Tag Archives: Construction

The Pacesetters

Union Minister Nitin Gadkari is a man in a hurry. Recently, he announced the Rs 1-trillion Mumbai-Delhi Expressway, which will connect India’s two most backward districts, Mewat (Haryana) and Dahod (Gujarat). With this, the travel time will reduce from the current 24 hours to 12 hours. The first tender for the project worth Rs 440 billion between Mumbai and Vadodara has been floated. The expressway is scheduled for completion in three years. Further, the Maharashtra and Madhya Pradesh governments are to sign a memorandum of understanding (MoU) to build the 339-km Indore-Manmad railway line, worth Rs 100 billion. The Centre and six states of North India will sign a MoU for construction of the Lakhwar multi-purpose project in the Upper Yamuna basin in Uttarakhand, worth Rs 40 billion. Work on five major river linking projects, including the one that would transfer surplus water from Godavari to Cauvery, is expected to commence from December. According to Gadkari, a total of 31 river linking projects are under consideration under the National River Linking programme.

The value of new project announcements by the private sector rose for the first time in two years in the June 2018 quarter, as per analysis by CMIE. However, the bulk of them were made by foreign companies.

So although L&T reported a 37 per cent growth in order book during the quarter, it guided for a subdued 10-12 per cent order inflow growth for the full year, which is only a slight increase of over 7 per cent from the previous year.

Despite the deficit in infrastructure, the pace of public spending is keeping the economic spirits of India up, and the infrastructure sector seems to be back in favour. Given the elections next year, it is estimated that this pace will not slacken as the government wants to achieve numbers, which indicate an upswing in the economy by the time the government is ready to announce the Union Budget on February 1, 2019. This augurs well for a swell in the economic tide.

While contracts are being awarded, it is also time for awards. FIRST Construction Council, the think tank has completed its exercise in identifying winners across verticals. First off, CONSTRUCTION WORLD is hosting its 13th CONSTRUCTION WORLD Architect & Builder Awards on September 11, 2018, in Mumbai (look for our new column on architecture on page 116). On October 24-25, it will then host the INDIA CONSTRUCTION FESTIVAL, which will bring the best and the biggest with the fastest construction companies in India. This issue’s cover story is devoted to bringing you in touch with the nominees of the fastest growing companies in the country.

If Graham Robinson, the eminent economist from the UK – who is the keynote speaker for the CONSTRUCTION WORLD Global Awards being held on October 24 – is right, and India becomes the fastest construction market in the world by 2030, then keep an eye on the nominees as they have already begun to set the pace.

Quality over quantity

Oil, the single biggest factor that helped the government manage the fiscal deficit, has climbed from its advantageous position to well over $75. Even as GST is gaining stability, the E-way bill has caused feathers to be ruffled again. Not only are small companies having to contend with compliance changes a bit too often, there are certain anomalies that require clarification. GST for government contracts has been brought to 12 per cent while GST on private contracts is at 18 per cent. The only good news on the macro front is that a normal monsoon is expected.

However, the outlook is positive for 2018-19. Roads and highways are gathering pace with Union Minister Nitin Gadkari laying the construction target for 2018-19 at 45 km per day. He has also raised the award target to 20,000 km for the current fiscal, up 25 per cent over the previous year.

Year         Roads awarded (km)    Roads constructed (km)
2017-18        17,055                           9,829
(Actual)
2018-19         20,000                           16,420
(Target)

Mumbai’s Development Plan (MDP) 2034 has been released after revisions and has hiked the FSI in the island city to 3 from 1.33 for residential, and 5 for commercial.
In the suburbs, FSI has been raised from 2 to 2.5 for residential and from 2.5 to 5 for commercial. MDP 2034 proposes to unlock 3,700 hectare of public and private land currently tagged as a no-development zone (NDZ) for the construction of 10 lakh affordable homes.

While the unlocking of the land will be from no-development zones, FSI has been enhanced in the island city, which is landlocked. This is likely to put severe pressure on the current infrastructure. While the metro-rail should ease traffic congestion bringing enhanced capacity to public transport, the lack of any build-up in capacity in water, sanitation and waste management will throw the city into an accelerated pace of decay.

