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MARCH 2015
Vol. 6 Issue 10
Pages 106
150/-
Report
Construction Sector ...40 Roads & Highways ...60
Feature
Clean Energy ...68
Analysis
Real Estate (REITs) ...84
Urban Development Smart Cities ...88
Engineering
Projects
Construction
Extensive Coverage Obsessive Readership
UNION BUDGET 2015 Hopping high on
‘Make in India’
THE CHIEF EDITOR'S TAKE
THE CHIEF EDITOR'S TAKE
EPC WORLD
‘India’s Chance To Fly’
Union finance minister Arun Jaitley’s opening remarks in this year’s budget speech raised bright hopes where-in he stated – ‘when other economies are facing serious challenges, India is about to take – off on a faster growth trajectory once again’. Stating that the present NDA government has taken several significant steps to energize the economy, he stressed that ‘the credibility of the Indian economy has been reestablished. The world is predicting that it is India’s chance to fly’. While the intent to turnaround the economy is fairly evident, the road map to timey delivery is distinctly hazy. The need to, construct 6 crore affordable homes by 2022 and 6 crore toilets, electrify remaining 20,000 villages by 2020, complete one lakh km of roads presently under construction and sanction and build another one lakh km of roads, upgrade over 80,000 secondary schools and add/upgrade 75,000 more, corporatize public sector ports and train and skill the nearly 54 per cent of the population below 25 years of age, has been rightly recognized in the budget. The government proposes to permit tax free infrastructure bonds for projects in the rail, road and irrigation sectors, has increased considerably the outlay on rail and road projects and intends to establish a National Investment and Infrastructure Fund. Why then is this focus and push elusive to projects that promise housing for all by 2022 and other large scale public construction works for sanitation and education? The pace of construction of roads is being enhanced from the present 11 km per day to 30 km per day that promise about 21,000 km in two years, falling much short of the targeted scale of work. Acknowledging that the major slippage in the last decade has been on the infrastructure front, the finance minister aptly pointed at the need of infrastructure to match growth ambitions and a pressing need to increase public investment. He therefore raised government’s investment in infrastructure by ` 70,000 crore in 2015 – 16 over that in the last financial year, which has triggered positive sentiments in the sector. The stage is indeed set for a much larger growth in infrastructure. The budget is certainly not the final road map of either direction or pace of the Indian economy. It is essentially a statement of accounts of public finances. But the present budget by a government that had the mandate for change has echoed the change with large allocations in infrastructure. The real test will be in the pace of implementation of stalled and new projects that are so very vital to spur growth. It would be fair to give this government their mandated five years to achieve the results of their game plan to boost and sustain the fiscal growth as also contain inflation. The impact of the budget will certify whether the nation grabbed the chance to fly or rested on its wings of hope for ‘Achhe Din’.
Tejasvi Sharma (tejasvi@epcworld.in)
Editor-in-Chief
Tejasvi Sharma (tejasvi@epcworld.in) Executive Director Meenakshi Verma (meenakshi@epcworld.in) Consulting Editor Vishwarath R. Nayar Deputy Editor Pradeep Pandey Assitant Editor Prasenjit Chakraborty
Head-Marketing & Communications Sriniwas Kumar (sriniwas@epcworld.in) Head-Business Development Venkatesh K GM-Sales & Mktg Santosh Rai Manager Co-Ordination Brijender Kumar Manager-Sales & Marketing Umesh Savlekar Subscription Joydeep Ganguly Website Management Manish Sharma Sanjay Sharma Design Vishwas G. Machivale Photographer Pramod Ingle
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6 u EPC World u March - 2015
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CONTENTS CONTENTS
26 COVER STORY
Budget 2015 Hopping high on ‘Make in India’ Amid the huge expectations of the infrastructure players and global investors, the Finance Minister Arun Jaitley presented Narendra Modi government’s first full year Budget.
CONSTRUCTION Report
Worst is over for construction sector The Government is taking several steps for the growth of infrastructure sector.
Case study
Maroshi-Ruperal-a winning challenge HCC with its engineering know-how has encountered several problems right from excavation at Mahim shaft to volcanic cavity successfully.
Technology Trend
Construction technology trends 2015 As the country embarked on huge infrastructure development it is imperative to adopt new and advanced technologies for speedy completion of projects.
8 u EPC World u March - 2015
40 56 46 52
Interview
Quality & speed of construction will drive the demand for construction chemicals -says Giles Everitt, MD, Chryso India
60
ROADS & HIGHWAYS Report For the road sector, the year between 2007-2011 was considered as the golden age for PPPs. However, it faced rough weather due to various reasons.
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CONTENTS CONTENTS POWER Feature 2.66 K MW commitment for renewable energy
68 88
Private companies and state entities are betting high on renewable energy in the country. In order to showcase the opportunities in non conventional energy sources Ministry for New and Renewable Energy held a global conclave cum exhibition in New Delhi for the first time.
98 OIL & GAS Company Feature Shell lube bullish on rising demand Shell Lubricants is one of the global market share leaders in finished lubricants with 13 per cent of the market in volume terms. Its blending facility in India, the plant has a capacity to produce 110 million litres per annum.
REAL ESTATE Analysis REIT- a potential investment vehicle to transform the Indian real estate sector It is expected that introduction of REITs in India would generate returns similar to that of other countries. It is also expected that a diversified REITs only focusing on rental income can generate higher returns in order of 9-11%.
99 80
URBAN DEVELOPMENT Focus Building Smart Cities the Smart way
Currently, urban population in India is at 31%, contributes over 60% to India’s GDP. Hence investing in Indian cities has sound economic rationale as it will lead to enhanced economic activity.
SPOTLIGHT
CASE Construction celebrates 25 Years in India CASE India kicks off its Silver Jubilee Celebration in India at ConMac 2015. In the last 25 years the company won several awards for its transparent and ethical business conduct.
“We are entering extreme mobility” When mud or sand have swallowed the road, the only way to stay out of trouble is to keep moving. This is where the highly controllable driven front axle in the Volvo FMX is hard to beat.
84
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EPC World Media Pvt. Ltd 303, Hilton Centre, CBD Belapur, Navi Mumbai - 400 614. Monthly Dinesh Tipnis Indian Siddhi Offset Pvt Ltd, 5/12, Kamat Industrial Estate, 396, Veer Savarkar Marg, Prabhadevi, Mumbai- 400025. Tejasvi S Sharma Indian 303, Hilton Centre, CBD Belapur, Navi Mumbai - 400 614. Tejasvi S Sharma Indian 303, Hilton Centre, CBD Belapur, Navi Mumbai - 400 614.
I, Tejasvi S Sharma, hereby declare that all particulars given above are true to the best of my knowledge and belief.
Date: 1st March 2015
10 u EPC World u March - 2015
Sd/. (Tejasvi S Sharma) publisher & Editor-in-Chief
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Exhibition
News
JCB showcased world class fuel efficient machines at ConMac 2015 JCB India Limited, India’s leading manufacturer of Construction & Earthmoving Equipment showcased its innovative, made-in-India, made-for-India machines at CONMAC 2015 from 27thFebruary to 1stMarch, 2015. Speaking on this occasion, Amit Gossain, Executive Vice President – Sales, Marketing and Business Development, JCB India Ltd. said, “We are absolutely delighted to be a part of this Construction Equipment exhibition. North East is an important geography for JCB India and participating in CONMAC gives us an opportunity to showcase and reiterate that JCB machines are the most reliable & fuel efficient in the construction equipment industry. We are committed to offering the best product range and best product support in North East.” JCB will have its entire range of world class fuel efficient machines on display including the Made in India Skid Steer Loaders.
Thermal Power TPCIL Unit-I at Krishnapatnam starts commercial operations
Power
The first 660 MW unit of Thermal Powertech Corporation India’s (TPCIL’s) 1,320 MW facility, located at Andhra Pradesh’s SPSR Nellore district, has begun commercial operations. The first unit of 660 MW attained its full load on 25 February, 2015. It was successful in completing 72 hours of full load trail operation on 25 February, 2015. As a result, 28 February 2015 has been declared as the unit’s official date of commercial operations. In the third quarter of 2015, the plant’s second 660 MW unit is expected to commence operations and it will take the total installed capacity of the plant to 1,320 MW. The plant operates on a combination of domestic and imported coal. It utilises supercritical technology, which enhances efficiency and reduces emissions of carbon dioxide and other pollutants. The company has signed a combined power purchase agreement (PPA) with the Andhra Pradesh and Telangana power distribution companies for the supply of 500 MW of power for a period of 25 years. TPCIL is a joint venture between Singapore-based Sembcorp Utilities and Gayatri Energy Ventures.
Cement SCL commissions cement mill section in Chhattisgarh Shree Cements (SCL) has successfully commissioned the cement mill section of 2.60 million tonne per annum capacity at Baloda Bazar near Raipur, in Chhattisgarh, on 24 February, 2015. Shree Cement has eight cement plants in Rajasthan and one grinding unit in Uttrakhand. This results in having an aggregate capacity of 13.5 million tonne per annum. It has plants at Beawar, Ras, Khushkhera, Jobner (Jaipur) and Suratgarh in Rajasthan, Aurangabad in Bihar and more. The company is engaged in the manufacturing of cement and power generation.
Mega Project Cost escalates for four mega projects in Mumbai The four mega projects cost in Mumbai has escalated to ` 3,500 crore from ` 2,600 crore due to delays. BMC has spent more than the estimated cost on the projects. One of the four mega projects that has suffered delay is a bridge linking S V Road and the Western Express Highway, across Jogeshwari. The 1.6 km bridge’s cost, which was ` 67 crore, has increased to four times the estimated amount, to ` 256 crore. The project was supposed to get completed in 2011, but is still incomplete. The new deadline for the project is May 2015 but it may be further delayed due to encroachments and a dispute over rehabilitation. The Veermata Jijabai Bhosale Udyan (Byculla Zoo) project, which was to be completed by March 2014, has also suffered delay. The project cost has gone up to ` 325 crore from ` 150 crore and the work is only half done. BMC’s ` 1,200 crore Brimstowad project, which will widen and deepen drains for smooth flow of rainwater has also eaten up funds by delay. The project cost has now gone up to ` 4,000 crore. Also, the Mithi project's cost has increased from ` 1,200 crore to ` 1,600 crore.
L&T commissions projects in Maharashtra and Rajasthan Larsen & Toubro (L&T) has commissioned two projects in Maharashtra and Rajasthan. The company’s power transmission and distribution division has commissioned both the projects. The pojects are 765 kV GIS (gas insulated substation) in Maharashtra, 765 kV transmission line, and 765 kV air insulated substation at Rajasthan. The GIS project is part of the transmission system associated with the Krishnapatinam UMPP to strengthen the grid connectivity through 765 kV Solapur substation as well as to strengthen the 400 kV power distribution in western India. The 765 kV transmission line has been built between Anta (Baran) and Phagi (Jaipur) for Rajasthan Rajya Vidhyut Prasaran Nigam.
14 u EPC World u March - 2015
Urban Development
News
NBCC signs MoU with DDA for mega project To develop a mega project, National Buildings Construction Corporation (NBCC) signed a Memorandum of Understanding (MoU) with the Delhi Development Authority (DDA) recently. The pact has been inked for development of ‘East Delhi Hub’ at Karkardooma. This mega project will come up over 30 ha of land and will also house the tallest tower in the capital, including residential, commercial, recreational and social infrastructure, among others. This will be the first project based on Transit Oriented Development (TOD) norms and Smart City features. NBCC will be paid PMC (project management consultancy) and marketing fee. East Delhi Hub shall be ready in a period of approximately three years, after receiving the statutory approvals. NBCC is present in three main segments - Project Management Consultancy (PMC), Real Estate Development, and EPC Contracting.
Rail Project CIL board in-principle approves East Corridor Rail project
Wind Energy Suzlon commissions 65 MW Wind Energy Park in Uruguay
Metro Rail
The East Corridor Railway project has got its in-principle approval from the CIL board. The project may see an investment of around ` 2,500 crore. The approximately 180 km long East Corridor Railway project will go through KharsiaChhal-Gharghoda-Korichhapar-DharamjaygarhKorba and connect mines of Gare-Pelma block. In this direction, a special purpose vehicle (SPV) will be set up to develop the project. Chhattisgarh East Rail and South Eastern Coalfields holds 64 per cent stake, while Indian Railways-promoted Ircon has 26 per cent share, and the Chhattisgarh government 10 per cent. Besides, another rail project, East-West Corridor, has also been planned by another SPV, Chhattisgarh East-West Rail with the same shareholding pattern. The Coal India board is yet to clear this project. Three critical railway lines in Chhattisgarh, Odisha and Jharkhand will increase coal evacuation by 200 million tonne over the next several years. The coal ministry has identified 51 new railway lines to connect blocks of various Coal India subsidiaries.
Suzlon Group, the world’s fifth largest wind turbine maker recently announced commissioning of Rouar S A’s Wind Energy Farm at Artilleros for 65.1 MW. The Wind Farm is located 170 km east of Uruguay’s capital Montevideo and was inaugurated by the President of Brazil, Ms. Dilma Rousseff and President of Uruguay, Jose Mujica. This is the first of its kind joint venture between Brazil and Uruguay to harness wind energy for energy security. Suzlon is responsible for complete Engineering, Procurement and Construction (EPC) and life-time service there on of the Wind Energy Park at Artilleros. The 65.1 MW Wind Energy Park is located on state-owned land near Tarariras city in Uruguay's Colonia province. The energy farm includes Suzlon’s 31 WTG’s (Wind Turbine Generators)
of S95-90 make with a rated capacity of 2.1 MW. Tulsi R. Tanti, Chairman, Suzlon Group said, “The successful completion of the maiden project in Uruguay is a strong testament to Suzlon’s diversified product portfolio that seamlessly caters to different markets and geographies. We stand committed to build on our technological edge and offer new age products and best in class services. Suzlon is committed to contribute to Uruguay’s energy basket by reducing its carbon footprint and achieve the country’s vision of energy security and low carbon economy.” Rouar S A is a joint venture (JV) set up by Brazilian federal power company Electrobras and Uruguayan partner Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE).
Union finance ministry allocates ` 126.58 crore for Pune metro The union finance ministry has allocated ` 126.58 crore for the Pune metro rail project in the 2015-16 budget. A provision of ` 30.32 crore for Pune has been made under the head of metro projects. Another ` 70.38 crore and ` 25.88 crore have been sanctioned under the heads of investment in public enterprise and assistance for externally-aided projects, respectively. The much delayed Pune metro got its first provision of ` 10.01 crore in the 2013-14 budget. In February last year, the UPA government accorded in-principle approval for the elevated metro plan which includes two corridors - Pimpri-Chinchwad to Swargate, and Vanaz to Ramwadi - covering a total distance of 31.51 km. The Pune Municipal Corporation (PMC), in its 2015-16 draft budget, has proposed ` 25 crore for the project. The collective cost of the various infrastructure projects that need to be undertaken in Pune is estimated at ` 25,806 crore over the next 20 years.
16 u EPC World u March - 2015
Product Launch
News
Consul unveils its Flagship Falcon Range of Online UPS for international markets Consul Neowatt Power Solutions Pvt Ltd, the largest India Power Electronics company recently unveiled the extended range of its successful Flagship Falcon range of online UPS for international markets at the prestigious Middle East Electricity show in Dubai. The Falcon range of online UPS from 10 – 800 KVA has been designed for harsh power and site conditions found in India and other developing markets. Falcon UPS come with state of the art 32-bit FloatingPoint DSP controller which can handle any load variations or input power quality issues at supersonic speeds in an efficient manner to provide clean, reliable and uninterrupted power to all critical applications even in harsh conditions. Consul is one of the few power electronic companies globally that today have the capability to manufacture online UPS for capacities above 300KVA. It was the first company to manufacture a 600KVA IGBT based UPS in India and has the capability to manufacture UPS upto 800KVA. Speaking on this occasion Mr. Sriram Ramakrishnan, MD & CEO, Consul Neowatt Power Solutions said, “The Falcon range of online UPS has set a scorching pace since its roll out in India gaining customer acceptance and recognition for their next generational technology married with institutive human machine. This range of UPS has been designed with several innovative features to ensure that they are cost effective and exceptionally reliable thereby winning customer hearts.”
Real Estate Ahuja Tower offers ‘The Seven’s Heaven’, a bespoke collection
Real Estate
Ahuja Constructions, a real estate firm, with its presence in Mumbai and Navi Mumbai has offered 7 exclusive residences in Ahuja Towers to be designed in collaboration with world’s most coveted interior designer, Wilson Associates, New York. These limited edition residences are being offered as part of ‘The Seven’s Heaven’, bespoke collection, with ready to move in privileges which will re-define the future of luxury living in the city. Through this state-of-the-art proposition, the customer will be personally meeting the designer
from Wilson Associates in New York to discuss the interiors of the apartment. This offer is planned meticulously keeping every minute detail in mind right from preparing the wishlist along with detailed information of customer’s preferences to finalizing the agenda for 3 days travel to New York and choosing the exclusive artefacts for the apartment with them. Gautam Ahuja, MD, Ahuja Constructions says, “The Seven’s Heaven Limited Edition Bespoke Residences” is an endeavour to bequeath our customers with superlative living experience within their apartment at Ahuja Towers. By bringing in Wilson Associates, New York, the name behind one of the most spectacular interior designs of the world, we will enable 7 cherished couples to custom design their homes according their wishlist.”
Power Plant OPGS Power’s coal-based power plant inaugurated OPGS Power Gujarat’s 300 MW coal fired power station was inaugurated by chief minister, Anandiben Patel, recently. The plant is situated in Bhadreshwar in the district of Kutch. This makes it the first OPG venture in Gujarat. The total cost of the project is ` 1,855 crore with equity capital of ` 464 crore. The plant was conceptualised and started seven years ago. The company will also work on their 2,000 MW power plant worth ` 15,000 crore this year. It signed an MoU with the Gujarat government during Vibrant Gujarat Summit in 2011. Funding for the projects by OPG Power Ventures is done through Foreign Direct Investment (FDI) equity capital. OPGS Power Gujarat is a subsidiary of OPG Power Ventures which is a UK-based company.
Kolte-Patil and Amura sell 250 units online worth ` 150 crore Kolte-Patil Developers Limited Pune’s largest real estate developer, recently made the strategic decision of using the digital medium to kick off the campaign for their first-ever home buying festival, NestFest 2015, through Amura Marketing Technologies. The company took its customer engagement to the next level by showcasing inventory availability, virtual tours, floor plans and actual site photographs across all Pune projects on the digital platform and enabling customers to book online a home of their choice from the convenience of their residences. It is a remarkable feat considering that a major part of the inventory sold during NestFest came through the online channel and marks a new chapter in real estate marketing and sales, where technology and e-commerce will play an important role going forward. "We (Amura and Kolte-Patil) have created history in real estate where over 250 apartments worth ` 150 Crores were sold online in ten days" said Vikram Kotnis, MD, Amura. He added, “With trusted brands it's easier for customers to make the decision of even buying homes online. With developers uploading all relevant project-related information and site pictures to their websites, customers can have a complete digital sales experience.”
