Tag Archives: JNPT

Why Public Works needs to work for private!

Have you noticed that the size of project execution has grown manifold? New projects worth Rs 1.95 trillion were announced in the January to March quarter, up from Rs 1.20 trillion in the previous quarter. The capacity of companies in delivering larger projects has expanded. Earlier, we would rarely discuss a few mega projects concurrently in progress. But now, we have the launch of the Rs 167 billion Navi Mumbai International project; the finalisation of 18 bidders for the Rs 460 billion Mumbai Nagpur expressway for which work is expected to commence this September; launch of the Rs 79 billion fourth container project at JNPT to be operated by Singapore ports – all have raised the bar on value, scale and size. However, the construction sector’s share in India’s overall gross value declined to 7.4 per cent in the financial year 2017-18 (FY18) from 9.6 per cent in FY12 owing to poor demand in the real estate sector and lower capital expenditure. Essentially, private sector spending, which contributed a big chunk in infrastructure, has remained shy, and public spending purses have opened to drive the momentum.

The government has finally recognised this imbalance and the GST council is likely to reduce tariff from 28 per cent to 18 per cent for paints, cement, plywood, plaster, etc, later this month to give a fillip for building materials. The PMAY drive to build ‘Housing for All by 2022’ has Rs 600 billion being deployed to build 12 million houses with 0.3 to 0.5 million houses being built every month! Recently, the consortium of Tata Projects, Capacit’e Infraprojects and CITIC Group has been awarded a Rs 117.44 billion project by the Maharashtra Government for redevelopment in Mumbai. This year is all about stepping up awarding of contracts and expediting execution and we are likely to see results of construction companies improve. Non-clarity of our tax laws has been a major reason for litigation and corruption. This has helped the legal profession but paralysed our economic growth. While our ranking in the Ease of Doing Business improved to the 100th position among 190 countries, we are still ranked 119th in paying taxes, 164th in enforcing contracts, and 181st in dealing with construction permits.

Contractors are yet to be compensated by the Public Works Department (PWD) of various states for GST compensation on rates reduced from 18 per cent to 12 per cent for government contracts. Since, Tier-II and Tier-III centres are driving growth in aviation, automobiles and e-commerce, the 13th Construction World Architect & Builder (CWAB) Awards are going “Regional” too. Having completed Kolkata, CWAB is concluding its ‘Regionals’ in Pune, Bengaluru and Delhi and recognising talent all round. Get set for CWAB 2018 scheduled on 12th September in Mumbai.

Check website for more details: www.CWABawards.com

Don’t stymie equipment & technology

The recent inauguration of the 9.15-km Dhola-Sadiya Bridge, India’s longest bridge above water, by Prime Minister Modi coincided with the completion of three years of his government in office. Apart from underscoring the government’s emphasis on infrastructure, it also reaffirmed its resolve in improving connectivity to the Northeastern region. Built at Rs 1,000 crore under PPP with Navayuga Engineering over rivers Bramhaputra and Lohit, the bridge cuts travel time by four hours.

In fact, the Nitin Gadkari ministry has awarded 16,800 km of highway contracts and constructed around 8,500 km for the year ended March, taking the count up to 23 km per day. The 135-km Eastern Peripheral Expressway, being constructed to decongest Delhi, is scheduled for completion in the next few months. Similarly, other expressways to take off include Delhi-Meerut, Mumbai-Vadodara, Dwarka Expressway, Bengaluru-Chennai and Delhi-Jaipur. With HAM not being popular yet, EPC is the easier way to accelerate road development. The 43-km, 12-lane Dedicated Freight Corridor costing Rs 3,000 crore from JNPT (Navi Mumbai) to Panvel, being built to ease container traffic is also under construction. Further, the UDAN scheme envisages 45 new airports and 70 regional routes, and caps ticket fares at Rs 2,500 for one-hour flights. Six new ports are being developed, and automobile and leather clusters have been planned alongside. Indeed, infrastructure bottlenecks are being addressed like never before and the pace is surely picking up.

However, the recent rate slabs announced under GST are likely to undermine infrastructure plans as construction equipment has been put under the same category as luxury cars! The rate applicable is 28 per cent; given the fact that 70 per cent of buyers of construction equipment are small entrepreneurs, small rental companies and hiring small setups, their capacity to buy will be affected and may deter the pace of execution. A pace of 40 km per day from the current 23 km would require extensive mechanisation and the government must consider a slab that encourages adoption. Categorising it with luxury cars is unfair – if the government thinks this equipment is purchased by companies that will pass on the tax impact, it is ill-advised. The Budget has allocated a spend of Rs 3.96 lakh crore on infrastructure in 2017-18 and this GST rate will result in inflating the cost, apart from affecting rightful demand. Even the ‘Make in India’ initiative that is helping the industry gain its status as an export hub will take a beating with the GST dampener. Given the importance of building infrastructure at a reasonable cost and easing the pressure of high financial costs hurting the infrastructure industry, a rate of 12 per cent for GST is being proposed.