The ban on the construction of new buildings, too, was recently lifted by the Supreme Court for six months, with conditions. The ban, which held up construction projects worth Rs 20 billion, had been granted as landfill sites were saturated and developers and contractors were dumping debris all over the city.

The above impetus for construction can help the industry exponentially, provided it also enables its key actors: The workers. With only 4 per cent of the current 32 million construction workers skilled, obtaining high productivity through mechanisation and use of advanced tools remains a pipe dream. An unskilled force will set us to lose qualitative aspects in the quest to chase quantitative targets. Our cover story unravels the pitfalls ailing the industry and what it needs to do to muscle up!

The sustainability challenge

Indian architecture has been decorated with its crown jewel BV Doshi being honoured with the Pritzker Prize, making him the first Indian ever to have received this honour.

Charles-Édouard Jeanneret, known as Le Corbusier, was a Swiss-French architect, designer, painter, urban planner and writer, and a pioneer of what is now called modern architecture. In 1950, Le Corbusier laid the master plan for Chandigarh. Balkrishna Doshi (BV Doshi), born in Pune on 26 August 1927, is one of the last living architects to have apprenticed with Le Corbusier, and has built low-cost housing and public institutions, such as the Centre for Environmental Planning and Technology (CEPT), IIM-Bangalore, the Aranya Low-Cost Housing, and Tagore Memorial Hall. In fact, the Aranya Low-Cost Housing project, located 6 km from Indore, was built at Rs 100 million way back in 1989, which also won Doshi the Aga Khan Award for Architecture in 1996.

The master plan for this had taken several aspects of sustainable living into consideration in a balanced manner; several considerations taken into account are extremely unique to the design and relevant to the concerned income group.

For instance, the building’s height-to-street width ratio ensures shade to streets at all times except when the sun is overhead. Concepts like these remain alien to several planners even today. Further, Doshi was significantly involved in the design and planning of the city of Chandigarh.

For his part, Doshi has said he owed the prestigious prize to his guru, Le Corbusier. My works are an extension of my life, philosophy and dreams trying to create a treasury of architectural spirit.

I owe this prestigious prize to my guru, Le Corbusier, he said in a statement thanking the Pritzker jury.

Indeed, planning a sustainable habitat is the challenge urban local bodies face as they grapple with developing smart cities. While the progress on projects may be slow, the brilliance of some of the torchbearers of this mission is sure to inspire and revive this profession. Despite our rich heritage and knowledge, why has India remained poor in offering the best to architecture in the context of modern urbanism? Why are we not learning from the examples of our own past? Nearly a hundred years ago, Jamshedpur was created as India’s first planned smart industrial city; recently, at a function, Tata Group Chairman N Chandrasekaran promised to turn the city smarter.

All considered, as our nation builds, the construction community must tread carefully. While we provide livelihood, we must train, administer and manage efficiently. Project management, skill training and use of technology are truly the guiding principles today.

Cheers to tomorrow!

Building Smart

According to McKinsey, construction holds the dubious honour of having the lowest productivity gains of any industry. The reasons attributed to this include continued use of labour instead of technology; lack of consolidation; and the fact that builders are still averse to using technology even though architects increasingly espouse it.
Technology is becoming key: The MoRTH is trying to escalate the pace of execution from 25 km to 40 km per day; the Prime Minister’s PRAGATI project, where he reviews projects worth Rs 9 trillion, is regularly laying stress upon speed of execution of metro projects, power plants; and there is a race for implementing affordable housing projects in line with the PMAY, for which incentives are being provided to developers and buyers.

In fact, L&T, Shapoorji Pallonji and NCC have qualified for a number of such projects and these are being executed using technologies like MIVAN. Design and engineering, too, are gaining importance as cities are considering master planning, which will bring tools of urban planning into play. Pre-engineered buildings, prefab and shuttering systems are being deployed like never before. Road building companies are completing projects to earn bonuses by advancing completion deadlines. What’s more, the smart cities mission has advocated the use of technology in planning, administering and maintaining assets for cities. This has encouraged the use of IoT devices, GPS systems, RFID, digital systems, advanced CCTV, Wi-Fi, waste-to-energy management, tracking devices, data management, e-governance and so on.

With the advent of technology comes the need for capacity building, where procurement, engineering, architecture and design departments need to upgrade themselves. Inability to upgrade these skills will lead to flaws in bidding documents, specifications, withdrawal of tenders and failures in generating interest in tenders. This, in turn, would lead to delays in project execution. (Delays in projects cost our nation over Rs 500 billion per annum.)