18 u EPC World u March - 2015
Marketing Strategy
News
VEKA to be more aggressive in India VEKA India, a subsidiary of VEKA AG – the world’s second largest manufacturers of windows and doors systems recently marked ten successful years of operations in India. To commemorate the occasion, Andreas Hartleif, Group CEO and Managing Director, VEKA AG visited its India facility located in Navi Mumbai and inaugurated its newly built state-of-the-art showroom and application centre. The company also announced its plans of expanding its operations and making strategic inroads into the Indian markets including residential projects, hotels, hospitals and other commercial establishments. “The overall market size of PVC window profiles in India is about 40,000 tons in an annum. In Germany, VEKA by itself surpasses the figure in less than a month. We believe there is room for exponential growth in India and we are here to capitalize on it,” says Andreas Hartleif, Managing Director, VEKA AG. “Currently the door and window profiles in India are dominated by aluminium and wood. Also the fabrication is very primitive. World over, uPVC profile is the default choice. This not only provides greater durability, but also offers stunning looks and ultimate energy efficiency by entirely keeping out noise, dust, heat or cold. uPVC profiles also are more cost effective than aluminium and wood when compared apple to apple,” adds Hartleif.
Steel Tata Steel to supply highly wear-resistant rail for the Crossrail project in London
New Initiative
Tata Steel recently announced the signing of a prestigious contract to supply highly wear-resistant rail for the Crossrail project beneath the heart of London. The Crossrail route will serve 40 stations and travel more than 100km from Reading and Heathrow in the west, through new twin-bore 21km tunnels below central London to Shenfield and Abbey Wood in the east. Tata Steel has already commenced deliveries to the Crossrail project, and will ultimately supply the project with more than 57km of its heat treated, wear-resistant rail. In total 7,000 tonnes of Tata Steel rail will be used to create one of Europe’s largest railway and infrastructure projects. Gérard Glas, Tata Steel’s Rail Sector Head, said,“The Crossrail project will have a huge impact on improving the commuting experience in London and we are delighted to be a part of that.” He also added, “Our premium heat-treated rail is produced using a unique patented process which ensures it has exceptional wear resistance.” During 2015, Crossrail’s major tunnelling works will conclude and the focus will shift towards fit-out and implementing railway systems within the tunnels and stations. Alstom, TSO and Costain Limited Joint Venture (ATCjv) have been appointed to provide the tunnel fit-out, including track and train power supply, in the central area which extends east under London from the Royal Oak tunnel portal at Paddington. Tata Steel rail will be installed across the route.
JSPL showcases its unique, state-of-the-art Coal-to-Gas plant Jindal Steel and Power Limited (JSPL) stressed the need for India to explore alternate ways of obtaining gas to help attain energy security, while showcasing its unique, state-of-the-art Coal-to-Gas plant at Angul, Odisha at the 6th International summit on Gasification and its Applications, GASIFICATION INDIA: 2015 . Worldwide, gasification has reliably gained a good share in the past few decades, as there is a rise in chemical, energy, and natural gas demand all over the world. Gasification is a thermochemical process that is low on cost, high on efficiency, resulting in greenhouse savings. The two-day international summit covers the entire field related to science, technology and policy of gasification of coal, biomass and other carbonaceous feedstock's, as well as applications to power generation, production of liquid fuels, and related topics. The scope of the summit is to estimate the global market for gasification by the end of 2020. Addressing the delegates, Mr. Naveen Jindal, Chairman, JSPL said “We see tremendous importance of coal gasification and have invested $4 billion in coal & steel plants. We hope that the Government encourages coal gasification as this will be good for the country in the long run. Our Coal Gasifiers are performing very well, they have stabilised and can meet the gas requirement.”
20 u EPC World u March - 2015
Wind Power
News
Wind Industry confident of achieving 60 GW Indian Wind Turbine Manufacturers’ Association (IWTMA), an association formed to promote and harness wind energy in India recently announced its support to Ministry of New Renewable Energy (MNRE), Government of India in fulfilling the target of creating 60 GW of wind energy by the year 2022. The growth of Renewable Energy in India is enormous and Wind Energy proves to be the most effective solution to the problem of depleting fossil fuels, importing of coal, greenhouse gas emission, environmental pollution etc. Wind energy as a renewable, non-polluting and affordable source directly avoids dependency of fuel and transport, can lead to green and clean electricity. With an installed capacity of 21136.3 MW (March 2014) of wind energy, Renewable Energy Sources (excluding large Hydro) currently accounts for 13.86 % of India’s overall installed power capacity of 228721.73 MW. Wind Energy holds the major portion of 66.7 % (of 31707.2 GW total RE capacity) among renewable and continued as the largest supplier of clean energy. IWTMA sponsored a panel discussion titled ‘Onshore Wind’ at the first Renewable Energy Global Investors Meet & Government Expo (RE-Invest). The conference was mainly focusing on policy, regulatory, financing and other major issues concerning wind power business in India and concentrate on building a comprehensive roadmap for achieving our targets.
New Facility Allahabad gets its first integrated facility for JCB Equipment JCB India celebrates the grand opening of Alliance Industrial Marketing’s new state-of-the-art integrated facility in Allahabad, Uttar Pradesh. This world class 3S facility aims at providing JCB customers with a world class experience for all their equipment needs – Sales, Service or their requirement for JCB Genuine Parts. “We are delighted to inaugurate the newly designed facility built by our dealer, Alliance Industrial Marketing. With a renewed focus on Infrastructure, it is imperative that we are fully prepared to give our customers world class products and product support in the industry.” said Mr. Amit Gossain, Executive Vice President – Sales, Marketing and Business Development, JCB India Ltd. Now operational, this dealership facility is spread across 11,000 sq ft. area out of which built up area is 8,000 sq ft. The infrastructure has been built as per the JCB Corporate Identity norms and is equipped with JCB standardized systems.
Renewable Energy Welspun Renewables to set up solar and wind projects across the country
Green Building
Welspun Renewables, India’s leading renewable energy generator has pledged to set up mega 11 GW solar and wind projects across the country. In line with supporting Prime Minister Narendra Modi’s vision of 100 GW, Welspun Renewables will be formally announcing this commitment in the presence of Narendra Modi and other prominent global and national policymakers. The 11001 MW capacity will be developed as 8660 MW of solar and 2341 MW of wind power projects. Vineet Mittal, Vice Chairman Welspun Renewables said, “We believe in Honorable Prime Minister Modi’s vision and are committed to doing our utmost in exponentially increasing India’s green energy capacities. Under the aegis of Shri Modiji, India has emerged as one of the most conducive regions for renewable energy development. Our 11001 MW commitment is a direct reflection of how the solar and wind energy industries will be growing in the future. We would like to thank both the MNRE and the state governments for giving us their support in developing our current and previous projects.” Welspun Renewables will be commissioning over 1 GW of solar and wind capacities well within this calendar year - December 2015. In recent months Welspun Renewables has signed renewable energy agreements of 1100 MW with Gujarat and 100 MW PPA with Andhra Pradesh.
LEED spans 833 million Square Feet of Green Building space in India The U.S. Green Building Council (USGBC) announced that Leadership in Energy & Environmental Design (LEED) comprises 833 million square feet of green building space in India. The announcement was made at a recent summit hosted by The Energy Resource Center’s (TERI) where USGBC’s President & Founding Chair Rick Fedrizzi and its COO, Mahesh Ramanujam, spoke. The summit was centered on how businesses will lead India's energy, water and food security. Because LEED-certified buildings are part of the solution for energy savings, carbon mitigation and water conservation, LEED featured throughout the program, including a speech from USGBC’s Fedrizzi. “The solutions we need from our built environment require the full participation of the business community if we are to make progress against climate change, drive energy efficiency and the development of a diverse portfolio of energy resources that includes renewables, conserve precious water, and improve human health ,” said Fedrizzi. “LEED buildings have proven to be a big part of that solution, especially in a country like India where energy efficiency is so critical and the human health impacts of rapid growth are significant,” he added.
22 u EPC World u March - 2015
Real Estate
News
Godrej Properties ties up with Snapdeal Godrej Properties Ltd. (GPL), the real estate development arm of the Godrej Group, lately announced a partnership with Snapdeal.com, India’s largest online marketplace through which it will offer online booking of its real estate projects. GPL already offers customers the ability to book properties online through its own website and has added this additional sales channel to further enhance customer access. This new tie up offers customers increased flexibility and unique offers at the time of booking. Girish Shah, EVP, Marketing & Sales, Godrej Properties, said, “We are happy to have tied up with Snapdeal and look forward to a long term relationship that will benefit customers immensely. Our aim is to strategically enhance our sales channels while offering our customers greater ease and convenience."
Solar Power First Solar to develop 5 GW of capacity by 2019
Hydro power
First Solar, Inc. made a Green Energy Committment to develop 5 GW of capacity by 2019 at the RE-INVEST meet, joining India’s vision to ramp up solar energy capacity in the total energy mix to 10 per cent to meet the country’s increasing demand for sustainable renewable energy. Total global installed PV Solar capacity has jumped from 3.7GW in 2004 to 135GW at the end of 2013. And, India’s plan to install 100 GW capacity of solar-generated electricity by 2022 is following that lead, with R&D bringing about more efficiencies to support an even larger growth. “India remains one of our most important global markets. Given its economic growth and the need for energy security and energy access, solar presents a very compelling opportunity to the government and the industry today, to demonstrate how it enables a sustainable and affordable energy solution for the 1.2Bn people of this country. First Solar is excited about the vision that the new Indian government has for solar energy, and as a global market leader our commitment demonstrates our intent to work with the government in achieving this goal”, said James Hughes, Chief Executive Officer of First Solar, Inc. “We are one of the lowest cost producers of solar energy in India with a development pipeline of over 200MW of projects in AP and Telengana. The overall commitment is of course contingent upon the government providing PPA allocations from utilities by way of enforcing RPO’s as well as the land/evacuation infrastructure under the solar park policy”, said Sujoy Ghosh, Country Head, for First Solar India.
Pumps KEPL supplies critical application pumps to Reliance Jamnagar Refinery complex KEPL (a joint venture company of Kirloskar Brothers Limited in India) , a pioneer in critical process pumps technology and a leading manufacturer of complex engineered pumps in India, has shipped the first set “5-stage BB3” pumps to Reliance Industries Limited (RIL) for J3 Project at Jamnagar in Gujarat, India. API 610 standard BB3 pumps are Between Bearing Axially-Split case pump. KEPL manufacture process pumps as per API (American Petroleum Institute) standard for High temperature and High pressure application. KEPL BB3 pumps are designed for fluid transfer applications. Its near-centreline mounting design makes the BB3 pump suitable for various refinery applications subjected to the ISO or API criteria for flammable hydrocarbons. The pumping temperatures range for the BB3 Pump is from 5 degree Celsius to 200 degree Celsius and its capacity is up to 2500 cubic meters per hour. Sanjay Mande, Assistant Vice President, KEPL said: “We are delighted to provide our indigenously-developed critical applications to Reliance Industries limited. BB3 pumps are designed to ensure high reliability under high pressure applications and are very easy to maintain.” Reliance Industries limited Jamnagar complex represents the largest refinery and petrochemical project ever implemented by an Indian corporate. access to a pipeline network. The project, known as J3, is designed to increase production capacity of ethylene and other hydrocarbon products at the complex.
Tata Power commissions Unit 1 of 126 MW Dagachhu Hydro project in Bhutan Tata Power, India’s largest integrated power company has successfully commissioned 63 MW sized Unit 1 of its 126 MW Dagachhu Hydro Power Corporation (DHPC) in Bhutan. This project is in line with Tata Power’s commitment to commission 120 MW of new Hydro Power Project this year as part of the centenary year celebration theme of Invisible Goodness, and is the first cross border project registered under UNFCCC’s Clean Development Mechanism (CDM). The Dagachhu project is a Joint Venture initiative between Tata Power (and Druk Green Power Corporation, owned by Royal Government of Bhutan (RGoB), and National Pension & Provident Fund of Bhutan. With the commissioning of the project, Tata Power’s total hydro generation capacity today stands at 513 MW and overall capacity at 8684 MW. Speaking on the occasion, Anil Sardana, CEO and Managing Director, Tata Power, said, “We are delighted to announce the commissioning of the Dagachhu hydro project in Bhutan. Hydro power is an intrinsic part of our clean energy mix and we aim to develop new Hydro project of yet another 450 MW this year. We are committed to reducing our carbon footprint through the generation of 20-25 per cent of our total capacity through clean and renewable energy sources.”
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Budget 2015
BUDGET 2015 Hopping high on
‘Make in India’
Amid the huge expectations of the infrastructure players and global investors, the Finance Minister Arun Jaitley presented Narendra Modi government's first full year Budget. Moreover, the focus of the Budget was on growth, investment, redistribution and promoting the 'Make in India' campaign of the Prime Minister. Certainly, the Budget comes as a big push for investments in infrastructure & manufacturing sector. But the industry people and experts have mixed feeling. EPC World takes a look-- ‘in and out’--of the Budget. www.epcworld.in
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T
he government is trying its best to make a real success—Make in India—and for that bringing in all possible solutions. Nevertheless, Narendra Modi led government is taking cautious steps and vying largely on long term plans and target. Modi and his ministries are setting up targets which have minimum risk of failure. This was the probable reason, the finance minister Arun Jaitely and railway minister Suresh Prabhu portrayed populist and developmental prospects rather than yearly projections, in their respective budget proposal. Interestingly, both of them mainly avoided customized proposals and did not fixed targets or spending for a year, though, laid out plan for resource mobilization to boost economic growth.
Investment boost in infrastructure through higher public funding Positive • Budgetary allocation: Total outlay for infrastructure has been increased by 1.5 times to ` 2.8 trillion (roads, railways and urban infrastructure the biggest beneficiaries). • Roads: Investments for development of national highways proposed to be hiked by 178% y-o-y to ` 85,607 crore. A major portion of this increase will be funded by a ` 4 per litre
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increase in road cess on petrol and diesel. • Railways: Total outlay raised by 52% to ` 1,000.11 billion. In the Railway Budget 2015-16, there have been many announcements of PPP projects in areas of coastal connectivity, gauge conversion, dedicated freight corridors (DFCs) and the Mumbai suburban rail. • Airports & Ports: No new project announcements. Exemption on service tax for constructing airports and ports has been withdrawn. • Funding availability: A ` 200 billion National Investment and Infrastructure Fund to be set up for infrastructure finance companies to raise debt. The budget also provides for issuance of tax-free bonds for roads, railways and irrigation projects, and aims to rationalise the tax regime for Infrastructure Investment Trusts. • Other measures: The government's intent to table a Public Contracts (Settlement of Disputes) Bill will help speedy redressal of disputes in large public projects and create a conducive environment for PPP projects. At a time when private sector interest in infrastructure development is low, the increase in budgetary support holds the potential to kick-start capital investments in the economy. Moreover, the significant increase in public funding for the
Budget 2015
roads sector has the potential to boost execution of national highway projects by about 5,800 km annually and create a robust construction opportunity for road engineering procurement & construction (EPC) companies. The Union Budget 2015 has proposed that the National Investment and Infrastructure Fund will create additional funding resources for private developers, over and above the rise proposed in public funding. Moreover, rationalisation of tax regime for Infrastructure Investment Trusts may help free up private capital currently locked in completed projects. CRISIL Research observes, “While the budget provisions are positive, it puts the execution capability of implementing agencies such as the National Highways Authority of India (NHAI) at test. Addressing on-ground issues such as clearances and land acquisition becomes extremely critical to ensure a sharp increase in project execution.” India Ratings states that despite a reduction in capital expenditure plan in FY14 and FY15, some progress has been made with respect to roads, power, railways and ports. Capital spending, according to FY16BE, has been increased to ` 2,414.31bn from ` 1,923.78bn in FY15. The capital would be used for key initiatives in the railways, roads and other infrastructure sectors as also mobilisation of resources by the
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public sector. The government has provided ` 1,000.11bn to railways in FY15 as against ` 657.98bn in FY15.
EPC gets the booster shot “We are happy that the budget has taken cognizance of the fact that India’s present infrastructure does not accord with her ambitions of being an economic super power,” says G Sathiamoorthy, Country Manager & MD, Black & Veatch India. The increased budgetary allocation of ` 70,000 crore in addition to the establishment of the National Investment and Infrastructure Fund (NIIF) with an annual fiscal support of ` 20,000 crore comes as a shot in the arm for a sector that has seen long-term under-investment. What truly makes this budget confidence inducing to EPC players like Black & Veatch is the revitalizing of the PPP mode of infrastructure development wherein the sovereign would shoulder a major part of the risk. The tax pass through proposed for alternative infrastructure focused funds would help solve financial constraints. “Overall, the budget reinforces the economic belief that infrastructure related fiscal stimulus would have a multiplier effect on the economy manifesting in job creation and GDP growth,” said Sathiamoorthy.
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Positive note for oil companies • Government announces oil subsidy of ` 300 billion for 2015-16. • Change in excise duty structure on petrol and diesel: Reduction in CENVAT by ` 3.5-3.7 per litre, increase in road cess by ` 4 per litre, removal of 3 per cent education cess levied on overall excise duty • Exemption of special additional customs duty on petrol and diesel, in excess of ` 6 per litre The overall impact is marginally positive. The government's estimate of oil subsidies in 2014-15 and 2015-16 will wipe out the subsidy rollover of ` 90-100 billion from 2014-15, reducing working capital requirements of oil marketing companies. With the government contributing ` 300 billion towards fuel subsidies (including rollover), upstream oil companies will see a 5% decline in their contribution to underrecoveries in 2015-16. “Increase in road cess on petrol and diesel has been completely offset by the decline in basic excise duty and removal of education cess. Hence, there will be no impact. As petrol and diesel imports are marginal, exemption in special additional customs duty will not have any major impact,” notes CRISIL Research.
