign direct investment (FDI), in particular private investments. Going forward, the scope of work will range from construction of new airports to expansion and modernisation of existing airports and development of low-cost airports. Investments totalling $12.4 billion in the airport sector are likely to be made during the Twelfth Five-Year Plan (2012-17); of these, private investments are expected to total $9.2 billion as compared to $5.5 billion in the previous plan.
Ready to take-off
Taking the lead, Airports Authority of India (AAI) aims to bring about 250 airports under operation across the country by 2020 with the plan to spend $1.3 billion on non-metro projects over 2013-17 and mainly focusing on the modernisation and upgradation of airports. Sudhir Raheja, Member-Planning, AAI, adds, "The development works at Port Blair, Hubli, Belgaum, Jammu, Vijayawada, Pantnagar, etc, will take off soon. Development of airports at Kishangarh, Jharsuguda, Deoghar and airports in Uttar Pradesh and Haryana are on the anvil. Plan for a greenfield airport at Itanagar is also ready." The details of some of these projects, which are planned to be completed in two to three years are mentioned in the table below.
AAI has taken up several initiatives towards sustainable development and eco-friendly construction. Raheja says, "Usage of the following are going to be more: electrical appliances conforming to BEE rating 4 stars and above, occupancy sensors or timers, building management system (BMS), energy efficient chillers and variable speed drivers in air-conditioning plans, energy efficient fluorescent or LED lamps, automatic sliding doors with air curtains, machine room less elevators, sensor controlled baggage conveyor system, etc. For the structure of the terminal buildings, mostly steel and glass walls and thin skin roofing are preferred."
Since many of the new projects are in remote areas, getting well-experienced financially sound agencies as contractors and skilled manpower is a major challenge. Raheja adds, "In some of the remote areas threat from underground groups is a critical issue. Getting land free from encumbrances and local disturbances is another challenge that requires to be addressed by the state governments. In some of the joint user airports, coordination with other stakeholders such as the Indian Air Force, Indian Army, etc is also a task that requires constant follow-up."PROJECT OPPORTUNITIES
The vision of the Government of India is to take aviation to the remote corners of the country to spearhead equitable and inclusive economic growth. Raheja concludes, "AAI is making a road map for the construction of small or low-cost airports in the Tier-II and Tier-III cities. It is expected that more than 50 such airports will be planned and the construction will take off in the near future. To support the expected increase in air traffic, the air traffic management system is also being upgraded and modernised in line with the global trends."
METRO: A TUNNEL OF OPPORTUNITIES
Oflate, due to increasing urban population, a number of cities are having metro projects on their radar. As of now, five metro projects are operational and seven are under construction. By 2020, more than $42 billion investment is expected in metro rail networks.
Invest - when and where!
"Metro sector projects require over Rs 1 lakh crore investments every year," says Gyan Prakash, Director General, Institute of Metro & Rail Technology. Apart from ongoing projects in Chennai, Bengaluru, Delhi, Hyderabad, Jaipur, Kolkata and Kochi, new projects are on the anvil in Tier-II cities as well including Ahmedabad, Bhubaneshwar, Bhopal, Indore, Lucknow, Nagpur, to name a few.
"With opportunities in farebox collection, signalling, communication, etc, there is enough scope for civil contractors as well," says VB Gadgil, Chief Executive & Managing Director, L&T Metro Rail (Hyderabad) Ltd. Hardened rails - not very popular in India - is going to be a normal choice for any metro. On the equipment front, Prakash points out to the growing demand for cranes, backhoe loaders and batching plants.
The tough way
As metro projects are new for India, modelling or calculating the ridership is a big challenge, says Gadgil. He further informs that no metro in the world is viable only through farebox collection, ie, revenue by ticket selling. These are long gestation projects and the developer needs to determine a resource through which additional revenue can be obtained. Ashwani Saxena, Director (Project), Jaipur Metro Rail Corporation, says, "There are no major private investments coming up in PPP model. With private investments, the sector will further open up." But for Prakash, shortage of skilled professionals in the sector is a major area of concern.PROJECT OPPORTUNITIES
Big betsPrakash points out to Jaipur, Kochi and Bengaluru as major metro projects where tenders are expected to be floated this year. Saxena elaborates on the Jaipur Metro Phase-1, which is being developed in two parts - Phase 1a and 1b. He informs, "For 9.3-km Phase 1a, work has been awarded and the project should be commissioned in June 2014. However, for Phase 1b, with works for Rs 507 crore already awarded, balance work - electrical, automatic fare collection gates, signalling, etc - of Rs 500 crore will be floated soon."
This said, metro will offer a tunnel of opportunities in 2014!
RAILWAYS: TRACKING NEW TERRITORIES
With FDI in railways receiving the cabinet's nod, it will be a new route that private players may want to turn towards! Private players have been involved in allied activities such as track laying, maintenance of coaches and wagons, and construction of bridges, stations, signalling and telecommunication works. Consider this: In the Twelfth Five-Year Plan, the government intends to raise investments worth $18.4 billion through PPP mode. This investment, if it materialises, can propel India's economic growth. Subodh Kumar Jain, Member-Engineering, Indian Railway Board, agrees, "More lines will be constructed and a considerable number of wagons will be owned by private players. So, eventually, all the purchases - be it equipment, materials, systems - will be routed through private players and not the Railways."
Indian Railways' (IR) private freight terminals (PFTs) appear to be catching up slowly. The need for a railway line to connect to a logistics park has resulted in a lucrative opportunity. With PFTs, road and rail transport along with warehousing can be provided in one single place. "We already have six to seven PFTs, which are performing well, and this is a good opportunity involving investments of Rs 50-100 crore," informs Jain.