Clearly, the world is changing and India is transforming. Globally, 3D printing is being used to build flats. Modular buildings, like the one built by a Chinese company that built 57 stories in 19 days, are setting new benchmarks. Just as smart phones are being sold all over India even though so many parts of the country do not have access to electricity, we will have to pursue the dialogue to convert India into a smart nation even though gaps exist in basic delivery of services.

Do visit SM@RT URBANATION on March 22-23, 2018 at HICC, Hyderabad and experience, observe and connect with the smart solutions that are changing our lives – and our nation.

The construction ban is justified

The Nikkei India Manufacturing Purchasing Managers’ Index for July was at its lowest in the past eight years and demand took a deep dive owing to GST adjustments. By the deadline of August 25, over 36 lakh businesses had filed their GST returns. The overall impact is indicated to be an upswing of 16.6 per cent on a comprehensive level, though some states would need compensation and others may have a beneficial gain. The disruption of demand has hurt the industry and is not likely to be compensated by the same quantum of the drop.

Demand needs momentum.
The interest relaxation of 25 bps was too meagre, given the low levels of inflation currently. Public spending will need to be kept up to hold the economic growth numbers. Even though Tata Steel and JSW have begun to plan their expansion, none will invest yet. They may be keener in making a pick from the stressed companies sounding their death knells at the altars of the NCLT.

The August 29 mayhem in Mumbai was a repeat of the havoc in 2005. Little has changed in 12 years. Although social media updated everyone earlier on what was to follow and office-goers left offices earlier, as the tracks were flooded, trains stopped, electricity cut off and the Bandra-Worli Sea Link closed, traffic was left in a complete jam.

The usual areas prone to water-logging caused several people to abandon their vehicles and walk home in the filth.

The High Court has banned new construction in Mumbai and an appeal to reverse this in May 2017 was thrown out by the courts. When I raised this issue with the BMC Commissioner at a conference, he had dismissed the suggestion, saying, ‘Stopping construction is not the answer.’ Then, Mr Ajoy Mehta, what is the answer? Is August 29 your answer?

Simply put, enhancing the infrastructure capacity of the city is the answer. So what is the capacity required for a city of our population in terms of storm-water drainage, solid waste management, power, water supply, and so on? Why can’t we have the BMC targeting these numbers for the creation of capacity? These should be linked to TDR charges and capacity creation should lead permissions. In our quest to win better ‘ease of doing business’ rankings, the number of permissions have been brought down – it would now take 60 days instead of over 200 in Mumbai and Delhi to get construction permits. But permissions should be given only after enough capacity is created. Why has the BMC not been able to provide even a dumping ground for construction debris, the original reason for the ban on construction? If construction is allowed to continue without the authorities providing for increase in capacity, we will soon be seeking the ‘right to breathe’ instead of ‘right to privacy’.

Brace for impact!

Nagpur has been in the news ever since the political capital shifted under the current regime. All roads now lead to this ‘orange’ city which has always been a ‘capital in waiting’. The 710-km road that recently invited controversy was the Rs 46,000-crore Mumbai-Nagpur Expressway, which revised its invitation for bids with a supplementary advertisement and caused much heartburn, as the riders imposed were allegedly introduced to outfox fair competition. The project, which is expected to be completed in two years, envisages 16 packages of construction. High-speed corridors have proven to bring prosperity within the corridor zone and this can pave the way for some political capital, as 24 new nodes will be developed in phases projected to generate employment for 25,000 people each across logistic, industrial, IT, agro-industry, tourism, education, healthcare, auto, warehousing and food processing, besides from social infrastructure development including hotels, malls, petrol pumps, offices, hospitals and educational institutes.

Thirty more smart cities have been added to the existing 60, taking the tally to 90 cities that have been selected under the Centre’s Smart Cities mission, taking the total budgeted spend to over $31 billion. Of the ones selected, 26 have proposed affordable housing projects, 26 cities will be taking up school and hospital projects, and 29 will be taking up redesign and redevelopment of roads to enable walking and cycling. Development is likely to score higher in smaller cities as the impact of infrastructure projects is more visible and has a life-changing impact. This underscores the importance of the recently launched Energy Conservation Building Code 2017 (ECBC 2017) developed by the Ministry of Power and Bureau of Energy Efficiency (BEE). ECBC 2017 mandates a 25 per cent saving in energy for compliance. However, we recommend that the ECBC rating must devolve, unless renewed annually for effective compliance.