Higher budgetary allocations and fund availability to boost power investments • Capacity additions: Installed capacity target for renewable energy set at 175 GW, led by additions of 100 GW of solar power capacity by 2022. Setting up of five ultra-mega power plants (UMPPs), each of 4,000 MW, with pre-awarded clearances and fuel linkages envisaged. • Budgetary allocation: Allocation to transmission & distribution (T&D) segment increased by 26% to ` 63.5 billion. Funding to renewable energy sector has also been increased by 5% to ` 61.6 billion. • Funding availability: ` 200 billion National Investment and Infrastructure Fund to be set up for help infrastructure finance companies to raise debt. • Duties and levies: Clean energy cess on coal doubled to ` 200 per tonne in 2015-16; however, the rise in generation cost of ` 0.06/unit to be largely passed through. Moreover, 30 u EPC World u March - 2015
steps have been taken to correct the inverted duty structure in renewable energy for selected components. However, the overall impact on capital costs is less than 5%. • Dispute redressal: Public Contracts Bill introduced for resolving contractual disputes to create a conducive environment for PPP projects • Other benefits: Additional depreciation of 20% granted to new plant and machinery installed by a manufacturing unit or a unit engaged in generation and distribution of power. According to CRISIL Research, the budget provides a thrust on investments in the power and renewable energy space, with a 16% y-o-y increase in planned expenditure. We believe that a healthy growth in capacity additions and augmentation of T&D infrastructure will reduce power deficit to about 1% by 2018-19. However, a favourable regulatory framework coupled with states facilitating implementation of projects will be critical to boost investments. Anil Sardana, CEO & MD, Tata Power said, “The Finance Minister has rightfully focused on policy and taxation reforms to provide much needed & opportune impetus to strengthening of the economy in the Union Budget today. The budget has strongly indicated the Government's desire to move towards an annual growth of 8 to 8.5 per cent this fiscal year. The budget enhanced target of 175,000 MW for Renewable energy by 2022, and also proposed 5 new Ultra Mega projects on plug & play model, with a capital outlay of ` 100,000 Crores. This is much appreciated and this model will be good to learn the new approach to bidding & awards. The proposal to set up Regulatory process of permissions than seeking clearances, so that work can commence on investments without holding up for permissions is a welcome move. The government also launched e-Biz Portal that would help to integrate regulatory permissions at one source. This has been a long standing need of the industry. The announcement of implementation of Goods and Services Tax (GST) from 1st April 2016 will help reduce multiple taxation and also in simplification of the tax process in India. The government is targeting Housing for all and 24 x 7 electricity for all, by 2022. Electrification of remaining 20,000 villages 2020 is the need of the hour. These targets need States
Budget 2015
to reform distribution sector & this aspect has thus been far been, illusionary in most of the states. “We look forward for introduction of more schemes like rationalisation of Minimum Alternate Tax and introduction of innovative financing schemes for power sector, Sardana added.” Budget failed to provide any concrete road map for green energy: Finance Minister Arun Jaitley shared no details on the implementation and financing of solar, wind, biomass and hydro energy projects in the country. "The Ministry of New Renewable Energy has revised its target of renewable energy capacity to 1,75,000 MW till 2022, comprising 100,000 MW Solar, 60,000 MW Wind, 10,000 MW Biomass and 5000 MW Small Hydro," said Jaitley in his speech. However, these targets had already been announced over the past few months. Budget 2015-16 has thus met with a lukewarm response from the renewable energy industry. In the solar energy space the government is keen to attract private sector investment but financing, land acquisition, policy instability and grid efficiency continue to hold back installation of capacity and generation of power. The Budget did not incentivise investment or manufacturing in the solar sector other than an excise duty cut on round copper wire and tin alloys for use in the manufacture of Solar PV ribbon (used in solar PV cells), subject to certification by the Department of Electronics and Information Technology. Anmol Jaggi, director, Gensol Consultants, says, "The excise cut on copper wire and tin alloy for solar PV cell manufacturing is again a good move but the impact on project cost is not even 0.5 percent." India is today a 1,000 MW per year solar market; the government wants to increase this 100 times in the next seven years. The Finance Minister has proposed to increase the clean energy cess from ` 100 to ` 200 per metric tonnes of coal, etc. to finance clean environment initiatives. “Another big expectation from the Budget was a reduction in the MAT (Minimum Applicable Tax)," says Jaggi, "However it hasn't been changed and renewable energy companies shall continue to pay 18 % MAT even though there are said to be exempted from income tax." www.epcworld.in
Commercial real estate developers to benefit in the medium term • Rationalisation of capital gains tax for the sponsors at the time of listing of real estate investment trusts (REITs). • Service tax increased from 12.36% to 14%. Rationalisation of capital gains tax for the sponsors* exiting at the time of listing of REITs is positive for developers with a significant exposure to rental yielding real estate assets. The increase in service tax will be marginally negative for the real estate sector. “As per the Securities Exchange Board of India, ‘sponsor’ has been defined as any person(s) who set(s) up the REIT and designated as such at thetime of application made to the Board,” says CRISIL Research. In the Union Budget 2015-16, the Finance Minister has conveyed a message wherein the benefits lie only in the fine print. For the common man, though the cumulative savings implied by various provisions are stated to be to the tune of ` 4.44 lakh, this is assuming a certain magnitude of personal investments into pension funds and health insurance. “The budget has not provided any additional relief via increased income tax deduction limit or on repayment of housing loans. The regime on these fronts which was announced during the previous budget from eight months ago remains unchanged. This is a disappointment, since there was expectation that the Finance Minister would further increase either or both of these limits and thereby address the reality of high property prices in India,” said Anuj Puri, Chairman & Country Head, JLL India.
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Smart Cities in fine print: It was indeed a surprise for Smart Cities ostensibly not to find a mention in the Union Budget this year. More so because it is one among the several flagship programmes of the ruling dispensation with an allocation of ` 7,060 crore in last year’s interim budget. The main announcements aligned in this regard have been those of the first phase of GIFT (Gujarat International Finance Tec-City), which is modeled as a smart city that would compete with Mumbai in becoming a hub for International financial institutions, and the ` 1200 crore being allocated to projects in the Delhi Mumbai Industrial Corridor. With the Dholera Special Investment Region billed to be the first to be developed as a smart city in this corridor, many opportunities for building utility services, desalination and waste water treatment plants, power infrastructure and conduits for creating an Information and Communication Technology (ICT) network. Afterall, Smart Cities need Smarter utilities with Smart Integrated Infrastructure, said Sathiamoorthy. The budget did not provide any details on this initiative taken by the Government. Factors such how it will define these cities and which cities have been identified remain unclear. “However, increased allocations for rail-road development, penetration of education and training centre and towards the Digital India initiative could contribute to the shaping of Smart Cities in the country,” Puri adds.” GST: The Finance Minister has announced that GST will commence from the next financial year and has increased service tax and central excise duty as a preparatory measure for its deployment. This puts an end to the speculation on when GST would finally become a reality. REITs: The Finance Minister has said that he proposes to rationalise the capital gains regime for REITs, but has not given any specifics. This could mean that the sponsor of a REIT may get a one-time capital exemption in exchange for units, but this needs to be confirmed. Wealth Tax: Wealth tax has been eliminated and a new Super Rich tax has been put in place with an applicability limit of ` 1 crore, which is significantly higher than the erstwhile ` 30 lakh (in India, a major share of personal assets are in the form of real estate, particularly in the urban areas, where real estate prices are very high.) Effectively, this new measure implies that a lot of urban housing stock is out of the purview of the new Super Rich tax, and this is a relief for the common man. Only houses priced above ` 1 crore will now be taxable. Transparency: Incentivising usage of wired money rather than cash transactions has significant pertinence to real estate, which is one sector where cash transactions have been impacting transparency. Another boost to transparency in the real estate sector is the enhanced punitive measures which will now be taken on concealment of assets, including benami properties. 32 u EPC World u March - 2015
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Affordable housing completely ignored: The Confederation of Real Estate Developers’ Associations of India (CREDAI), the apex body for private real estate developers in India, feels that the sector has not got the desired position of importance in the budget for the fiscal year 2015-16. The Real estate sector was expecting that the Modi Government, like last time, would extend the support to this vital sector and iron-out the difficulties faced by the real estate sector to ensure a positive contribution to the development of the country, by providing jobs and achieving the mission “Housing for all by 2022”. C Shekar Reddy, National President, CREDAI said, “The budget was quite disappointing for the real estate sector as Budget has not given any impetus to the sector. The sector provides much needed employment, which is the need of the hour, yet, the only provisions in the budget for the real estate sector is the pass through tax for investments in the REITs and rationalization of the capital gains for the sponsors exiting at the time of listing of the units of REITs and InvITs.” The Government has allocated ` 22,407 Crores in the budget for Housing & Urban Development. The government envisages a plan to construct 2 crore houses in rural India, 4 Crore houses in the urban areas towards achieving housing for all by 2022. It is not clear how these targets will be achieved.” Reddy added that, “Moreover our demand for infrastructure status to the affordable housing, home loan interest rate subvention schemes to enable affordability for housing and propel the demand for affordable housing (houses below 80 sqm) has not been heeded to. These along with the adoption of liberal FSI norms were critical to drive the affordable housing demand and supply to achieve ‘Housing for all by 2022’. To top it all, contrary to our demand for removal of service tax on affordable housing, the service tax has been increased from 12.36% to 14% adding to the cost of houses. There was a requirement of a special package for the affordable housing segment. ” On a similar note, Manju Yagnik, Vice Chairperson, Nahar Group says that it was a very disappointing budget as far as the real estate sector is concerned. “There was a lot of expectation from this budget as our PM had proposed Housing for all by 2022 and developing Manju Yagnik, smart cities. The sector Vice Chairperson, Nahar Group
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has been widely ignored,” said Yagnik. Overall Growth factor was missing. The industry’s long pending demand for industry status for the real estate sector has not been met, though the sector being the largest employment provider and second largest GDP contributor to the Indian economy. New reforms and rebates would have brought about a sea change to the whole sectorand would have accelerated the growth further. REIT as an instrument could have brought funds for the real estate sector had it been elaborated and permitted for the funds to be used for residential projects. Also tax implications on REIT should have been streamlined. ECB not touched upon either. The sector will continue to face the crunch for liquidity. “We were expecting incentives for developing affordable housing in terms of tax rebate on raw materials and additional exemption on the income tax on housing loan, and streaming of other taxes including service tax. On the contrary the service tax has been increased from current 12.5% to 14%,” Yagnik added. Monish Doshi Managing Director Acme Housing India, said, “This budget seems to be more focused on Housing for All and Make in India. The Government has tried to work out long term plans, although there is not much in the store for real-estate segment except, 100% REIT is now available for commercial real estate and reduction in corporate tax in four year.” Abolish of wealth tax will allow people to have more than 1 flat, without additional tax implication, but service tax has been increased to 14% (from 12.5%). Also there has been no
Budget 2015
Industry Talks
incentive for Affordable Housing. Over all, there are no major differences in real-estate sector. However, there were a few real estate players who think the budget was positive, one of them was Venkatesh Gopalkrishnan, President and CIO of Shapoorji Pallonji Real Estate, who opines that it was a good budget focusing on propelling investments, increasing liquidity and catalysing growth. Clarity has been provided for the direction of the next 2 to 3 years in terms of fiscal deficit and growth. “Reduction in corporate tax from next year onwards for 4 years and concomitant reduction in exemptions is a very positive and transparent move 5. More could have been done on the personal taxation front,” said Gopalkrishnan. Overall it was a good budget for the economy but lukewarm for the housing sector in the immediate terms. But given that housing growth has a high correlation with economic growth, housing Venkatesh sector will definitely Gopalkrishnan, benefit in the medium to President, Shapoorji long term, he added. Pallonji Real Estate
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Arundhati Bhattacharya, Chairman, State Bank of India: The budget has laid out a clear and tangible roadmap for the future. The decision to incentivise credit and debit card transactions coupled with the proposed new law on black money will bring down the social cost of unaccounted money, apart from adding to the bank bottom-line. The move to frame a Public Contract Bill will kick start activities in the construction sector plagued by disputes. The move to bring NBFCs at par with financial institutions will help banks to clean up their balance sheets by selling stressed assets at an early stage to ARCs. This apart, framing of Bankruptcy Law, sprucing up public investment to channelize private investment and monetisation of gold assets are positive steps. Sudhakar Ramasubramanian, MD Aditya Birla Money Ltd: Union Budget Focussed on Improving the Ease of Business & Tax Buoyancy. While Railway Minister’s first Railway Budget sets the vision for transformation of Railways to become an engine of economic growth for the country, Finance minister followed it up with equally forward looking and pragmatic budget. It is growth enabler at a slight cost of Fiscal prudence - step in right direction. Roadmap to cut the corporate tax and clarity on GAAR are other positives from Foreign investor‘s perspective. Intent of government to curb black money is noteworthy. Subsidy on fuel has been halved while the FM has budgeted for higher divestment proceeds. Pick up in taxes will be gradual and linked to revival of the economy; therefore targeted disinvestments will be the key to boosting government’s nontax revenue kitty. Kaushal Sampat, President & Managing Director – India, Dun & Bradstreet: The budget is directionally very positive, with a long term vision to spur inclusive growth. The most important aspect of this Budget is its predictability, which is likely to boost investor confidence on the India economy. Thrust to infrastructure, measures to revive the investment 35
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cycle, focus on ease of doing business and boosting entrepreneurship would be the four key takeaways from the Budget. The corporate tax concessions, tax simplification, deferral of the GAAR, tax overhaul to allow REIT listing, Gold Monetisation Scheme, creation of a unified national agriculture market are some of the positive measures that would stimulate the flow of investments, which in the long run would also help boost consumption. For the investors, the budget gives clarity of long term vision and stability of fiscal policies in a potentially high growth environment. India continues to provide a great opportunity for investors to increase their participation in Capital market instruments including equities and mutual funds. Sharing the link of the photograph of Sudhakar Ramasubramanian, MD, Aditya Birla Money Ltd Gautam S. Adani, Chairman, Adani Group: This budget is focused on ease of doing business, Make in India, infrastructure, social sectors. Introduction of GST from 1 April 2016 will definitely rejuvenate the industry and make manufacturing more competitive. This, coupled with clarity on GAAR deferment for two years and no retrospective applicabilit y, comprehensive bankruptcy code, abolishing wealth tax act, merger of FMC with SEBI, rationalization of corporate tax from 30% to 25% coupled with review of deductions, etc. supports the Make in India campaign. Rathin Basu, Country President, Alstom India and South Asia: The Union Budget for Financial Year 2015-16 evenly balanced budget between industry and common people. Given the limited fiscal space, Finance Minister Arun Jaitley has taken several small but positive steps instead of any Big Bang reform announcements. While there are positive initiatives towards power sector including UMPPs and Renewable projects, one needs to see the execution speed, particularly in view of huge NPAs stuck with IPPs and State Discoms. The budget proposal to set up five ultra mega 5 new Ultra Mega Power Projects of 4000 MW each is a welcome move. The budget has also proposed tax free infrastructure bonds for projects in the rail, road and irrigation sectors. I am of the view that the ambit of such instruments must be expanded to 36 u EPC World u March - 2015
include power as well, given that power sector also needs sizeable investments in line with the government’s commitment of power to all by 2022. Dr GVK Reddy, Founder Chairman & MD of GVK: A very positive and a growth oriented budget with a strong focus on infrastructure development. Investments of ` 70,000 cr along with the risk sharing mechanism for PPP projects; setting up of a national investment and infrastructure fund; deepening of the Bond markets etc. will help revive infrastructure investment. Other ideas like abolition of wealth tax, creation of social security for all, focus on ease of doing business and a more predictable tax regime are all steps in the right direction to take the economy to a double digit growth over the next few years. Sanjay Malhotra, Chief Financial Officer, Emaar MGF: The budget clearly shows the focus of our Government towards sustainable growth, investment in infrastructure, employment generation and skill development. The roadmap to where we want to be has been well defined. We understand the details of implementation shall be rolled out during the year. Corporate tax regime has been given a clear direction of reduced tax rates balanced by rationalising exemptions over the next 4 years. The focus is to have a stable and non adversarial tax regime. Deferring GAAR by 2 years and making it prospective thereafter is a welcome step. Overall, the budget reflects the vision of the Government with emphasis on infrastructure development. It takes India forward on a path of inclusive growth, supported by steps that will make it easier to do business in India and a stable & non adversarial tax regime. Shishir Baijal, Chairman & Managing Director, Knight Frank: Overall the direction that the budget has taken is positive with
Budget 2015
several macro factors making way for a better economic regime. However, with three consecutive bad years for real estate that left developers and other stakeholders gasping for fresh air, the expectations were only building up by the minute for the last couple of months. Unfortunately, the budget has not given them anything to cheer about. Although the initial part of the budget did mention housing for all, it did not have a game-plan attached to it. Additionally, no sops or exemptions for homebuyers have been addressed. There is little on easing liquidity for real estate with only partial relief to REITs. All in all, there is practically no silver lining for stakeholders. With plugging of loopholes in the Benami properties act, stakeholders who used to rely upon it to make money will have a lot to worry about. An already comatose industry will have to wait a bit longer for succor. Sunil Mathur, MD & CEO, Siemens Ltd: The budget was consistent with the stated objectives of the Government, reinforcing its commitment to realization of infrastructure projects. With the Budget, the Government seems inclined to follow its bold path of building infrastructure and improve ease of doing business. Its intention to increase public investments while decreasing Corporate Taxation over a period of time are also steps in the right direction, and we are sure these steps will further improve the confidence of investors and industry alike. We also welcome the Government’s decision to defer GAAR by two years and the introduction of GST in April 2016. Tulsi Tanti, Chairman, Suzlon Group: The government’s thrust on renewable energy is clearly visible in the target of achieving 175 GW by 2022. India in the last 25 www.epcworld.in
years India has done 34 GW and in the next 7 years we now have a target of 175 GW, comprising of 60GW wind energy which is an ambitious target for the industry and we welcome the move since it is in the right direction. The budget reiterates mission and vision of the government to achieve the following: • Affordable sustainable energy for all • Low carbon economy • Achieve energy security • Long term sustainable economy & sustainable jobs The government’s commitment to green India manifests in some of the additional measures such as increasing the coal cess from ` 100 to ` 200 thereby providing impetus to clean energy Vineet Mittal, Vice Chairman Welspun Renewables: Overall it’s a positive budget for the industry. As direct investment in the infrastructure sector will surely lead to increase in the GDP growth of the country. With the announcement of the renewable capacity target the minister has reemphasized the g o v e r n m e n t ’s commitment to renewable energy. The infrastructure sector has been facing funding challenges and some of the measures introduced will surely help this situation. By doubling the cess on coal to ` 200 per tonne , the government is creating an additional corpus of funds for clean energy projects. ` 75,000 crore has been apportioned for infrastructure sector. Padma Priya J, Director, Grant Thornton India LLP: The highlight of the Union Budget 2015 is the boost given to the Infrastructure Sector, keeping in line with its development agenda. The most needed push in the infrastructure sector is expected to come from the host of measures announced. Amongst the key ones is revisiting the Public Private Partnership (PPP) framework wherein the sovereign will be bearing the major part of the project risks. In a country where majority of the PPP projects were not perceived as ‘successful’, this measure is expected to boost private investor confidence to a large extent. Similarly, the introduction of the proposed Regulatory Reform Law across various infrastructure sectors and introduction of Public Contracts and Resolution of Disputes Bill and institutional arrangements of resolution of 37
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disputes will provide the much needed boost to the sector. Announcement of measures for investment promotion through regulatory interventions like according permissions through an integrated portal and reducing the approval time will also go a long way in increasing private sector confidence. The wait for the Expert committee to prepare the draft legislations on permissions will now begin. Vipin Sondhi, MD, CEO, JCB India: With the investment and thrust to infrastructure increasing by ` 66,500 crore, budgetary outlay on roads and rails increasing by ` 13,300 crore and by ` 9,500 crore respectively, the industry is well poised for growth. As the economy picks up to 8% to 8.5% in the coming year, I am confident that these reformatory initiatives will spur the much needed growth in the sector. The Government has rightly anticipated the key drivers to kick start growth through enhancing the public spending in the sector and creating a conducive environment for the private sector to invest, participate and contribute. Nasir Mulani, Managing Director, Citec India: Infrastructure being a highly capital intensive sector, the union government has recognised that it needs to increase its own investment in the infrastructure sector in order to meet its development agenda. Towards this, measures like increasing the centre’s investment outlay by ` 70,000 crores, announcement of the much awaited National Investment and Infrastructure Fund with a corpus of ` 20,000 crs, encouraging tax free bonds in roads and railways sectors are expected to contribute to the growth of the sector. The new budget focuses on Infrastructure, Manufacturing and Power, all important drivers of the Indian economy. Considering the Industry, reforms towards relieving start-up hassles will attract investors and get long pending ventures back on track. For the common man, tax slabs remain quite unaltered from the previous budget. Compensating the situation to some extent are steps like employment generation through the ‘Make in India’ model which are significant. For corporate organizations, an encouraging feature is the corporate tax rate, lowered to 25% from 30% over next four years. 38 u EPC World u March - 2015
Construction
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ccording to India Ratings & Research (Ind-Ra) latest report, the construction sector is likely to witness a turnaround due to a pick-up in execution and order inflow on improved economic growth of 6.5% in FY16, according to Ind-Ra’s expectations.. The credit metrics of companies which have tied up their funding plans, either through equity and asset sales or through corporate debt restructuring (CDR) will improve in FY16. However, companies which are yet to sort out their liquidity issues will see further deterioration and could opt for CDR, possibly by FYE15, due to the regulatory forbearance available to banks regarding lower provisioning for such debt till 31 March 2015. Execution is likely to improve in FY16 due to improved liquidity. However, it will also depend on the materialisation of the government’s efforts to resolve the issues facing projects. The government has indicated its intent to resolve issues in 40 u EPC World u March - 2015
various sectors such as fuel availability and off-take risks for the power sector, viability issues for the road sector and land availability and delays in approvals and clearances for all infrastructure and industrial sectors. Order inflow is likely to pick-up in FY16, as economic growth prospects improve and industrial and infrastructure projects are launched. However, this will require a determined push by the government to explore the resources to fund infrastructure projects and eliminate the bottlenecks in execution. Margins are likely to improve for companies which have liquidity for execution, as absorption of overheads improves, and due to the easing of commodity prices. Margins are also likely to improve due to the higher-margin orders won during the past 1-1.5 years, when the competitive pressures reduced leading to rational bidding. Ind-Ra believes companies will be cautious in bidding for
Report
Worst is over for construction sector The Government is taking several pro-active steps to infuse growth in the infrastructure sector, this may create ample opportunity for construction sector in the years to come. However, to a significant extent it depends how the Government intends to solve the problems being faced by the projects.