Also, for large private players in the construction industry with surplus cash, IR offers risk-free opportunities, which involve undertaking remunerative projects on engineering, procurement and construction (EPC) basis. As Jain specifies, "A private player, with stake in the transport business, can sponsor a line and earn from it after some operational cost deductions." The first project being bided out in this direction is the 180-km Bagalkot-Kudachi line in Karnataka.
Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) has made a substantial progress by awarding contracts, acquiring land (more than 94 per cent land acquisition already completed) and obtaining all statutory environmental clearances for the project. "One challenge, which this project or the railway sector may face, is availability of adequate skilled manpower and experts, both for monitoring the projects from the employer side as well as execution and construction of project from the contractor's side," says RK Gupta, Managing Director, DFCCIL.PROJECT OPPORTUNITIES
In the know
A major project under the tutelage of the Ministry of Railways is the Dedicated Freight Corridor Project. "At present, two corridors - the Eastern Corridor from Ludhiana to Dankuni (about 1,800 km) and Western Corridor from Dadri to Jawaharlal Nehru Port Trust (JNPT) (about 1,500 km) - are under implementation, while four other corridors are in the project implementation stage," confirms Gupta. He further adds that while civil contracts for more than 1,100 route km double line sections have already been awarded, contracts for other sections have been invited and are scheduled to be awarded this year.
REAL ESTATE: READY FOR REJUVENATION
India's real estate sector - still awaiting an industry status - contributes about 5-6 per cent to the country's GDP. What's more, according to a report released by India Brand Equity Foundation, the sector accounted for 8.8 per cent of the total foreign direct investment (FDI) inflow into India during April 2012-January 2013 (Refer to page no. 118 for 'Best Deals Of 2013'). The reasons for the rising demand are urbanisation and growing household income. Also, a significant increase in real estate activities in Tier-II cities such as Indore, Raipur, Ahmadabad, Jaipur, etc, has opened new avenues of growth in this sector. With the urban population expected to exceed 600 million by 2031, the real estate sector is set to offer a basket of opportunities.
"With the need for speedy construction, there has been a shift towards adopting automation systems. In this scenario, equipment does matter," avers Lalit Kumar Jain, Chairman, Confederation of Real Estate Developers Association of India (CREDAI). He further highlights automation as one of the latest trends along with systems formwork, high grade and liquefied concrete, concrete placing, and boom and concrete pumps as the order of the day.
In the time to come, subject to improvement in the economy, Jain expects an exponential growth in this sector. Moreover, while infrastructure mainly drives real estate growth, Ramakant Jha, Managing Director and Group CEO, Gujarat International
Tec-City (GIFT City), observes, "The government has been doing a lot of work towards pushing infrastructure growth." For Jain, projects such as sea links, metro rail, ring roads, Delhi-Mumbai Industrial Corridor (DMIC), etc, are the real growth drivers. However, Jha foresees high rise developments in India this year as big opportunities for the developers. He also anticipates a possibility of many private equity players coming together for real estate funding and related investment opportunities.
Giving an example of the GIFT City, Jha says that it will offer plenty of investment opportunities for developers." He adds that in the coming fiscal, two types of tenders will be floated for this project. While the first tender will be for developers to participate in commercial and residential building development, the second one will relate to infrastructure and related works.PROJECT OPPORTUNITIES
Funding is a major challenge for the sector, followed by negative sentiments in the industry and availability of raw materials at a reasonable price. Even Jha agrees that increasing cost of raw materials is a big challenge faced by them. The second biggest problem being faced is getting the necessary approvals. To address this issue, the GIFT City has come up with a practical solution. "We have made all the necessary approvals online. Once the developer sends the building plan for approval, he receives an approval within 14 days, if everything is alright," concludes Jha.
ROADS: GEARING UP
At present, the Government is looking to develop a total of 66,117 km of roads under various programmes such as National Highways Development Project, Special Accelerated Road Development Programme for North Eastern Region, etc. Of the total roads, more than 21,000 km have been developed, and a major share of the remaining is likely to be completed by the end of the Twelfth Five-Year Plan.
The journey begins
National Highways Authority of India (NHAI) is planning to award about 2,000 km of roads in 2013-14, according to a source in NHAI. Some of its major projects in the pipeline are given in the adjacent table.
The Mumbai Metropolitan Region Development Authority (MMRDA) on its part plays a key role in developing strategic road infrastructure for the MMR as well as constructing major road corridors that form components of the Comprehensive Transport Strategy for the city of Mumbai. According to Sharad Sabnis, Chief Engineer, MMRDA, "New projects that are expected to be launched this year include the Worli-Sewri Elevated Road (4 km long) and the Elevated Road Connector between Bandra Kurla Complex and the Eastern Express Highway. The Mumbai Trans Harbour Link Project that is set to transform the transport landscape of the city is likely to commence in the later part of next year."
Opportunities on the way
According to NHAI, there will be great opportunities for aggregates, bituminous materials, machinery (pavers, hot mix plants, etc), steel, etc, for these projects. Besides, there will be further opportunities for the service providers of feasibility reports, detailed project reports, consulting, financial modelling, project supervision, contracting, etc.
Although there are different challenges, depending on the type of the project, it is high time the construction sector regained its growth momentum. "Policy needs to focus on sustained efforts at developing new infrastructure and removing bottlenecks so as to get the projects moving on fast track," concludes Sabnis.To share opportunities in the construction and infrastructure sector, write in at feedback@ASAPPmedia.com