Led by its dynamic municipal commissioner Kunal Kumar, Pune Municipal Corporation (PMC) has created history by raising Rs 200 crore for its Rs 2,800-crore water supply project via bonds. The bonds have been listed on the stock exchanges. PMC plans to raise Rs 2,264 crore over the next five years and plans to repay the debt by enhancing its revenues through water charges.

The remarkable aspect of this issue was the appetite as the issue elicited oversubscription to the extent of Rs 1,200 crore. This sets the stage for a new stream of funds for municipalities while ushering in an era of transparency.

The worst news for India’s economy has been the loan waivers the state governments have conceded to, all at the altar of political capital. On the other hand, the GST juggernaut is ready to roll. Now, it’s time to brace for impact.

Win some, lose some

The balance between social good and infrastructural development is a delicate one. A citizen has a constitutional right to be provided basic amenities but the nation has limited resources, further constrained by a poor administrative system of collection of revenues, making it necessary to depend upon private investment. Private investment has to serve the profit motive, which in turn conflicts with the ´right to be served´ of the citizen.

The recent judgement by Allahabad High Court has split this wound wide open. It denied Noida Toll Bridge Company, which has been awarded the contract of collecting toll from passengers for 30 years, the right to continue collecting toll as it claimed that the concessionaire has earned reasonable profits. Even the Supreme Court has not entertained the plea of the defendant. It has noted that ´the Concessionaire, according to their own financial statements, has recovered Rs 810.18 crore from toll income from the date of commencement of the project till March 31, 2014, and after deduction of operation and maintenance expenses and corporate income tax, the surplus was Rs 578.80 crore (computed before interest, depreciation, and lease rental received by the Concessionaire)´.

Many issues need to be addressed here. Are contracts that provide service to citizens but allow the company providing the service to make profits, void? If power companies, airport operators and port operators can make 16 per cent return or more, why not toll concessionaires? Will this not have a retrograde effect as was the case with retrospective tax, which drove foreign investors away? How will the government, then, fund such projects?

Only funds with a long payout date that are ultra conservative will invest in these projects, provided the government provides sovereign guarantees. Noida Toll Bridge Company is a public-listed entity and its business plan comprised the returns from this project alone. By withdrawing the company´s right to earn tolls, the courts have made the government renege on its commitment and kill shareholder value, apart from scaring away potential investors in such projects. The risk quotient has spiked and shareholder value in such projects has eroded. Moreover, this will set a trend as local leaders with political ambitions will join protests to derail user charges and win the favour of voters.

Meanwhile, GMR has won an arbitration order of $270 million against the Maldives government, which had arbitrarily cancelled GMR´s contract to run its airport. The compensation covers the debt and equity invested in the project along with a return of 17 per cent, as well as termination payments and legal costs.

It´s true what they say – you win some and you lose some! On October 21, 2016, though, we had a room full of winners. This issue brings to life the magical evening that recognised India´s Fastest Growing Construction Companies and Top Challengers. The jury is playing a more responsible role than ever before as it serves as a moral guardian for the integrity of the awards process through its acumen and judgement. Raghav Chandra, Chairman, National Highway Authority of India, hit the nail on the head when he said, ´Construction is an intimate affair.´ His sentiment was echoed by Dilip Suryavanshi, along with Devendra Jain of Dilip Buildcon – while accepting the award for the fastest growing construction company in the large category, he said, ´When my competitor sleeps, I am at work, and the top management needs to be intricately involved in the management of men, materials and machines to deliver a sterling performance.´

We are happy to have been able to bring this evening to your homes by webcasting it live; in case you missed it, you can watch it at bit.ly/CWAA16. Meanwhile, enjoy some of the highlights in this issue. Here´s wishing all our readers a happy and prosperous new samvat year!