projects under the public-private partnership (PPP) model in FY16 due to the issues faced in execution and operation of such projects in the past. Better understanding of risks due to lower economic growth as well as restrictions placed on the companies by their boards or under their borrowing arrangements with banks will curb aggressive bidding. Given the limited award of projects under the PPP model in the last year, the pressure for additional funding is likely to ease. Most of the Ind-Ra rated companies in the sector have Stable Outlooks. Given the expected turn-around in the sector, Ind-Ra rated companies are not likely to see further downward pressure on their ratings with a few exceptions. Outlook of construction sector: India Ratings & Research (Ind-Ra) has revised its outlook on the construction sector to stable for FY16 from negative. The sector is likely to witness a turnaround due to a pick-up in execution and order inflow on improved economic growth of 6.5% in FY16, according to www.epcworld.in
Ind-Ra’s expectations. Construction companies which have tied up their funding plans, either through equity and asset sales or through corporate debt restructuring (CDR), will witness improved credit metrics in FY16 benefiting from the turnaround. However, companies which are yet to sort out their liquidity issues will see further deterioration and could go for CDR, possibly by FYE15, due to the regulatory forbearance available to banks regarding lower provisioning for such debt till that time. Rating Outlook too Revised to Stable: Most of the Ind-Ra rated companies in the sector have Stable Outlooks; given the expected turn-around in the sector, Ind-Ra rated companies are not likely to see further downward pressure on their ratings with a few exceptions. Order Execution to Improve: Execution is likely to improve in FY16 due to improved liquidity. It will also depend on the materialisation of the government’s efforts to resolve the issues 41
Construction
facing projects. The government has indicated its intent to resolve issues in various sectors such as fuel availability and offtake risks for the power sector, viability issues for the road sector and land availability and delays in approvals and clearances for all infrastructure and industrial sectors. Order execution was sluggish during 1HFY15 and FY14 due to the inability of companies to fund working capital, delays in statutory clearances and the general elections. Order inflow to pick-up: After declining in the past couple of years, order inflow is likely to pick-up in FY16, as economic growth improves and new industrial and infrastructure projects are launched. However, this will require a determined push by the government to explore the resources to fund infrastructure projects and eliminate the bottlenecks to execution. Ind-Ra expects the competition for new orders to be lower in FY16; companies will be more cautious in bidding. This will lead to higher margins in the coming years, as these projects get executed. Margins to Improve: In FY16, margins are likely to improve for companies which have liquidity for execution, as absorption of overheads improves, and due to the easing of commodity prices. Margins are also likely to improve due to the higher-margin orders won during the past 1-1.5 years, when the competitive pressures reduced leading to rational bidding. EBITDA margins fell during FY14 and H1FY15 for companies facing liquidity pressure, as revenue was either flat or lower leading to under-absorption of overheads. Fund Raising: Many companies were able to free up funds through the sale of assets during the previous year, especially for land and power projects. However, investor interest in road projects continues to be muted, given its direct correlation with economic growth and inflation. Given the limited award of projects under the publicprivate partnership (PPP) model in the last year, the pressure for additional funding is likely to ease. Ind-Ra believes companies will be cautious in bidding for projects under the PPP model in FY16, due to the issues faced in execution and operation of previous such projects, reduced viability due to lower economic growth and restrictions placed on the companies by their boards or under their borrowing arrangements with banks.
Outlook Sensitivities Improvement in Cash Flow: The outlook could be revised to positive, if there is an improvement in order execution 42 u EPC World u March - 2015
and profitability, leading to higher cash flow. Continued Government Paralysis: The outlook could be revised back to negative, if the government is unable to resolve the issues faced by various infrastructure sectors and the industry in general, leading to lower-than-expected execution and cash flow for the sector.
Key Issues Order Inflow Ind-Ra expects order inflow to improve during FY16. The order book of most construction companies has been stagnant over the past three years due to subdued industrial investments, troubles in the power and road sector and lower appetite of construction companies to take on new orders due to the shortage of working capital funding. The government had announced ambitious targets for infrastructure creation in the Union Budget 2014-15 (8,500km of roads, 16 new ports, new smart cities, industrial corridors). However, finding funding options for such projects, given the high fiscal deficit and the dampened appetite for PPP projects, looks like an uphill task for the government. Also, the track record of the past two years in this regard has been abysmal. According to the Economic Survey 2013-14, 1,436km of road projects were awarded in FY14 (FY13: 1,116km). Both industrial and infrastructure investments (in power and road sectors) have been held up due to legislative and regulatory issues in environment, land acquisition and other approvals. Though the government has been trying to resolve these issues through policy and legislative action, a lot more needs to be done. We expect the benefits from the government’s efforts to accrue by 2HFY16. This, along with improved economic growth and sentiments, will lead to higher order inflow in FY16. The improvement in order flow will be particularly beneficial for those companies which have tied up their funding. However, we expect companies to focus on engineering procurement and construction (EPC) contracts for the time being and not take up projects on a PPP basis, given the funding constraints.
Construction
Power: Order inflow from the power sector has been negligible due to fuel availability and offtake risks. The government is envisaging policy actions to resolve these issues. However, this will likely lead to the operation of completed plants and the completion of those already under construction, while the announcement of new capacities by private power generation companies might take some time. Roads: The government is awarding new projects on an EPC basis, as companies have stayed away from bidding under the PPP route during the past two years. This will be positive for the sector, as it will appropriately assign various risks such as land acquisition, approvals and toll estimation to the government and enable the sector to focus on execution, its core strength. Industrial: Order inflow from the industrial segment is also likely to pick up during FY16 on improved economic growth.
Order Execution Order execution is likely to improve in FY16, as many of the liquidity-starved companies have raised funds either through CDR (wherein additional funds are generally disbursed to kick-start execution) or through equity and asset sales. Also, the new government’s efforts to streamline the approvals process and eliminate the hurdles in project execution are likely to materialise during FY16. Order execution has been sluggish, with aggregate revenue registering a single digit fall during FY14 and a double digit fall during 1HFY15. This was due to the shortfall in working capital funding required for order book execution. Also, with various regulatory and legal issues facing execution in the road, power and other segments, execution took a further hit.
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EBITDA Margins EBITDA margins of construction companies are likely to improve in FY16 as many companies have sorted their liquidity issues during FY15. Also, the competitive pressures had abated in new bids during the past 1-1.5 years and the benefits of the higher margins from such projects are likely to accrue FY16 onwards. Margins will also benefit from the current low commodity prices. EBITDA margins improved in FY14, after shrinking for two years. This was due to the reduction in losses of the companies which have gone through CDR and improving profits in companies with comfortable liquidity. However, companies with weak liquidity continue to be a drag on the industry aggregate margins. The chance of aggressive bidding strategies returning to the sector remains a concern. This is due to the fact that companies with improved liquidity or those under CDR need to win orders to execute projects and repay debt. This could lead to another round of competitive pressures on the industry. However, Ind-Ra expects companies to refrain from bidding aggressively considering their experience of the on-going negative cycle. The increased monitoring by banks could also hinder such a recurrence.
Working Capital Liquidity was impacted by the continuous lengthening of working capital cycle and due to an increase in the proportion of overdue receivables (above 180 days aging) and work-inprogress (WIP) stuck in disputes or litigation, which are typically not funded by banks as part of their working capital lending. To overcome the liquidity stress, construction companies have arranged for funds through many means, including rights issues, private equity funding or through CDR. Approved CDR
Report
Fund Raising
packages of various companies provide a longer timeframe for the recovery of such dues from customers and also provide immediate funds for execution, thus leading to improvement in liquidity for these companies. The liquidity position of companies which have not tied up funding already is likely to deteriorate further in the absence of funds infusion from any other source. Therefore, these companies could be headed towards the CDR cell. This may happen as early as FYE15, as the regulatory forbearance provided to the banks by the Reserve Bank of India ends on 31 March 2015.
Credit Metrics Credit metrics of construction companies are likely to improve in FY16, as profitability increases with improved liquidity and companies raise funds through equity and asset sales to reduce debt. Credit metrics continued to worsen during FY14 and FY15 due to a slowdown in order execution and the consequent devolution of non-fundbased facilities onto the balance sheet. The CDR packages of companies also sanctioned additional debt, which led to an increase in aggregate debt. Credit metrics were also under pressure due to the losses incurred by companies under liquidity stress.
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During 2014, many construction companies were able to raise funds through equity and asset sales, especially of land and power projects. Equity sales are likely to pick up pace, as equity markets are improving and as higher economic growth will make the sector attractive for investors. Road projects continue to see limited investor interest, as the viability of such projects has been hit by lower economic growth. Some interest may be generated if there is a sustained improvement in economic growth and consequently the traffic. However, easing inflation may act as a dampener, as toll rate hikes are linked to inflation. Ind-Ra expects the pressure for additional funding for PPP projects to ease, as companies have been cautious in bidding for road projects under this route and new announcements in power projects have also come down. We expect companies to continue to be cautious in committing to additional investments under this model at least till FY16. Also, with the regulator proposing to allow long-term funding under the 5x25 model for both underconstruction and completed infrastructure projects, the debt servicing capability of such projects could improve, leading to lower requirement of sponsor support. Under the 5x25 model, banks have been allowed to lend to projects for a longer duration (up to 25 years) with an option of refinancing every five-to-seven years after the commencement of operations.
2014 Review Of the 39 rating reviews undertaken during the year in the construction sector, 22 resulted in an affirmation. While eight companies were upgraded, nine were downgraded. The downgrades were in line with our expectations of the downward pressure on ratings during 2014. Most of the downward pressure was due to the tightening of liquidity and the resultant fall in revenue and profitability. The upgrades were due to company-specific factors. 45
Construction
Maroshi-Ruperal-a winning challenge
T
he Maroshi-Ruparel College Tunnel, a 12.24 km long underground water tunnel, is divided into three sections namely, Maroshi-Vakola (5.83 km long), Vakola-Mahim (4.55 km long) and Mahim-Ruparel College (1.86 km long). This tunnel is connected with shafts at Maroshi, Vakola, Mahim and Ruparel College locations. The shafts are 10 m in diameter and about 60 to 70 meters deep which is equivalent to a 20-storey building. The shafts at Maroshi and Vakola were started first, as the land handover for the Mahim shaft was delayed by over 12 months due to local issues. Both the Maroshi and Vakola shaft 46 u EPC World u March - 2015
were excavated using a drill-blast method in around 60 days after constructing a circular well chamber up to 6m through open excavation. After finishing the shaft lining work, the assembly tunnel was also completed using the drill and blast method. The 500 odd workmen who were engaged in the tunnel boring were required to work 200 feet under the ground in dark and humid conditions for about 8 to 10 hours at a stretch. A comfortable, well-ventilated working environment was maintained inside the tunnel and regular power and electric supply were arranged at the work locations inside the tunnel to ensure efficient progress. Two independent ventilation systems were provided from both the work fronts.
Case Study
Major Quantities Excavation Concrete Reinforcement Chemical grouting Cement grouting
1,60,000 Cum 55,000 Cum 5500 MT 2,35,000 Kg 1000 MT
HCC with its engineering know-how has encountered several problems right from excavation at Mahim shaft to volcanic cavity successfully in the 12.24 km long Maroshi-Ruperal college underground water tunnel in Mumbai. Maroshi-Ruparel Tunnel Project As part of these ongoing initiatives, in September 2007, HCC was awarded a contract by BMC for constructing the longest underground water tunnel inside the city limits – from Marol Maroshi in Andheri East to Ruparel College in Mahim spanning a length of 12.24 km with a diameter of 3.60 m. Upon completion, this tunnel will ensure uninterrupted water supply (1,100 million litres daily) to the western suburbs and south-west part of Mumbai. This is a Water Supply Project executed under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and is funded by the Government of India, Government of www.epcworld.in
Maharashtra & Municipal Corporation of Greater Mumbai. The other two tunnels that are being built by other agencies include the 3.6-km tunnel from Malabar Hill to Cross Maidan and the 6.1-km tunnel from Verawali to Yari Road. The Maroshi-Ruparel underground pipeline will replace the existing Vaitarna Tansa (East) and Tansa (West) main surface pipelines which are almost a century old or more. This new tunnel will offer many advantages over the existing surface pipelines. As it is secured at a depth of 70 meters below ground level, it cannot be tampered with as in the case of surface pipelines. The new pipelines will require minimum maintenance as the entire tunnel is made of concrete-unlike surface pipelines which corrode over a period of time. 47
Construction
Key highlights The tunnel will have many advantages over existing surface pipeline: It is secured at a depth of 70 meters below ground level and cannot be tampered as it happens in case of surface pipelines. Hence, less chances of leakages and pilferage of water. It will require minimum maintenance as the entire tunnel is made of concrete, unlike surface pipelines which corrode over a period of time. The tunnel alignment passes under the operational runways of Mumbai International Airport. Over the last six years, even as hundreds of flights use the runways above the city surface, about 200 feet below, a team of engineers from HCC have been quietly burrowing a tunnel without disturbing the airport operations. The tunnel also passes below the Mahim creek, underneath the tracks of the Western Railway line and below the Mithi River near Bandra Kurla Complex.
Project Management & Execution Shafts: This is constructed to gain access to the tunnel. Shafts were excavated by full face drilling and controlled blasting method at Maroshi and Vakola. The shafts are 10.0 m in diameter. Their depth varies from 60 m to 70m. At the Mahim site, due to poor geological condition of soil and local issues, shaft excavation was done in two parts: the initial loose portion was executed by well sinking and the remaining portion was constructed by an excavator with a hydraulic breaker. Shafts are lined with concrete using slip form shutter and the finished diameter of the shafts is 9.0m Assembly & Tail tunnel: It is constructed to assemble the TBM parts inside the tunnel at the bottom of the shaft and also to 48 u EPC World u March - 2015
provide space for TBM back up movement / for parking of locos and mine cars. This tunnel has also been constructed by controlled drilling and blasting method. In the assembly tunnel, dewatering arrangement was made to collect the tunnel seepage water by gravity in a sump. This collected water is removed with help of pumps to a de-silting chamber at the top of the shaft and after sedimentation it is discharged to a storm water drain. Tunnel excavation by TBM: After completion of Shaft & Assembly and tail tunnel excavation, TBM parts were lowered part by part and the same was assembled in the assembly tunnel. Two Tunnel Boring Machines of Aker Wirth make, around 80 meters in length, were deployed for the project. The tunnel boring machines were lowered part by part from the respective shafts and assembled inside the assembly tunnel. The first TBM started working 11 months after the start of the project from the Maroshi end towards Vakola, while the second TMB commenced operations in 14 months from the Vakola end towards Maroshi. On an average, 13-14 meters of tunnel excavation was achieved in a single day. A record of 40 meters of tunneling was executed in a single day with one tunnel boring machine, and a maximum progress of 543 m was achieved in a month. Tunnels with a diameter of 3.6m were excavated. After completion of the tunnel boring, a concrete lining was provided, to give the tunnel a finished diameter of 3 meters. Tunnel lining was done with help of Cifa Shutter, and epoxy coated reinforcement steel was used. Tunnel boring was completed at Maroshi in 9.10 months with an average monthly progress of 339.20m. Boring at Vakola was completed in 9.20 months with an average monthly progress of 282.0m. Breakthrough was achieved on October 1, 2009. TBM-2 was again refurbished and has been put on operation to excavate Vakola-Mahim section. Tunnel boring on this stretch was completed up to Mahim curvature portion in12.5 months with an average monthly progress of 349.8m.
