Cement, steel availability and prices regularised?
The supply chain disruptions affected a large number of infra projects. July 2020
Pratap Padode, Founder, ASAPP Info Global Group, and Founder & Executive Director at FIRST Construction Council and Smart Cities Council India
Coronavirus has put the brakes on growth in several industries.
Most analysts believe it takes a lot to be part of the supply chain and as this is only a short-term event, India does not have a chance. But I believe this is a ‘Black Swan’ event, as coined by Nassim Nicholas Taleb, meaning an unpredictable event that is beyond what is normally expected of a situation with potentially severe consequences. Companies are already scouting for alternate sources for supplies. Not having a fix on how long this will last, companies will want to secure an alternate supply chain route even as positive news on the containment of the virus begins to surface. Indian production facilities of construction equipment owned by multinationals are already set for exports with many already established as export hubs for specific models. These could take some load off the demand of countries dependent on Chinese production facilities in the short run. China is the biggest exporter of ceramic products, especially vitrified floor tiles in Europe, the US, Far-Eastern countries and Africa. Indian tile manufacturers from Morbi and others can also look at a spike in demand from markets that hitherto preferred Chinese ceramics.
For this to turn into an opportunity, the Government must pull its head out of the rabbit hole. It must announce a revised package for exporters as an emergent tactic. Even contractors from India can expect to see a revision in tenders of some projects that have been awarded to Chinese contractors as it would be extremely difficult for them to now provide Chinese workers and machines to undertake the task.
Meanwhile, the National Infrastructure Pipeline has an interesting line-up (see report HERE ). The FM has set aside Rs 220 billion towards the National Investment and Infrastructure Fund. This would be leveraged to raise funds from pension and sovereign funds, which would now find the deal worthwhile given that the impact of the dividend distribution tax has been muted. They have also been provided tax relief when investing in infrastructure. Cube Highways has been agile and is already looking at offloading its road assets at a premium through an InvIT. Stepping in after construction and then off-loading after the asset has gained traction could bring smart returns for the courageous. NHAI needs to follow suit by displaying some agility. We do not have anything to ‘Trumpet’ about during the latest visit by the US President (except probably the Motera project - click HERE); so far, it has only been a good PR exercise.
Despite the godsent opportunity, if we remain absorbed in ‘home’ matters, the world will pass us by. If we want to provide employment to the world’s largest and youngest workforce, we need to wake up and smell the coffee!