The tide is turning

There is finally good news on the economic front.
Projects commissioned in the country reached a record high of Rs 4.6 lakh crore in FY2016, according to CMIE. This is the highest-ever commissioning of projects in a year and represents a 12 per cent increase over Rs 4 lakh crore in FY2015. The stock of projects on hand is also huge – total outstanding projects are worth Rs 159 lakh crore. Of these, Rs 92 lakh crore worth of projects are estimated to be under implementation.

FDI increased by 27.5 per cent to $42 billion during April-February FY2016 as against $32.96 billion during the corresponding period of the previous year. Indirect tax collections moved up by 31.1 per cent to Rs 7.11 lakh crore in FY2016 over FY2015, indicating an improvement in demand. Transmission companies are recording a 20-25 per cent surge in their order books. And, initiatives like UDAY and DISCOM reforms are firing the power sector.

Among other patches that have started to see green shoots are the solar sector, railways and coal production. Commercial vehicle (CV) sales, which were languishing till a few quarters ago, have veered into positive territory, especially in the medium and heavy segment. In FY2015-16, the overall CV industry did well to post 11.51 per cent year-on-year growth with sales of 685,704.

Even consumption of products used for construction or industrial purposes are indicating an uptick: Bitumen (up by 16.9 per cent), petroleum coke (up by 42.9 per cent) and furnace oil (up by 39.4 per cent). Further indicators include sales of medium and heavy commercial vehicles (up 29.9 per cent in 2015-16), cement production (13.5 per cent increase year-on-year in February) and electricity generation (9.2 per cent growth in February).

Government spending has contributed to this spurt. In 2015-16, a total of 6,029 km of national highways were built, which was not just an all-time high but a substantial jump over the 4,340 km, 3,950 km and 5,732 km that were constructed in the preceding three fiscal years. In the past three to four months of 2016, construction equipment too has been witnessing growth over the previous corresponding years. The green shoots are evidently here. And, with the prospect of a good monsoon after two bad years, the time seems set for an overall improvement in the economic scenario in the construction and infrastructure space. Real estate will still take time as the buoyancy in the economy will take some time to percolate.

A revival in PPP also indicates an improvement in the confidence of the business sector. For India’s infrastructure building plans, a huge contribution has been envisaged from the private sector. A total of about 1,200 projects in different segments of the infrastructure sector, with investments worth about Rs 7 lakh crore, are being carried out under PPP mode throughout India, according to an ASSOCHAM study. Of these, there are about 650 projects worth over Rs 4.5 lakh crore with about 67 per cent share in roads and bridges; followed by over 100 projects in the ports sector (12 per cent) with an investment worth over Rs 80,700 crore; over 150 projects in energy (6 per cent) with investments worth over Rs 41,000 crore; investments worth over Rs 30,000 crore in SEZ (5 per cent); as well as projects in water sanitation (2.6 per cent), and others. Almost 73 per cent of total investments worth over Rs 3.3 lakh crore (rest are either terminated or information is not available on them) attracted by the infrastructure sector in various segments under construction in the PPP mode are concentrated in roads and bridges. Currently, there are about 480 investment projects under construction in the PPP mode in various other segments: SEZ, ports, energy, water sanitation, airports, tourism, healthcare, cold chain and others.

The stage is set for a revival and, with the indulgence of the rain gods, the clouds on the horizon are signalling good tidings – at last!

City Lights

According to a World Bank report titled Dealing with Construction Permits, India is languishing at the 183rd position in this parameter, rubbing shoulders with the likes of Afghanistan (185). But, finally, the government has attacked this in right earnest. March has been a watershed month of sorts in the history of construction in India. The Budget announcement on allowing 100-per-cent deduction for profits to projects building homes up to 30 sq m in the four metros and 60 sq m in other cities is likely to spur supply of affordable homes. This was followed by the passing of the Real-Estate Regulatory Act (RERA), which has created a robust structure for protecting homebuyers. And recently, the Model Building Bye Laws 2016 were proposed – these provide a structural framework for a single-window, integrated, building plan approval process and set the maximum time limit for all kind of building approvals at 30 days, after which the approval can be considered ´deemed´. All these measures have come at a time when the sector is reeling under debt stress and low demand but they form firm pillars for the sector to stand upon during better times. The next wave of the economic boom can be well sustained for a longer duration with systems in place that provide checks and balances.

Our cities are in definite need for resuscitation. As per a 21-city survey conducted by Janaagraha, our cities continue to score poorly in comparison with the likes of London and New York.