Case Study
Challenges encountered during execution of the project Excavation at the Mahim shaft: The Mahim shaft is located closer to the sea in comparison to the Vakola and Maroshi shaft. Following hand over of the site, the project team initially excavated a borehole up to a depth of 70m depth for assessment of ground strata. Marine clay, sandy soil and weathered rock was encountered up to a depth of around 20 m (where seawater seepage was also anticipated), and beyond this depth, hard rock strata was prevalent. As a result of the sandy surface layer, open excavation methodology could not be adopted. To stabilise and hold the shaft wall in this sandy surface layer, curtain grouting was done on the shaft periphery up to a depth of 60 m and then a well sinking methodology was deployed up to a depth of 20 m till hard rock strata was encountered. The Mahim shaft was located in a densely populated area where the surrounding buildings were old; therefore, the drill and blast method was not permitted for subsequent shaft excavation and assembly & tail tunnel excavation. The project team extensively deployed hydraulic breakers to excavate the rock strata. This method was very time consuming in comparison to the drill and blast method. While the Vakola and Maroshi shafts were completed in around 60 days, the Mahim shaft took over nine months to complete. Poor Geology and variation in rock classes: The Geological survey of the entire work stretch from Maroshi to Ruparel College showed a wide variety of rock strata including Weathered Tuff Breccia, Tuff Breccia / Shaile, Breccia, highly fractured and jointed rocks as well as Grey Basalt. Elaborate and systematic planning was done while tunneling through bad geological strata of the rock, including adequate www.epcworld.in
safety measures. Across sections with loose rock, safety was ensured through widespread tunnel protection works: by fixing rock bolt, wire mesh, shotcrete, rib fixing and steel liner fixing. Heavy water seepage: For the tunnel stretches that were in close proximity to the coast line, saline water seepage was expected during the tunnel boring process. The Geotechnical survey conducted by the client had estimated seepage of 2,700 liters per minute during tunneling activity in the MaroshiVakola tunnel stretch. However, during execution, very high seepage of the saline water was encountered to the tune of 20,000 liters per minute. This was equivalent to a volume of two tankers of water per minute. This posed a severe challenge in the execution of the project. The project team deployed experts from Canada to tackle the situation. They proposed a new methodology where polyurethane foam was used as a grouting material beside the regulate cement grouts. The entire amount of polyurethane for this process was imported from Belgium. Through extensive grouting, the seepage was lowered from an intensity of 20,000 liters per minute and controlled to a level of 100 liters per minute. To drain out the seepage water from the tunnel, heavy pumping arrangements were installed at each of the shafts. After pumping the saline water up from the shaft, it was sent to a sedimentation tank before being discharged into the drainage system. Volcanic cavity: At one location on the Mahim stretch, the tunnel boring machine encountered a huge volcanic cavity. Luckily, it was located on one of the sides of the tunnel and a major catastrophe was avoided. It was lined with shiny calcite rocks that are generally formed by sedimentary mineral. The cavity was huge and the depth of the cavity could not be ascertained. Since the TBM had breached one of the sides of the cavity, it had started collapsing. The project team quickly 49
Construction
began to deposit muck bags into the cavity. Initially, the depth of the cavity could not be ascertained and the bags being deposited kept disappearing into it. The team kept dumping muck bags into the cavity till the muck bags became visible and thereafter, the cavity was filled with concrete. Approximately, 40 cum muck and 90 cum of concrete was used to seal the cavity before proceeding with the tunneling.
Project Economics The tunnel stretch from Maroshi to Vakola to Mahim fell on a straight line alignment, whereas at the Mahim shaft it took a 35 degree turn to proceed towards the Ruparel college shaft. If the tunneling had to be proceeded at the same angle, it would have required an assembly tunnel and tail tunnel of 70 meters and 30 meters respectively at an angle of 35 degrees to the tunnel. Since the excavation and other activities at the Mahim shaft was executed by hydraulic breaking, all this would have consumed a lot of time to complete before beginning the TBM operations towards Ruparel College. The project team explored several options for realigning the tunnel between Vakola and Mahim so that it takes a smooth curve at Mahim shaft. However, making the 80 meter long tunnel boring machine to take a turn was a difficult proposition. The TBM had a conveyer belt that carried the muck to the wagons at the back which was around 50-60 meters long. It could have got stuck while taking the smooth curve inside the tunnel. To overcome this problem, the project team came up with an innovative idea. The engineers broke the conveyer into two parts with a flexible connection between them. This arrangement completely avoided the tail tunnel and required a very small assembly tunnel of 20 meters instead of 70 meters. However, adopting this methodology was not very simple. It 50 u EPC World u March - 2015
threw up another challenge. When the TBM came out at the Mahim shaft from one side, to further proceed in the same direction, it required a gripper. Building a gripper inside the shaft was a challenge. The project team came out with another innovative idea to construct the gripper inside the shaft. It lowered a 3.6 meter diameter pipe of around 3 meters length at the precise location inside the tunnel and covered the pipe with concrete to give it rigidity. This pipe acted as a gripper for the TBM boom and it enabled the progress of work towards the Ruparel shaft without any interruption. The TBM kept boring till around 200 meters towards the Ruparel shaft. Subsequently, the gripper was removed from the Mahim shaft to make room for muck removal, dewatering and other ancillary activities. This operation not only saved the cost of digging the tail tunnel and assembly tunnel and later refilling it, but also saved a lot of time as the maintenance and assembly of the TBM could be executed in the already excavated space.
Project Quality ISO 9001 2008 quality management systems were implemented at the Maroshi-Ruparel Tunnel Project. The Project has successfully completed TUV Audit for Quality, HSE and ISO on two occasions in its span. A fully equipped Quality Control / Assurance Lab was maintained at the project, having well qualified QC/ QA persons to ensure the quality of the project. Adherence to design specifications were very closely checked by the quality assurance team along with the design team which made rectifications if any deviation are found the in construction from the original engineering drawings. Best practices were applied for quality assurance and control. Documents as per IMS procedures were maintained and periodically internal audit were carried out.
Construction
Construction technology trends 2015 The need of the hour is to adopt new and advanced construction technologies in India as the country has embarked on huge infrastructure development. Besides this, tighter project completion schedules and acute shortage of skilled manpower further intensify the demand of sophisticated technology in construction sector.
C
onstruction technology is fast evolving in the Indian Real Estate Market. Construction Industry is a major contributor to the country’s GDP and one of the largest employment generators. The exponential growth in the real estate development comprising of high-rise buildings have been observing a long gestation period primarily due to the current conventional construction system being extremely time consuming and costly. Adaption of advanced construction technologies is becoming increasingly imperative owing to rapid pace of infrastructure development, tighter project completion schedules and acute paucity of skilled workers. The past years have seen an increased urbanization and also witnessed colossal growth in the increase in number of high-rise buildings not only in Mumbai but across the country. With the advent of high rise buildings the need of the hour is to bring in innovative building materials and technologies entering the industry that can deliver innovative systems for building structures and provide affordable and sustainable infrastructure. Though it is quite significant to take over newer construction technologies for the projects, however, it should be ensured that the technologies taken over for the projects are competitive and deliver quality and sustainable projects. It is also important to know and adopt the latest green technologies and innovations that are making buildings more sustainable. Innovative strategies help to boost the use of natural resources, reduce total energy use, and conserve water. While the role of technology is constantly evolving today most of the real estate players across the country are adopting novel technologies to cater to the needs of a wider audience.
Precast technology Precast construction rises to all the challenges of modern buildings in terms of energy efficiency, moisture control and durability, while requiring minimal maintenance it is cost effective, fire resistant and has enhanced durability. In this 52 u EPC World u March - 2015
type of construction the structures are not made up of mortar or cement but of beams and columns, slabs and panels. This technology provides a hindrance free construction.
BIM Building Information Modelling (BIM) is one of the latest technologies introduced by developers in the country today. BIM is an exclusive tool, which brings about the complete engineering detailing in 3D. This technology helps analyse and execute the finest of the details in terms of finishing as well. There is a lot of scope of IT integrated construction
Guest Article
luxury for themselves. Smart home solutions will become an indispensable part of every real estate product offering. The Indian market has witnessed a constant demand from buyers when it comes to high-end luxury properties. Smart home automation is the next big thing. Smart homes are clearly the way forward for the sector with urban lifestyle increasingly getting automated and end users showing a clear preference for homes that offer the maximum convenience. Moreover, in today’s fast-paced lifestyle, buildings need a brain to intelligently control the many systems and thousands of data points they generate. In this very scene, BMS is essential irrespective of whether the project is a luxury or premium property. They save a considerable amount of energy and are apt for the technology conscious current generation. Aspects such as entrance management system enabling monitoring of home even from miles away, gas leak sensor that detects a gas leak instantly, Soft panic button raises alarm, Continuous video surveillance of all the common areas with access control sensor to recognise resident’s car and automatically open the boom barriers.
Embarking on sustainable structures
technology in the current scenario. This will be the future prospect for the construction industry as developers are seeking IT support to minimise the cost, enhance productivity and reduce the time taken to complete projects.
The smart home automation features The concept of smart homes has evolved tremendously in the Indian market during 2012. The primary reason for the growth of this segment is due to the HNIs & NRIs who are looking to invest in the real estate market. They prefer to have more of individual spaces and expect an enhanced quantum of www.epcworld.in
The city of Mumbai has willingly acknowledged the rightful solicitation of green technology to uphold high level of sustainability. The real estate projects aim at full utilization of solar energy for power and thermal stabilization along with the prime focus on water harvesting and waste recycling. Another important fact that has been looked into profusely is that of landscaping. Most of the structure design proposes terrace farms to minimize the loss of plantation on the ground. Utilization of LAR designs, a concept that encourages ecological architecture inspired by pyramid style. Herein the designers propose vegetation on all terraces which would meet the cooling requirements of the building. Besides that the design also concentrates vastly on rain water and solar energy harvesting. The recent residential edifices believe in utilizing power and meeting the energy requirements from wind turbines. 53
Construction
Prefabrication Prefabrication is making a strong comeback in both commercial and residential properties, as the benefits of greener and faster production techniques become more attractive to firms looking to cut building and operating costs. With modular construction, units can be stacked and arranged into aesthetically pleasing, functional designs that convey an ecoconscious mentality. Clean lines, aluminium panelling and energy-efficient glass give modular buildings a modern chic that will soon populate downtown corridors the world over.
Mivan Technology The technology has been used extensively in Europe, Gulf Countries, Asia and other parts of the world. Mivan technology is suitable for constructing large number of houses in a short span of time. The technology requires relatively less labour, increases durability, has more seismic resistance, reduces leakages and also leads to fast completion of the construction. In this direction, it is important to mention here that Sheth Creators upcoming project Vasant Oasis is an ultraluxurious residential project of 19 towers of 22 storeys each 54 u EPC World u March - 2015
spread over 18 acres of land with 5 acres of recreational land and has an extremely well developed physical and social infrastructure in its vicinity has adopted Mivan Technology for this project. The sector is experiencing a reboot of sorts, the industry more than ever needs an influx of inspired, innovative architectural designs that will work to give our cities and communities physical shape to our evolving goals of environmental care, energy conservation, and improved resource management. With these and other emerging trends leading the way, the next few years in the building sector will be greener and more imaginative than ever. About the author: Hiral Sheth, has successfully risen through the ranks by handling multidimensional assignments of the challenging real estate sector. With her prolific achievements in academics from Indiana University Bloomington majoring in Economics and specializing in marketing she is currently heading all the major functions in Sheth Creators for over two years. She believes that in a perceived male dominant realty industry, women have been acquiring top leadership positions and have been making vital decisions. She is focused on satisfying the customers with luxurious projects and international standards amenities.
Construction Chemicals
“Quality and speed of construction will drive the demand” Today, much of the emphasis is on the quality and speed of construction. So you have many new-age materials, products with more features that ensure longer durability of structures, environment protection, and anti-corrosion (protection against water), says GILES EVERITT, Managing Director, Chryso India, in an interaction with EPC World.
What are the positive changes you observed in the construction chemicals sector in the recent past (Especially after the new Government assumed office)? With new government the road map for the future augurs well for the construction industry. We hope that we will be able to see direct foreign investment coming into play, fast implementation & execution of projects, etc. The strong focus on infrastructural development through initiatives like hike in investment in infrastructure, allocation of `.25, 000 cr for rural infrastructure and building 20 Million houses in urban India to realize the dream of a roof for each family in India by 2022, are instrumental indicators to drive the overall growth of construction chemical industry. What would be the triggers for the growth of construction chemicals in general ? Infrastructural activities are the Building Blocks of the Indian construction chemicals market. The Indian construction industry has been growing at 15-20 per cent year on year, mainly on the strength of increased manufacturing activities, industrial growth, and heightened investments - especially by the government - in infrastructure and real estate sector. Expanding construction businesses in the largely untapped rural areas are expected to provide a huge thrust to the construction chemicals market. Moreover, the Government’s decision to give 100 per cent foreign direct investments (FDIs) in the real estate business has boosted construction activities throughout India. Increasing investments in both new construction and improvement and repair projects will drive the demand for construction chemicals. Do you face competition from the unorganized sector? Yes, absence of specifications, reluctance of consultants to specify construction chemicals, absence of a regulating body and the human tendency of the contractor to pick up the most economical product available has encouraged the unorganized sector to jump into this business. What is the recent trends and developments in this sector? The construction chemicals sector is moving towards ensuring actual construction happens much faster today.
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Interview
How do you view the Projects are completed “Lack of skilled manpower is one of future scope of earlier than in the older the biggest challenges and a major construction chemicals days, maybe 10 years ago. constraint faced by the sector. in the country? Today, much of the Other larger challenges are low Indian construction emphasis is on the quality awareness regarding the benefits of chemical industry has and speed of construction chemicals. inadequate shown strong growth of construction. So you have knowledge on proper usage of these chemicals.” 17 per cent over last 5 many new-age materials, Giles Everitt, Managing Director, Chryso India. years. Going forward the products with more industry is expected to features that ensure maintain its growth longer durability of momentum driven by untapped potential of market and structures, environment protection, and anti-corrosion expected growth in construction industry over next 5-7 years (protection against water). due to government’s investment plan. Also increased awareness amongst industry players regarding compliance What are the challenges faced by the sector? Do you think with international standards, ban on onsite mixing of cement that skilled manpower is a major constraint in India? and compulsory usage of ready to mix cement in metros are Yes, lack of skilled manpower is one of the biggest challenges key government regulations which have significant impact on and a major constraint faced by the sector. Other larger the industry challenges are low awareness regarding the benefits of construction chemicals, inadequate knowledge on proper What is the level of awareness amongst the contractors and usage of these chemicals and lack of enforcement of quality builders especially in Tier 2 & 3 cities? What is your standards on construction activities. Majority of contractors and builders are not aware of the key advantages of using endeavor to create awareness? construction chemicals and have limited knowledge on their The awareness among the contractors and builders proper applications. regarding construction chemicals is pretty less. To address this issue we are conducting a series of seminars in association with Can you throw light on the R&D efforts of your company? IITs to share knowledge & experience to create proper How ‘green’ are the solutions that you offer? awareness. The seminar will focus on subjects identified as viz. Our consistent efforts are to generate green solutions for (i) Challenges in pumping in high rise building (ii) various areas of application catering to the needs of complex Supplementary additives in cement manufacturing (iii) high-rise structures. Repairs & rehabilitation and high end waterproofing. www.epcworld.in
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IT in construction
Ensuring excellence in Structural Steel Tekla’s software solution to structural steel offers immense benefits right from erection to delivery. Moreover, its products ensure speedy estimation and design process hence create more accurate bids.
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owadays IT in construction plays an important role. It is because tight project completion schedule, managing cost etc have necessitated the adoption of IT. There are many companies offering IT solution to construction and infrastructure sectors. Tekla is one of the companies that has made a strong toe-hold in the market. Established in 1966, Tekla has customer in over 100 countries, offices in over 20 countries, and a global partner network. Tekla Building and construction is a part of Trimble Buildings Group, a Trimble Navigation Ltd. which focused on technology solutions that improve collaboration, efficiency and accuracy across the Design-Build-Operate (DBO) lifecycle of construction. Tekla’s endeavour is to make its customers grow. For example, it provides a BIM (Building Information Modeling) software environment that contractors, structural engineers, detailers and fabricators of all materials can share. Tekla software creates, combines and distributes detailed, constructable 3D models. Information reach models lead the way for production control and more collaborative and integrated project management and delivery. This translates into increased productivity and elimination of waste, thus making construction and buildings more sustainable and company’s ability to achieve big becomes more realistic. 58 u EPC World u March - 2015
Its software is instrumental to increase productivity apart from this it also helps create accurate bids. When it comes to design it interface with analysis packages such as tower and enhance productivity with customized modeling and detailing tools. In manufacturing, it can export the fabrication data directly to workshop machinery and reduce human errors. Moreover, it creates erection drawings, planning schedules and erection simulations. Information in Tekla models lets customers increase productivity and avoid human errors through higher level of automation in fabrication. CNC machines can use the exported information directly from Tekla, while the two way interface of Tekla and the leading MIS/PLM systems allows advanced production planning and material procurement. Everyone, right from engineers, detailers, project managers and other parties can view or control the model simultaneously. Centralised model data enables collaborative and integrated way to manage and deliver projects. Quality control is assured as the information, including assembly drawings and lists of materials, is easy to access and always up to date. Smooth change management and revision control minimize costly errors. With the 3D Tekla model one can speed up estimation and design process and create more accurate bids. Tekla’s tower template and components bring efficiency to detailing hence avoid time consuming manual work and human errors.
Roads & Highways
A white paper on road sector in India Paucity of fund and financial stress have become a major stumbling block for road development projects in India. For the road sector, the year 2007-2011 was considered as the golden age for PPPs. The period witnessed aggressive bidding by developers to bag more and more BOT-Toll projects. Consequently, the developers faced viability issues with the projects in the later stages. Issues pertaining to subdued financing, lower traffic and delayed execution have stressed the balance sheets of the developers. As a result, today, PPP projects failed to attract any bidders due to stressed balance sheet of the developers. Taking due cognizance of the fact the government has come out with several measures to boost the segment as it plays very important role in economy. In this direction, recently, CRISIL & PHD Chamber has come out with a white paper which is an outlook on the road transportation in India. Here, we are presenting selected portions of the white paper. 60 u EPC World u March - 2015
Report
attributed to the termination of a large number of stalled projects. It is expected that around 3,761 km of national highways would be awarded in 2014-15, with 3/4th of the length to bid out on the EPC mode. The trend shall continue till 2015-16, post which greater participation from the private sector is expected because of improved financial conditions. While investments in national highways are expected to increase to 2.2 trillion in the next five years, over half is expected to be by the government in contrast to just about 1/3rd in the previous five years.
State roads State governments have been increasingly focusing on improving state roads, which in turn has resulted in increased expenditure. The total investments in state roads in the past five years is estimated to be around 2.3 trillion which is expected to increase at 12% on an average in the next five years. Though in the past years, most of the state roads constructed were on the EPC mode, many states have now started to increase private sector participation in road projects via the PPP mode. The states that are extensively evaluating PPP as a preferred mode for road projects wherever feasible include Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Tamil Nadu, Rajasthan and Uttar Pradesh.