The lowest-ranked city among all is surprisingly Chandigarh, having the dubious distinction of coming last among 21 for the second time in a row. Further, our cities are grossly underprepared to deliver a high quality of life that is sustainable in the long term.

This is particularly worrisome given the rapid pace of urbanisation in India and the huge backlog in public service delivery. Cities face governance challenges on multiple levels. Most fail to disclose audited accounts. They have no evaluation mechanism for the plans implemented by the municipal corporations. They have extremely weak finances and no city among the 21 reviewed has an effective system in place to monitor and prevent violations or mechanisms to undertake punitive or corrective action. City leaders don´t really have the power to formulate a long-term vision or the length of tenure to execute the same. How is it possible for Bengaluru and Jaipur to become smart cities unless they provide some stability to their commissioners? Both cities have had six commissioners in five years while Raipur has had eight! The Swachh Bharat mission has also ranked the ´cleanest cities´ in India where Mysore, Chandigarh and Tiruchirapalli have secured the top three honours. Now, the smart cities challenge launched by the Ministry of Urban Development has set a race among cities and their leaders, including chief ministers, in urban renewal. Although there is a long way to go, this is now being taken up on a war footing.

So far all deadlines for the smart cities mission have been maintained and the programme appears to be moving forward to prepare India to rebuild its growth engines: Its cities. Read this issue´s cover story for a ringside view of the plans for the cities of tomorrow…..

Toasting the fighters

We are not out of the woods yet. Eight core sectors – coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity – slowed to 1.1 per cent in July after a growth of 3 per cent in June, mainly on account of low expansion in coal output and contraction in steel, crude oil and natural gas production, all hinting at weakness in industrial recovery. AM Naik, chairman of engineering and construction conglomerate L&T, expressed his anguish publicly, and maintained that any recovery was at least a year away.

While Naik may be right, the roads sector has definitely rebounded, to about 13 km a day from just 3 km when the NDA took over, as per the ministry´s website. The government plans to sanction 20,000 km of projects in the coming three years and the target for the year to March 2016 has been set at 8,000 km. Seven top road builders have raised Rs 10,700 crore by way of bonds, paving the way for finance to the debt-stressed sector. Bonds come at a cost of 11 per cent and can be serviced, provided tolls commence within the timeline. Recent easing of policies, including allowing companies to exit projects and getting environmental clearances in time, have helped improve the climate.

Raising finance overseas has been the route many companies like ITNL have followed. The global scenario, though, is not too smooth with Caterpillar planning to cut up to 10,000 jobs by 2018 and JCB cutting 400 jobs in the UK. The Chinese residential property market, which contributes tremendously to the GDP, continues to remain under pressure. In the Middle East, too, the pressure on oil prices has rubbed off on public-sector spending, with the award of new construction projects having slowed down.

In the light of this global upheaval, India remains an attractive option. During Prime Minister Modi´s visit to the US, American CEOs implored him to step up the pace of reforms. Once he´s back, he will jump into the Bihar elections, but will have to sharpen his ability on seeing through bills of reform. For instance, the plan to build 50 non-frill regional airports has been revived. The logic to accelerate connection of the hinterland is unquestionable. However, roads take their own time and larger investment; a quicker way would be to deploy air taxis on economically run airports. Creation of these ´air corridors´ can accelerate economic growth.

Similarly Union Minister for Roads, Highways and Shipping Nitin Gadkari has been a strong proponent of the use of inland waterways and a bill is in the works. There is a proposal to offer 850 ports along major rivers to transport coal to the private sector. This will create new opportunities in logistics and is likely to bring in Rs 4,000 crore of private investments apart from saving sizeable freight costs. The smart cities mission, in which nearly two dozen countries are showing interest, also has great potential to revive the urban construction scenario. However, all this will require good footwork on the floor of Parliament.

Meanwhile, a flock of nimble-footed construction companies are emerging, who are moving stealthily and strengthening their order-books. Many of them are small and new. These and others who have retained their conservative approach are in the reckoning to grab the business as it is likely to unfold. Our 13th Construction World Annual Awards will celebrate these winners on October 16, in Mumbai. So while the third quarter gets underway along with the hopes of a better festive season, we will raise a toast to the fighters who managed to score on a rough turf.