Road transportation in India - ou
R
oad transportation is the crucial mode of transportation in India, it carries around 86 per cent of the passenger traffic and 63 per cent of the total freight traffic. However, the road sector, in the recent past was facing rough weather due to various reasons like funding, issues in land acquisition, environmental clearances, reluctance to accept toll etc. In 2010, road transport accounted for a share of 5.4 percent in GDP, whereas the overall share of the transport sector was 6.4 percent of GDP. Taking due cognizance, the government has come out with several measures to boost the segment.
Roads in India have come a long way from pug dandies (c Issuestoand challenges times a grand system of national highways, state highway cities. Today, India large and extensive road ne The importance of roads’has sectoradevelopment could not be kilometers, thethe second inoverall the world after undermined given share of largest roads in the transport of USA. Road goods and passenger traffic.inAlthough thetraffic government transportation in India terms of share.hasIt carries almo been continuously making efforts to accentuate the progress of of the total freight traffic. In 2010, road transport account the sector, several issues and challenges hamper the pace of whereas the overall share of the transport sector was 6.4 per development. Some of these issues are described below.
Figure 1: Share of roads in passenger and freight traffic Share in passenger traffic (2011)
14%
National highways The execution of National Highway Development Project (NHDP) has declined sharply to 3.2 km per day during AprOct 2014-15 vis-Ă -vis 4.3 km per day during the same period of the previous year. This sharp decline could be primarily www.epcworld.in
S
86%
Road
National highways
Rail
61
The execution of National Highway Development Project (NH
This sharp decline could be primarily attributed to the termination of a large number of stalled projects. th
It is expected that around 3,761 km of national highways would be awarded in 2014-15, with 3/4 of the length to bid out on the EPC mode. The trend shall continue till 2015-16, post which greater Roads& Highways participation from the private sector is expected because of improved financial conditions. Figure 2: National highways’ outlook for next five years
National highways’ outlook for next five years 7,000 6,000 5,000 4,000 3,000 2,000 1,000 -
5,042
5,775
3,761 4,092 8.2
9.6
10.4
12.3
6,301 14.2
16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -
Length awarded (Km) Length constructed/upgraded (Km/day)
700 600 500 400 300 200 100 -
Investments (Rs. Billion)
Source: CRISIL Infrastructure Advisory, CRISIL Research
Limited financial flexibility of the PPP road developers 4
Funding constraint and financial stress have thwarted the pace of development in the roads sector. The public-private partnership model for road construction and development acted as a catalyst and provided impetus to the growth of the sector. In the 11th Five-Year Plan, out of the total 10,600 km of national highways completed under NHDP, 50% were funded through the BOT-Toll model and 10% through the BOTAnnuity model. The rise of PPP in the road sector also had some adverse effects. During 2007-2011, which was considered to be the golden age for PPPs in the road sector, road developers bid aggressively to bag more and more BOT-Toll projects. Consequently, the developers faced viability issues with the projects in the later stages. Issues pertaining to subdued financing, lower traffic and delayed execution have stressed the balance sheets of the developers. The gearing level of many players was high due to sizeable portfolios and some companyspecific investments in real estate. For major players, the average gearing in roads-BOT was as high as 4.2 times as of 2011-12. PPP toll projects are now unable to attract any further bidders due to the stressed balance sheet of the developers, resulting from unavailability of financing from banks and stuck equity of the developers in the existing projects. As of FY 14, more than 22 PPP projects saw no bidders from the private sector which has forced the government to shift to government-funded EPC/Cash Contract mode. In the case of EPC contracts, the quality of the roads constructed has been usually poor as the EPC contractor has no stake in the roads constructed by it, once it is handed over to the government. Further, the maintenance of 62 u EPC World u March - 2015
the roads has been poor after handover to the government, as there is no proper accountability on the quality of the roads in the case of state-owned roads. In the case of PPP projects, the developer is bound to maintain the roads in good condition for a longer period of time, i.e., the concession period.
Delays in project execution and resultant cost overruns Delays in project execution have posed one of the major hurdles in the development of the road sector. Delays lead to significant cost overruns which lower the returns for the developer as well as adversely affect their debt servicing ability. The reasons for the delays are numerous and include: • Issues in land acquisition • Environmental clearances • Forest clearances • Railway clearances • Shifting of utilities, religious structures and encroachments On an average, a PPP project in the road sector faces 20 months’ delay and the average cost escalation is 36% with 50% possibility of occurrence project cost escalation is on the higher side for projects involving interstate road construction due to the involvement of different state agencies. Delays due to acquisition of land in the case of interstate highway development projects are 23 months on an average.
Hurdles in bank funding for road projects Banks are reluctant to fund road sector projects as they are approaching the sector exposure limits. Moreover, to ensure that delays due to land acquisition do not hinder the progress of the
Roads& Highways
Tax holiday for highway projects
project, they demand 80-100% of the land to be available with the developer at the time of the award of the project. Given the dependence of infrastructure projects on banks for funding, the projects are not able to take off due to such funding constraints.
Highway-widening projects qualify for the 10-year tax break under Section 80 IA of the Income Tax (IT) Act.
Reluctance to accept toll
Rural road development
India is yet to warm up to the culture of paying toll for the usage of roads. The Indian population has not yet completely accepted the importance of tolls for the construction of roads and the improvement of service delivery. Also, the appeasement of people through the provision of subsidies has been a major tool for political gains in the country. There have been several instances where people backed by various political groups have opposed toll plazas. Such instances have not only deteriorated the sentiment of the road developers but have also affected service delivery within the sector.
Taking cognizance of the neglect of up-gradation and construction of rural roads, a widespread program known as the Pradhan Mantri Gram Sadak Yojana was initiated by the government of India in 2000. The primary objective of the program was to provide all-weather connectivity to all identified habitations in the core networks in rural areas. The identified habitations include plain areas with above-500 population and hilly areas with population above 250. It is a 100% central-sponsored scheme and is funded by budgetary allocations, market committee fees, Central Roads Fund, and loan assistance from NABARD, ADB and World Bank.
Policies and initiatives for road sector The government had taken various policy initiatives to accentuate the growth of the roads sector. Some such initiatives and policies are described below.
100% FDI in road sector The government has facilitated 100% foreign direct investment (FDI) under the automatic route for support services to land transport such as operation of highway bridges, toll roads, and vehicular tunnels; services incidental to transport such as cargo handling is incidental to land transport; construction and maintenance of roads and bridges; and construction and maintenance of roads and highways offered on build-operatetransfer (BOT) basis, including collection of tolls. 64 u EPC World u March - 2015
Road Requirement plan for Left Wing Extremism (LWE): The government had conceived a Road Requirement Plan (RRP) in 2009-10 for the development of 1,126 kilometers of national highways and 4,351 kilometers of state roads in Left Wing Extremism (LWE) affected districts with projects currently under implementation in states of Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Maharashtra, Odisha and Uttar Pradesh at a total cost of USD 1.6 billion. Out of total 5469km length sanctioned, works for 4908km length were awarded. As on 11th Jan 2015, 3299 km length (67%) has been completed incurring an expenditure of ` 4374 Crore under this plan.
Report
National Highways and Infrastructure Development Corporation (NHIDCL) Recently in July 2014, the Ministry of Road Transport & Highways through a fully owned company, National Highways and Infrastructure Development Corporation, has taken up the initiative to promote, survey, establish, design, build, operate, maintain and upgrade National Highways and other infrastructure including interconnecting roads particularly in the North Eastern region and strategic areas of the country. Around 10,000 km of roads including both National and state highways have been identified for up-gradation. The vision will help to boost cross border trade and commerce and help safeguard India’s international borders.
credit rating of the guaranteed bond. The enhanced credit rating of the bonds facilitates channelizing of long-term funds from untapped resources such as insurance companies and pension funds. Currently, IIFCL (India Infrastructure Finance Company Ltd.) is conducting pilot PCG transactions.
Other recent developments and initiatives
The Central Government has created a dedicated fund, called Central Road Fund from collection of cess from petrol and diesel. Presently, `2 per litre is collected as cess on petrol and High Speed Diesel (HSD) Oil. The fund is distributed for the development and maintenance of the National Highways, state roads, and rural roads and for the provision of road over-bridges/ under-bridges and other safety features at unmanned railway crossings as provided in the Central Road Fund Act, 2000. The FY15 budgetary allocation from CRF towards various initiatives and grants is envisaged to be to the tune of INR 26,151 crores.
The Ministry of Road Transport and Highways has proposed to infuse funds in projects stuck due to cost overruns. There are around 26 such highway projects where the developer is 20-30% short of the revised project cost. The ministry has proposed to allow developers to borrow additional funds from the National Highway Authority of India (NHAI), required to complete stalled projects at a rate lower than that offered by banks. Upon implementation, the policy will help the roads ministry keep up construction activity in the sector, and also reduce the backlog of stuck projects, thereby improving connectivity for users. The second proposition is to amend the model concession agreement or the contract signed between NHAI and a developer to build a road, to address issues affecting private sector participation. Other measures also include a policy for rescheduling premium dues a developer owes the government for building highways, and collecting toll from users to provide relief to developers in the backdrop of the economic slowdown. • Provision of duty-free import of specified modern highcapacity equipment for highway Construction
Infrastructure Debt Funds (IDF)
Recommendations Hybrid PPP models
IDFs are investment vehicles which can be sponsored by commercial banks and NBFCs in India in which domestic/ offshore institutional investors, specially insurance and pension funds can invest through units and bonds issued by the IDFs. IDFs would essentially act as vehicles for refinancing the existing debt of infrastructure companies, thereby creating fresh headroom for banks to lend to fresh infrastructure projects. IDF-NBFCs would take over loans extended to infrastructure projects which are created through the Public-Private Partnership (PPP) route and have successfully completed one year of commercial production. Such take-over of loans from banks would be covered by a tripartite agreement between IDF, the concessionaire and the project authority for ensuring a compulsory buyout with termination payment, in the event of default in repayment by the concessionaire.
Though the EPC route for road construction is the immediate solution for current disinterest among developers, PPP is a better long-term solution due to its following implications: • additional capital • better management and implementation skills • value added to the consumer and the public at large • better identification of needs and optimal use of resources New hybrid PPP models are also introduced by various agencies to address different issues pertaining to road construction in the PPP model. One such model is “Operation and Performance-Based Road Contracts” (OPRC) that has been introduced by the World Bank. The OPRC model involves payments and incentives for the developer or the contractor on the basis of the quality of the output provided and the extent of achievement of the desired output.
Central Road Fund
Partial Credit Guarantee Scheme The partial credit guarantee scheme is a mechanism of credit enhancement to tap the bond market for infrastructure funding. In such schemes, a higher rated (AAA) entity provides a guarantee to lower rated bonds which in result enhance the www.epcworld.in
OPRC contracts OPRC are based on the life-cycle of the project, to address all the concerns related to asset management. The OPRC may extend 65
Roads& Highways
from the construction phase to the operation and maintenance of the road assets. An OPRC may or may not involve the construction of a road asset. It normally relieves the awarding authority from the liability of maintaining the road assets once the construction is completed and handed over to the awarding authority. Also, if deemed necessary, the concessionaire could be awarded the contract along with the construction of the road projects as well as for operations and maintenance or the asset could be built over EPC mode and then awarded for operation and maintenance to another bidder. The bids asked for OPRCs include quotations for the following aspects of road asset management. The bids are evaluated on the basis of the net present value of the sum of the above-given quotations.
Quotations parameters for OPRC contracts Sr. No. Quotation
Unit
1
Management & Maintenance Services
Rupees per month
2
Rehabilitation works
Rupees per kilometer per month
3
Improvement works
Rupees per kilometer per month
4
Emergency works
Bill of quantities
Benefits of OPRC • Better quality of roads for the same level of expenditure • Reduction of administrative efforts of the awarding or implementing authority • Incentives for the contractor in respect to the output achieved which make road maintenance an attractive business for road contractors • Ensured funding for road maintenance • Satisfaction
New financial schemes to reduce stress on bank funding As discussed, one of the issues that hampers the growth of the roads sector is the financing of road projects. Given the deterrence of banks from lending to road sector projects, new financing arrangements should be made to encourage developers to take up the projects. Bank finance is the prime source of funds for infrastructure projects in India especially in the context of PPPs. In order to relieve the sector from financial constraints, the government has taken various initiatives such as setting up infrastructure debt funds (IDF) and launching a partial credit guarantee scheme (PCG) by IIFCL to fund 66 u EPC World u March - 2015
operational infrastructure projects. However, banks are usually reluctant to sell the loans of operational projects, as they feel that they are less risky. This is because banks in India do not follow risk-based pricing and charge the same interest rates during the construction and operational phases. Encouraging banks to follow the risk-based pricing model and use new initiatives such as IDF and PCG will reduce the stress on the banking system and provide alternative sources of funds to developers. Some of the other financing mechanisms that could be considered to improve access to finance to enable easier access to finance road projects are discussed below
Subordinated lending from dedicated public funds to improve access of developers to debt finance Dedicated funds could be set up using contributions from the government and / or multilateral institutions to enable developer’s access to finance from financial institutions/bond markets. The subordinated debt provides more cushion for banks, and would thus encourage them to lend to developers in the current stressed scenario. This will help the developers to bid for more projects and enhance their debt servicing ability which would result in incremental awarding and construction of roads.
Promoting bond guarantee funds to increase access to bond market Currently, infrastructure projects are predominantly financed through banks in India. Another alternative channel for sourcing infrastructure finance is the bond market in India. A well-functioning corporate debt market could play a critical role by supplementing the banking system to meet the requirements of the corporate sector for long-term capital investment and asset creation. However, bond investors are credit-risk averse and prevented by regulations and / or internal investment policies from investing in issuances rated less than AA. Infrastructure projects, often, are rated below AA, thereby restricting their access to bond market. In this context, a bond guarantee fund could be created to work as a credit enhancement mechanism, providing guarantees to long-term bond issuances by entities in the infrastructure sector of issuers with credit rating less than AA (category); through this credit enhancement, these bond issues would achieve a structured rating of AA or above and would therefore be able to attract bond market investors. Globally, funds such as Credit Guarantee and Investment Facility and Danajamin, Malaysia provide guarantee against debt instruments. CRISIL Infrastructure Advisory has been appointed by ADB to ascertain the feasibility and design such a fund in India.
Power
P
rivate companies and state entities are betting high on renewable energy in the country. For the first time the Ministry for New and Renewable Energy held a global conclave cum exhibition in New Delhi to showcase the opportunities in non conventional energy sources. The high profile conclave, which was addressed by Prime Minister, Finance Minister and heads of concerned ministries, portrayed the probable investment potential and need for green energy solution to feed the ever growing demand for energy in the country. Finance Minister Arun Jaitley said that investment initiatives in renewable energy sector will lead to enormous jobs generation, investments resulting in profitability, competitiveness between various sectors, filling up the gaps in power supply, enhancement of manufacturing sector, and yet not hurting the environment. Jaitley said India has a very large land mass and therefore raw material required for renewable energy is right in front of us. It would be sheer incompetence if we are not able to convert this into a resource, and therefore the initiative which the Prime Minister has taken in the renewable energy sector, created an economically conducive environment. There is a huge change of mood and attitude in India, and that is reflective in the large scale enthusiasm shown in this conference. The Finance Minister said, “The kind of enthusiasm that the international investors are reposing in India today is a very rare occasion in the history, where you can become a natural recipient of both domestic and international investments.� There is a great opportunity for India to grow in
68 u EPC World u March - 2015
Finance Minister Arun Jaitley said that investment initiatives in renewable energy sector will lead to enormous jobs generation, investments resulting in profitability, competitiveness between various sectors, filling up the gaps in power supply, enhancement of manufacturing sector, and yet not hurting the environment.
Clean Energy Feature
2.66 K MW
commitment for
renewable energy
www.epcworld.in
terms of manufacturing and we also have to concentrate on our infrastructure. Jaitley added that the starting point of all this has to be the credibility of the Indian economy, the faith of people in Indian economy, and our ability to provide opportunity to investors and it is from that point of view our own systems have to be tuned themselves accordingly. The Finance Minister also asserted that the coal auctions initiated by the present government, will ultimately lead to a roadmap for cheaper electricity, and the process of reverse bidding will reach the common man in a sustainable manner. Railway Minister Suresh Prabhu, said the ambitious target of 200GW of solar energy is going to be a game changer for the energy scenario of the world and India. He said if more commercial electricity is made available to villages, then migration from villages could be stopped. The Minister of State for Environment, Forests, and Climate Change Prakash Javadekar announced that environment clearances for green energy will be given through green channel. He also said that the government would provide predictable policy regime with standard guidelines. The Vice Chairman of NITI Aayog, Arvind Panagariya speaking on the occasion said that there is a vast potential of wind and solar energy in the country which are complementary to each other which needs massive investments. He also said that in the coming years, challenges in cost effective renewable energy appliances have also to be taken into consideration. Outlining the future action plan in the renewable energy sector, Piyush Goyal, Minister of State for Coal, Power and New & Renewable energy said that a long term roadmap will be drawn to achieve the targets of renewable energy. He said there will be a monthly working session with various states so that the developers and states can work in partnership and there will be a six monthly personal review to ensure that the policies are actually implemented on the ground. The Ministry of New and Renewable energy will work actively in identifying the infrastructure requirements and debottling them, so that the manufacturers in India can successfully take their plans forward, Goyal added. The government’s initiative for promoting renewable energy investment was well received by the industry as 14 banks and financial institutions, 8 PSUs and private manufacturers, 15 private sector companies gave their Green Energy Commitments to the Ministers. Green Energy Commitments worth 2, 66, 000 MW were received. Upendra Tripathy, Secretary, Ministry New & Renewable Energy informed the meeting that 14 companies from seven countries have their Green Energy Commitments for 58 GW. Similarly, 22 PSUs for 18 GW, 257 private 69
Power
Investors Summit in limited companies for “The kind of enthusiasm that the Vigyan Bhawan, New 190 GW and the Railways international investors are reposing Delhi. The Chief for 5000MW have in India today is a very rare Minister showcased the submitted their occasion in the history, where you objectives and policies commitments for can become a natural recipient of put forth by his renewable energy. In both domestic and international government to smoothen addition, 27 banks have investments.” the process of installation also submitted their Arun Jaitley, of Solar and Wind Power commitments for Finance Minister Projects and achieve the financing 72 GW target of 10,000 MW of renewable energy Renewable Energy capacities by 2018-19. He promised a “safe projects. Dipak Dasgupta, Board Member Green Climate journey” for the investors in the state. Fund was also present in the valedictory session. The Andhra Chief Minister also launched the Online Portal for Single Window Clearance of Renewable Energy Policy boost by the states Projects in the state. During the occasion several queries of the stakeholders were answered with assurance from the Chief Union Railway Minister Suresh Prabhu has called for more Minister of granting all permissions for their projects within a active participation of states in harnessing renewable energy. time frame of 21 days. 17 companies signed MoUs with the He was speaking at the session tilted “Showcase of Policy State Government. The Chief Minister assured the investors Incentives by States” in the RE-INVEST 2015 in New Delhi. that more incentives are in the pipeline if these projects are Pointing out that states are drivers of change, Prabhu said that completed within one year. states should make specific laws and policies to become selfsufficient in energy. The Minister said that states which generate more renewable energy should be given more India’s ambitious plan and global response incentives. He said that state wise action plans should be India with its most ambitious renewable energy programme formulated and the potential of each district should be in the world, with a target of 15% generation by 2020 is trying mapped. Centre has taken many proactive steps in the field of to become a lucrative destination for investment in this sector. renewable energy and now it is the turn of the states to carry it Piyush Goyal Union Minister of State for Power, Coal & forward. Prabhu also said that now clean energy should be New and Renewable Energy in his opening address assured made part of “Swachh Bharat Mission”. that the Government will make sure that the investments in Sardar Bikram Singh Majithia, Minister for Renewable India will be protected and encouraged. He said for a new Energy, Punjab has said “we have to move from ground to investment destination the prerequisite is an atmosphere rooftop to make solar mission a movement. He said his state is which makes to do business easier , consistency in policies, lending full support to the vision of the Prime Minister for bankable contracts and prevalence of rule of law in the country making power available round the clock for all. . The Minister assured the investors that though the Madhya Pradesh Minister for New and Renewable Energy Government is pro-poor it understands the problems of Rajendra Shukla, said that Madhya Pradesh is second to business and will act as a facilitator. Goyal said the entire aim Gujarat in providing uninterrupted power supply. Satyendar of the government is to dovetail welfare measures which is Jain, Minister for Power of Delhi Government shared his state meant for the under privileged and the last man in the street plans of meeting the huge power generation targets in Delhi. with the efforts of keeping He sought advice on solar our environment clean and bio-mass energy “The Ministry of New and and with efforts of not generation. Renewable energy will work actively doing anything which The Andhra Pradesh in identif ying the infrastructure may affect the Chief Minister N requirements and de-bot tling them, environment. Chandrababu Naidu so that the manufacturers in India Goyal asserted that the interacted with the can successfully take their plans government stands investors and other forward.” committed to use stakeholders in the Piyush Goyal, Minister of State for Coal, renewable energy as our Renewable Energy sector Power and New & Renewable energy humble contribution today at the Global 70 u EPC World u March - 2015
Power
the manufacturing sector towards a cleaner and “The ambitious target of 200GW of as a whole. better world to take on solar energy is going to be a game “The key challenge for challenges of climate changer for the energy scenario of India is to grow at 9-10% change head on and to the world and India. If more per annum for three leave behind a cleaner , commercial electricity is made decades or more, to be better and greener India available to villages, then migration able to create jobs for a for the future generation. from villages could be stopped.” young population. The Michael R. Suresh Prabhu, second challenge is - India Bloomberg, UN Railway Minister is urbanising rapidly. Secretary General’s These challenges of Special Envoy for Cities growth can only be met if the manufacturing sector grows at & Climate Change urged both India’s private sector and 13-14% per annum. India has largely grown through services. foreign investors to continue developing and investing in the You can’t grow without energy and it is important to clean energy market which create knowledge-intensive jobs understand that, in India’s case, you cannot grow without and support the nation’s goals. All of these steps, he said, are renewable energy,” said Amitabh Kant. helping to position India as a crucial global leader in addressing India’s current renewable energy portfolio stands at 33.79 climate change, as nations work toward an international GW out of a total of 254 GW of installed power capacity, said climate agreement in Paris this December. No other country, Kant, and noted that the huge potential resource of 895 GW in his view, faces an energy challenge or has seized the energy from commercially exploitable resources had resulted in opportunity on nearly the same scale and scope. “Prime renewable energy being identified as one of 25 sectors for the Minister Modi is showing that confronting climate change ‘Make In India’ initiative. goes hand-in-hand with smart economic growth,” said Michael “You need to create a complete ecosystem for this. 70 Bloomberg. “And from my experience, he is absolutely correct percent of the country’s solar content is imported and coming to make cities a central focus of his work. The more India in from China and the US. In the wind sector, manufacturing invests in sustainable cities, the stronger its economy will capacity is 10 GW and caters to rural markets mainly even if grow.” said Bloomberg. numerous companies have set up operations. In the small Uwe Beckmeyer , Deputy Minister , Federal Ministry of hydro sector, we have installed capacity of 3.8 GW as against Economics & Energy , Federal Republic of Germany said that an estimated potential of 20 GW,” he said. his country wants stronger , wider and deeper partnership Kant and other members of the panel believe that with India in the renewable sector . For this , he said Germany renewables hold massive financial promise for investors since will support India in three “Fs” namely Framework , Financing India is aiming to expand energy generation from renewables and Firms . to 100 GW over the next five years. “There’s $100 billion to tap. It’s important to understand that the US and Europe have Make in India & Renewable already experienced urbanisation. In China, it’s now flattening, but in India it’s only just begun and this raises challenges and For a rapidly urbanising India, energy security is a key opportunities in energy security,” said Amitabh Kant. challenge that needs to be met at the earliest . This was stated The Secretary added that feed-in tariffs, portfolio by Amitabh Kant, Secretary, Department of Industrial Policy standards, better evacuation infrastructure and moving away & Promotion (DIPP), at a session of RE-INVEST 2015 titled from predictive buying and selling are some of the issues that ‘Make In India – Renewable Energy Focus’ The urgency of had to be looked into to the issue is evident from help grow the renewables the fact that India’s urban “Environment clearances for green sector’s footprint in population would energy will be given through green energy generation. India increase manifold and channel. He also said that the could also learn from the there should be an government would provide incentive schemes used in additional incentive for predictable policy regime with the US, Europe and spurring investments into standard guidelines.” China, such as tax rebates building infrastructure Prakash Javadekar, as well as financial for renewable energy to Minister of State for Environment, instruments like green provide energy security. Forests, and Climate Change bonds. This should also boost 72 u EPC World u March - 2015
Power
“The urgency of the issue is evident from the fact that India’s urban population would increase manifold and there should be an additional incentive for spurring investments into building infrastructure for renewable energy to provide energy security.”
Amitabh Kant, Secretary, Department of Industrial Policy & Promotion (DIPP)
“We need to ensure that renewable energy generation expansion by mandating a percentage of the grid supply that must be sourced from renewables. Since we are talking about size, scale and speed, we need to get over the technological barriers which remain because of poor evacuation infrastructure. Take wind, many assets lie unused because generated power is not being evacuated and not being sold. If we get this and net metering structure right, then it’ll be successful. Also, with open access smart infrastructure not in place, renewable generation cannot be aggregated and the buying and selling is predictive. Hence, the back end needs to be put right,” he stated. Adnan Amin, Director General, International Renewable Energy Agency, supported Prime Minister Narendra Modi’s ‘Make In India’ campaign in regards to renewable energy stressing that India is the fourth largest consumer of energy worldwide today. “This is expected to double by 2030 so there must be a focus on renewables,” he said. Ajay Goel, Chief Executive Officer, Tata Power Solar, believes that the thrust should not just be on manufacturing in India but also ‘Innovate In India’ which will “allow us to leverage our human capital and intellect”.
PPAs & RPOs Piyush Goyal, Union Minister of State for Coal, Power and New & Renewable Energy, said here today that noncompliance of RPO (Renewable Purchase Obligation) shall soon draw penalties. He said this at session titled ‘Financing “there is a vast potential of wind and solar energy in the country which are complementary to each other which needs massive investments.”
Arvind Panagariya, Vice Chairman of NITI Aayog
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Renewable Energy: Success Strategies’ at the 1st Renewable Energy Global Investors Meet & Expo (RE-INVEST) summit. The Minister said that the new RE policy, that will be enacted soon, shall also have provision for Renewable Generation Obligation (RGO). He said that the cost of renewable, except small hydro, has come down drastically over the last decade. “There is a need to socialise the cost of Renewable Energy (RE) through participation of all states, because currently only the states pushing for RE are bearing the burden,” said . Arvind Subramanian, India’s Chief Economic Advisor, said that the role of public sector financing will assume paramount importance if India is to expand its renewable energy footprint in power generation over the next decade. He also pointed out that while focusing on renewable energy is desirable, it could not be done without simultaneously greening coal, which will remain the primary source of energy for the near future. “For the foreseeable future, India is going to be reliant on coal. It’s a fact of life and we should understand that. In that case, if we are to make progress on climate change and health, unless coal is made cleaner and greener, the arithmetic just won’t add up. We should not lose sight in the middle of this discussion on renewable energy on the major investments that need to be made in greening coal,” said Subramanian, who was chairing the session. He also stressed on the need to look at the possibility of making PPAs (Power Purchase Agreements) in states bankable. While pointing at the persisting problems in financing the RE projects, Arundhati Bhattacharya Chairperson, State Bank of India, pointed at the need of persistent policies, need to address issues in land acquisition, off-taking i s s u e s and management of the developers. Naina Lal Kidwai, Chief Executive Officer & Country Head, HSBC India, highlighted the role capital markets could play in helping the renewable energy sector . “Particularly, we need
Clean Energy Feature
to create a domestic green “The role of public sector bond market which did financing will assume trading worldwide worth paramount importance if $34 billion last year. India India is to expand its needs to participate and I renewable energy footprint also believe that priority in power generation over the sector lending should include nex t decade.” renewables and better credit Arvind Subramanian, enhancement techniques,” India’s Chief Economic Advisor she said. Patricia Loui, Member, Board of Directors, US EXIM Bank, spoke about her experiences in working with the Indian renewable energy sector and other developing nations. “The US EXIM Bank’s total exposure amounts to $7.2 billion dollars and India ranks second in total exposures after Mexico. Our portfolio in India has been growing due to a convergence of interests. The US Government has given us a mandate to lend which allowed us early leadership in financing projects in Gujarat and Rajasthan, which became a catalyst for other digital investments,” she said. She also emphasised on the need for a basic template for PPA that would be applicable to all states. Loui also highlighted the US EXIM Bank’s competitive source of financing with the provision for an 18-year fixed interest rate at 3.13% that allowed financing to become feasible and cost-effective for a developing country’s institutions. “The drivers of success in India have been your clear national goals on the renewable energy front which is crucial since the clarity sends out the message to investors that India is ready to do business,” she added. Other speakers included Praveen Kadle (Managing Director & Chief Executive Officer, Tata Capital Ltd), Ravneet Gill (Chief Executive Officer, Deutsche Bank), Vivek Pathak (Regional Director, Asia Pacific International Finance Corporation) and T.M. Bhasin (Chairman, Indian Banks Association).
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Power
Solar Manufacturing sector needs policy support from Govt
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overnment support to domestic solar manufacturing will lead to improved energy security, job creation and huge forex savings for the industry, according to a report released by ISMA in collaboration with KPMG. The report highlights that given the strategic need for solar power in India, a holistic policy to encourage domestic solar manufacturing is the need of the hour. Indian Manufacturing Policy recognizes solar manufacturing to be of strategic importance. However, the solar manufacturing industry has been facing challenging times because of various factors including lack of a level playing field and various global factors. All these have not allowed the industry to develop economies of scale and an end to end supply chain in the country. It is estimated that about 100 GW of solar capacity shall be established in the country by 2030. “If a sustainable domestic manufacturing industry is promoted, it can save USD 42 billion in equipment imports. It will also create 50,000 direct new jobs and more than 125,000 indirect jobs in the next 5 76 u EPC World u March - 2015
years,” the report states. The presence of solar manufacturing within the country will also result in better energy security as it would prevent potential supply side disruptions since the country would not be dependent on imports. The report also highlights the striking similarity of the solar manufacturing industry today with the electronics industry in the past and suggests urgent measures to avoid repeating the same mistakes. The country currently imports over USD 30 billion of electronic goods annually making it the 4th largest item in India’s import basket contributing to 23% of India’s trade deficit. This situation could have been prevented, if the electronics industry was supported during the nascent stage. The cost of catch-up today is enormous and despite efforts to prop up the domestic electronics industry, we have not been able to curtail the massively growing electronics imports. This is because many critical drivers such as skilled manpower, economies of scale, R&D capability and the entire ecosystem need sustained government support over a period of time.
Clean Energy Report
• Solar power is a strategic need for the country as solar power can potentially save around USD 20 bn. in fossil fuel imports annually by 2030. • A sustainable domestic manufacturing industry can save USD 42 bn. in equipment imports by 2030 and create 50,000 direct jobs and at least 125,000 indirect jobs in the next 5 years, besides providing equipment supply security. • India’s Manufacturing Policy recognisessolar manufacturing to be of strategic importance; this intent needs to be backed with measures to help provide a level-playing field to help build economic scale and supportive supply chain which is lacking. • The electronics equipment industry is an example where India today imports over USD 30 bn. annually because we did not build scale at the right time. The cost of catch-up today is enormous. • While supporting domestic manufacturing industry will result in moderately higher prices of solar power in the short run, in the medium term cost curves will fall as scale and supply chains develop. Further, entry barriers for cell and module investments are low with lead times of 6-12 months only. • The net benefit to the Government of promoting domestic manufacturing is expected to be USD 1.1 bn. over next 10 years accounting for higher taxes due to GDP effect.
Ashwani Sehgal, President, ISMA said, “Indian solar manufacturing is competitive but suffers due to lack of incentives that are provided to solar manufacturers in other nations. 40% of the India solar producers have shut down with the industry utilization at just 21%.” Countries with ambitious solar energy generation plans such as China, USA and Japan have strongly supported domestic manufacturers through a number of trade and manufacturing incentives to make them even more dominant in the coming years. These measures include loans at reduced interest, credit guarantees, capital subsidies, tax holidays, antidumping measures and preferential domestic procurement amongst others, Sehgal added. Supporting similar sentiments, Santosh Kamath, Head of Renewable Energy, KPMG in India, says, “While supporting domestic manufacturing industry could result in moderately higher price of solar power in the short run, the cost curve would fall in the medium term as scale and supply chains develop. The concerns over unavailability of solar panels or www.epcworld.in
sharp price rise can be allayed given that adequate manufacturing capacities exist in countries such as South Korea, Japan, Mexico and Singapore. There is a cost difference of about 5-10% between the largest Chinese solar panel supplier and the largest Singaporean solar panel supplier indicating availability of competitively priced imports” According to Kamath, if solar manufacturing is backed by reliable long term demand on a level playing field, there would be substantial investments by solar equipment producers. Some global players may also invest in the country to make the country an export base .The entry barriers for solar capacity creation is low and gestation time for green-field investments is only 6-12 months. Thus a robust domestic industry will not only offset the higher costs of solar power today but would generate additional revenues through investments and taxes in the long run. The net benefit to the Government owing to promotion of solar manufacturing has been pegged at USD 1.1 billion over the next 10 years owing to employment and tax benefits. 77
Power
Being said that it is time to have indigenous technology development which is the need of the hour, the solar energy sector can develop cost effective projects with domestic support. However, at present the government support is must. Nevertheless, the new government is taking proactive steps to remove the bottleneck. For example, recently Power Ministry has put emphasis on investment in R&D facilities in the country.
There will be no budget restrictions on R&D in renewable energy In order to pave indigenous development of technologies for new and renewable energy Minister of State for Power, Coal & New and Renewable Energy Piyush Goyal has ensured that the government is committed to support such moves and there will not be any budget restriction on Research & Development activities. “Our government wants to make one big difference that we do not work in silos and we like to encourage greater degree of cross functional and inter-dependency amongst different wings of the Government,” said Goyal. The minister said this while inaugurating a conclave on R&D in New & Renewable Energy. Dr R. Chidambaram , Principal Scientific Adviser to Government was the Chief Guest at the one day conclave organised by Ministry of New & Renewable Energy (MNRE) at New Delhi recently. Goyal also urged the experienced and young scientists to guide on what can be done to create international level labs for research and development in the country. He assured that the Government will provide full support for the development of latest technologies within the country. “We will not be found wanting to help development of latest technologies within India and encourage all young 78 u EPC World u March - 2015
boys and girls to come up with innovative ideas,” Goyal said adding “in all aspects we as a nation looks Science & Technology, innovation, Research & Development as the way forward that is what is going to take us to the next level of development”. MNRE has taken some concrete measures for strengthening institutional mechanism to boost R&D in solar energy through setting up of National Institute of Solar Energy at Gurgaon. Similarly, National Institute for Wind Energy, Chennai and National Institute of Bioenergy, Kapurthala have been set up for RD, Testing and Demonstration in the fields of wind energy and bioenergy technologies and systems. According to Goyal, the Ministry is also working on setting up a Clean Energy Innovation centre at National Institute of Solar Energy as a Centre of Global Excellence modelled on the lines of Centres at Harward, Berkley and Stanford. The initiatives like these are considered necessary for taking R&D in Renewable Energy to the most desired next level. MNRE has been actively promoting research, development and demonstration (RD&D) in the field of new and renewable energy. The policy and guidelines provide enabling environment for strengthening Research, Development and Demonstration(RD&D) capacity of R&D institutions, organizations, industries, etc. and technology development and demonstration in the Renewable Energy sector. The emphasis has been on associating industry for technology development and demonstration leading to commercialization. The 11th Plan witnessed a tremendous impetus to R&D in new and renewable energy sector. Around 170 R&D projects in the areas of solar energy, bio-energy and hydrogen and fuel cells with budget of `525 crore have been sanctioned to the various R&D institutions, academic institutions, industries, etc during the 11th Plan Five Year Period. MNRE has made budgetary allocation of ` 910 crore for R&D during the current five year plan period to continue to support RD&D efforts for developing technology with improved efficiency and cost effectiveness to achieve our goal of large scale deployment in cost effective manner. It is envisaged that as a result of rapid scale up as well as technological developments, the price of solar power will attain parity with grid power at the end of the Mission, enabling accelerated and large-scale expansion thereafter. The inspiration would be to reach grid parity for both solar PV and solar thermal and achieve technological breakthroughs in biofuels and hydrogen energy or fuel cells.
Oil & Gas
Shell lube bullish on rising demand Shell Lubricants is one of the global market share leaders in finished lubricants with 13 per cent of the market in volume terms.
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hell Lubricants blending facility at Taloja, Navi Mumbai, is one of the best blending facilities in Asia. Established in 1997, the plant, spread over an area of 16 acres, is a fully automatic PCL based plant with piggable lines to ensure zero contamination. Shell’s blending facility in India, the plant has a capacity to produce 110 million litres per annum. With the Dutch company having acquired land to build a technology centre at Bangalore, plans are also afoot to expand the Taloja plant in an effort to better serve the Indian lube market. With an investment of US$ five million earmarked for capex to 130-140 million litres per annum by mid-2014, the Taloja plant caters to automotive as well as industrial clients of the company. The ratio of automotive and industrial product consumption, according to Akhileshwar Jha, Vice President Technical Lubricants, Shell India Markets Private Limited, is approximately 50:50. The more exciting being the automotive part of the company's business in the wake of the user profile 80 u EPC World u March - 2015
(OE and aftermarket), and the ability to leverage technological knowhow towards building a brand presence. Expressing that his company is bullish about India, Jha during an interaction with a select group of media at the Taloja plant, said Shell would like itself to be seen as a technology leader. He also drew attention to the fact that Shell lubes far exceed minimum specifications irrespective of the market the company has a presence in. In an effort to highlight the company's emphasis on technology, Jha announced that even in the dull period, Shell did not crimp on R&D expenditure. Operating in over 70 countries in the world, the lube giant spent US$ 1.3 billion on R&D in 2012. Reporting an income of US$ 28.6 billion in 2012, the company spent $2.2 billion on developing alternative energies, carbon capture and storage, and CO2 related R&D over the past five years. Working on lubes that will cater to the requirement of new, emerging technologies like hybrid, electric and hydrogen fuel vehicles, the company, headquartered at The Hague, Netherlands, is following a
Company feature
strategy to generate profitable growth through investment towards sustainable growth and a way of addressing global energy demand in a responsible way. An interesting fact about the Taloja plant is the execution of various processes according to weight rather than volume. Owners of some of the most acknowledged lube brands the world over - like Tellus and Rimula, the company caters to OE clients in India like Nissan, Ford, Eicher, John Deere and others. Offering an application for every need, the company in India supplies initial-fill oils and various other types of oils and greases to OEs, and clients in the auto industry. While arrangement with OEs ensures supply of company specified oils to authorised dealers and service outlets, in the aftermarket, the company supplies its oils under premium brands like Helix through a distributor network. Offering genuine, off-the-shelf and tweaked lubes, the company, said Jha, has an approach that could be divided into four stages. Stage one involves a tiered approach towards OEMs. Stage two involves bespoke formulations (also termed as tweaking of formulations). Stage www.epcworld.in
three involves tweaking of lubes as per the specifications of the clients. The most interesting is perhaps the fourth stage. It involves the task of co-engineering or co-creating a lube. An area that makes Shell a technology partner rather than a vendor, according to Jha. He further said that Indian OEMs are increasingly taking to co-engineering lubes with his company. "They understand the benefits derived by global OEMs from such exercises". Shell has co-engineered lubes with well known global automotive brands like Daimler, Ferrari, Ducati and others. A recent visit by Daimler engineers to the Taloja plant should highlight the lab, which plays a crucial role in ensuring that there is no slip in quality. The lab is refurbished with latest measuring instruments, making the plant one of the finest in Asia. Having a patent portfolio with over 150 patent series of lubes, oils and greases, the products the company produces at Taloja are consumed locally. Only a small quantity of the total produce, amounting to turbine oil, is exported. Post the Capex, the arrangement is not expected to be any different. Capable of producing synthetic products, the Taloja plant does 350 SKUs (pack sizes) and 250 products. With a three tiered approach towards clients (offering products as per specs, collaborative testing and branding), the company, in India, is also adapting to the trend of supplying lubes with less additives. "Our working with OEs at the global level helps us at the local level," said Jha. Serving off-highway equipment manufacturers like Putzmeister in India, Shell is among the top three in the B2B market. OE business apart, value clearly lies in the aftermarket. It presents the company to demonstrate its technological prowess more effectively. After all, lube is the life blood of a machine. In Akhileshwar Jha's words: "Lube is a trigger to get value". Shell Lubricants is one of the global market share leaders in finished lubricants with 13 % of the market in volume terms. Since 1997, Shell India has been manufacturing its lubricants at its state-of-the-art lubricant oil blending plant at Taloja, near Mumbai. Akhil Jha, Vice President Technical – Lubricants, Shell India Markets Pvt. Ltd says that the demand of lubricants in India is not growing due to country’s growing GDP – but proliferation of large numbers of OEM’s and growing number of construction equipment owners. Indian lubricants market is one of the fastest growing markets in the world growing at a CAGR of 17.8 per cent during FY 2008-2012 and expanding from $1,044.87 million to $2,014.85 million in the same period. The overall lubricants industry in India is expected to grow at a CAGR of 11.5 per cent to $7,713.7 million by FY’2017. Basis the estimates published in Kline’s report titled “Opportunities in Lubricants 2010: India Market Analysis”: We estimate India’s current overall lubricants market to be 81
Oil & Gas
sectors. The focus for this year was GTL Technology, Greases and Gear oils. Felix Guerzoni, Shell Global Product Application Specialist said, “Innovation, Product Application and technical partnerships are at the Nitin Prasad, Managing Director, Shell heart of Shell Lubricants. Lubricants, Shell India We work closely with the customers and pride Riding growth on ourselves of finding practical solutions to the challenges they synthetic lubes face. We are committed to develop & provide next generation of lubricants that will deliver improved energy efficiency for Following the success of the first National Synthetic Lubes our customers without compromising protection.” Seminar, Shell Lubricants, the global market leader in finished Shell synthetic lubricants are a smart investment. They are lubricants organized the 2nd edition of the seminar to made of newly created molecules, which are designed to meet showcase Shell Lubricants technological superiority in demanding specifications. Their structure is closely controlled Synthetic Lubricants. The event brought together OEMs, to help provide the superior performance and properties, such customers and industry experts at one platform to discuss the as extra-long oil life and reduced fluid friction, required to latest developments and trends in the industry along with lubricate today’s advanced industrial machinery efficiently. addressing the challenges. Shell synthetic lubricants can help to safeguard capital The forum provided an opportunity for the participants to investment by protecting the equipment from wear and discuss their lubrication challenges and requirements. The key corrosion, even under the most severe conditions. They also trends discussed were GTL Technology, Synthetic Technology offer the longest life oils and greases in the Shell range. in Open Gear Lubrication, Synthetic Gear Oil Technologies, Extending lubricant life saves money by cutting maintenance Technology trends in Gearbox maintenance & lubricant costs and reducing product and energy consumption. The practices etc. synthetic product portfolio includes the range of Shell Tellus, Speaking on the occasion, Nitin Prasad, Managing Shell Omala, Shell Corena and Shell Turbine oil (Shell Turbo) Director, Shell Lubricants, Shell India said, “At Shell in Fluids and the Greases from Shell Gadus range. Lubricants India, our focus has always been to provide our The first edition of the seminar was well received by 120 valuable patrons with solutions that help improve performance, participants comprising Shell Lubricants’ customers, prospects productivity and profits. Our product innovation is put to & OEMs from different industrial sectors including gear box work by our world-renowned industry specialists who create manufacturer, process industry like cement plants, steel, mining, the world’s best performing solutions. As a part of this seminar, auto components etc. The key participants attending the seminar we aim to provide a platform that allows our experts to were Adani Power Ltd., Bhushan Steel Ltd., John Deere, showcase solutions that suit our customer’s needs, ensuring Thermax, Ultratech Cements Ltd., etc. The sessions covered that the growth is uninterrupted.” prevalent topics like the need of synthetic lubricants, energy Akhil Jha, Vice President Technical (Lubricants), Shell India challenges, technology, product Markets Private Limited said, applications followed by a panel “Shell continually strives to “We are investing discussion. The Quality of develop technology leading enormously on R&D to sessions held & the experience products and services that help develop market leading meet deadlines, reduce provided was appreciated by the products and solutions for attendees. To further strengthen operational costs and maximize our OEMs & customers Shell Lubricants’ partnerships equipment availability. We are across sectors." with its customers and OEMs in investing enormously on R&D Akhil Jha, Vice President India, Shell Lubricants plans to to develop market leading Technical (Lubricants), continue with this initiative products and solutions for our Shell India next year. OEMs & customers across approx 2 million metric tons. Out of this onhighway segment is estimated to account for approx 0.53 million metric tons and offhighway segment approx 0.28 million metric tons. Off-highway segment consists of both construction and mining.
“At Shell Lubricants India, our focus has always been to provide our valuable patrons with solutions that help improve performance, productivity and profits. Our product innovation is put to work by our world-renowned industry specialists who create the world’s best performing solutions.”
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Real Estate
Importance of a Real Estate Investment Trust (REIT) in the Indian context A REIT could have a large opportunity in the Indian real estate market with a growing economy, existing portfolio of commercial real estate and conducive investment climate. According to an analysis produced by KPMG, Knight Frank India, Hariani & Co and NAREDCO REIT could provide an attractive alternative investment instrument in the Indian financial markets. It can be a potential boon for developers and more so to the real estate investors as it helps in negating the shortcomings of investing in physical real estate. This new investment vehicle offers an exit opportunity to developers thereby enabling them to monetise their investment in real estate. While on the other hand, mandatory listing of the REITs on recognised stock exchanges will offer an easy entry 84 u EPC World u March - 2015
and exit mechanism for investors. With respect to providing liquidity to the investors, REIT may be at par with equity shares trading on the exchange, the combined report asserts. Being a new investment instrument for an Indian investor, it is imperative to study the performance of REITs, globally. Over the past decade, returns on equity of traded REITs have comparatively over performed the returns on leading stock markets indexes, across the world. REITs across the globe have provided five year returns in the range of 12 to 24 %. With Japanese and Malaysian markets providing returns in the range of 7 to 12 %, the expectations from Asian economies are on the rise. “It is expected that a REIT in India would give returns similar to that of other countries. It is expected that a diversified REIT only focusing on rental income can generate returns in the range of 9 to 11% with an additional return of 2 to 3 % on capital appreciation, annually,� the report highlights.
Analysis
REIT- a potential investment vehicle to transform the Indian real estate sector It is expected that introduction of REITs in India would generate returns similar to that of other countries. It is also expected that a diversified REITs only focusing on rental income can generate higher returns in order of 9-11%.
How REIT could help industry
Opportunity for liquidation
REITs could help in bringing the much required professionalism and transparency in the real estate sector in India. However, it shall be governed by the SEBI guidelines, which would help ensure transparency and accountability of REITs. Nevertheless there are certain factors that need to be addressed in order to make REITs successful, like it would have to appoint an independent trustee, managers, auditor and valuer to help ensure that the functioning of REIT is transparent. Moreover, experiences in different facets of the real estate business are a prerequisite for the appointment of a manager in REIT, thereby helping in ensuring professionalism in real estate investments. While on the other hand, mandatory listing of the REITs on recognised stock exchanges will offer an easy entry and exit mechanism for investors.
REITs could provide developers and large investors of commercial real estate to tap into the REIT market for investment in the real estate assets. It could provide a long awaited exit opportunity to developers and Private Equity (PE) investors, with an option to retain a large share and diversify a smaller portion to unlock the potential of the assets. The liquidity generated could help developers with much needed capital to invest in future projects or complete existing projects. Moreover, a REIT as an investment vehicle has a huge opportunity in India. As on October 2014, India has a rent yielding office inventory to the tune of 425million sq ft valued in excess of USD 52billion. Apart from this, there are other properties like warehousing, retail malls, shopping centers, school buildings,etc. which could be considered for REIT.
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Real Estate
The comprehensive analysis, by KPMG, Knight Frank India, Hariani & Co and NAREDCO, has highlighted the importance of a REIT in the Indian context, guidelines applicable to REIT, tax implications and an overview of REIT model in other countries.
Key Highlights • Tax efficiency is critical to the success of REIT in India • Foreign investment is crucial to create liquidity post the listing of REIT • State governments could consider a one-time waiver of stamp duty on transfer of assets to REIT Following are some key highlights of the performance of REITs in key markets as per S&P Dow Jones at five year and ten year milestones. Country
REIT Performance as per S&P Dow Jones 5 year
10 year
15.93%
8.35%
8.95%
13.62% N.A.
Americas U.S. Europe France
United Kingdom 12.20% Pacific Australia
8.62%
3.56%
Japan
11.75%
Singapore
14.35%
Hong kong
23.80%
Malaysia
6.82%
6.32% 14.06% 14.32% N.A.
Asia
Source: Dow Jones Real Estate Indices – S&P Global Property Indices Quantitative Analysis Report for Q3 2014
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• Tweaking of IRDA investment regulations to allow insurance companies to invest in REIT, thereby widening the investor base “REIT could have a large opportunity in the Indian real estate market with a growing economy, existing portfolio of commercial real estate and conducive investment climate. REIT offers an exit opportunity to developers thereby enabling them to monetize their real estate. While on the other hand, mandatory listing of the REITs on recognized stock exchanges will offer an easy entry and exit mechanism for investors. However, in order to get REIT functional and successful in India, REIT regulators have to ensure that the REIT regime is continuously reviewed in accordance with the changing requirement of the real estate market,” said Punit Shah – Partner and Head, West India, KPMG in India. Added Shishir Baijal, Chairman & Managing Director, Knight Frank India “Given the functional model of some of the REIT established markets , it is evident that the success of REIT in any country depends on the capability to customise the rules and regulations governing REIT in such a way that they fit into their own markets. The support of governing authorities to help ensure a less restrictive REIT regime and favourable tax transparency status can be a critical factor in the development of a vibrant REIT sector in a new market. While there is huge potential, how much and how soon this is harnessed will depend on the overall economic momentum and the acceptance of REIT as an investment vehicle”. Ameet Hariani, Managing Partner, M/s. Hariani & Co., Advocates and Solicitors said, “REITs present an interesting opportunity to securitize the critical real estate sector in India and effectively make real estate a tradable commodity. While some more clarifications are still needed we should see launches by mid-2016.” Sunil Mantri, President, NAREDCO said, “We are hopeful that soon REIT will become a reality which is the need of the hour for India and especially for the real estate sector. REIT as an investment instrument is considered one of the safest and most trusted. Going forward, REIT is going to be a successful model for attracting huge investments in commercial real estate sector.”
Urban Development
Investment in our cities has sound Economic Imperative – More Jobs & Better Quality of Life
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rbanization is a global phenomenon. Experts predict the world’s urban population will double by 2050. People migrate primarily in search of economic opportunities (except in case of war and natural calamities). Migration, whether it is inter-continental, inter-state or from rural to urban, it is always in search of employment and the desire for a better quality of life. Cities worldwide are the engines of economic growth, leading to large-scale employment opportunities and creation of national wealth. In China, top 35 cities provide 70% of employment and contribute 50% to the nation’s GDP of USD 9.8 Trillion. The same is true for India. Our urban population, currently at 31%, contributes over 60% to India’s GDP. Hence investing in Indian cities has sound economic rationale as it will lead to enhanced economic activity resulting in large scale employment generation, a much desired socioeconomic outcome in a young nation where majority of our youth is either unemployed or underemployed.
Building
RK Misra Founder director, Center for SMART Cities 88 u EPC World u March - 2015
Focus
Cities the way SMART www.epcworld.in
89
Urban Development
OBJECTIVE
SMART Cities are for CITIZENs – Investment driven Economic Growth leading to Employment Opportunities & Better Quality of Life There is lot of confusion about what is meant by SMART City or more specifically The INDIAN SMART City. There is a misconception that SMART Cities are only about technology, big data analytics, high-tech gadgets, free Wi-Fi and CCTV Cameras. Merely having Wi-Fi routers hanging from tree tops, optic fiber cables dangling on electric poles and synchronized signals on potholed roads won’t make our cities SMART. True, all of this and more of technology intervention is needed, but more importantly what is the expected outcome of these technology and process interventions. What is the ultimate objective of a SMART City ?
a crying need for the cities to become EFFICIENT to handle this large-scale urbanization and finding new ways to plan and manage the socioeconomic complexity, improve efficiency of service delivery, be resilient to economic and natural calamities and improve quality of life of their denizens.Hence we have to ensure that the investment in SMART Cities and resultant economic and industrial activity leads to large-scale employment generation with a better quality of life for city dwellers and is achieved through sustainable means. And that is the SMART aspect of the SMART City agenda.
The Indian SMART City
Economically Viable, Ecologically Sustainable and Culturally Vibrant
Whatever the name we decide to give our cities, SMART or otherwise, our objective should be clear and simple – “investment in these cities should generate enhanced economic opportunities leading to employment generation resulting in better quality of life.”
The 4 Es of SMART Cities - Efficiency, Economy, Employment and Environment We need to look at the fundamental needs of our cities – “our cities need to be managed Efficiently to enhance Economic activity leading to Employment generation while protecting our Environment.” It is projected that urban India will account for nearly 75% of the national GDP in the next 15 years. There is accordingly 90 u EPC World u March - 2015
So what is meant by Smart City in Indian context? What will an Indian SMART City look like and how will we achieve that? To answer these questions, we need to look at the fundamental objective and the expected outcome of our SMART City agenda– “enhanced economic activity leading to employment generation and better quality of life while protecting our environment & persevering our cultural ethos”
Urban Development
India being a late starter to planned urbanization through SMART Cities has the unique advantage of learning from others’ mistakes. Many cities, in their quest for rapid economic development have not paid heed to cultural preservation and environmental sustainability. Indian cities pose a bigger challenge given their unique character, socioeconomic diversity and cultural heritage. We have to ensure that we enhance economic vitality of our cities without compromising on the cultural vibrancy, socioeconomic diversity and ecological sustainability. It is indeed a tough balance, but not impossible to achieve.
Indian Smart Cities are all about infrastructure & no one solution suits all Given the abysmal state of infrastructure in our cities, our SMART City agenda needs to be entirely driven by our infrastructure needs. Any city has four basic infrastructure needs– Mobility, Safety, Sanitation & Sustainability; complemented with citizen centric Good Governance. While these are the infrastructure pre-requisites of a
SMART CITY, each city will have its own unique infrastructure needs and its priorities could be different. The chronic traffic jams in Bangalore may require MOBILITY to become the high priority in it’s quest to become a SMART City while a Varanasi may need focus on CLEAN, sanitation being the priority area for the holy city. Each city, given its unique circumstances and infrastructure challenges should be allowed to prioritize it’s SMART CITY infrastructure focus areas while eventually all the above infrastructure pieces need to fall in place. The infrastructure options adopted by each city will also vary given the population mix, economic activity and geographic constraints of a city. A metro may be 92 u EPC World u March - 2015
the ideal mode of commute for 8 Metros but BRTS may suit better for Tier 2 and Tier 3 cities. An incinerator may be the ideal waste management solution for land starved Mumbai but Lucknow may opt for recycling and composting.
SELECTION
Which Cities should be Chosen to become SMART Cities in the first set of 100…. While every city deserves to become efficient and provide better quality of life to it’s citizens, but if we have to chose the first set of 100, we need to go back to the basic purpose of SMART Cities – to create enhanced economic activity leading to employment generation and better quality of life. So we should obviously give high priority to the cities that are already economically significant but are unable to sustain their economic growth and quality of life for their citizens due to poor planning and inadequate infrastructure. The 8 Metro cities with population of more than 50 Lakhs - Delhi (NCR), Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Pune and Ahmedabad are responsible for 70% of tax revenue and contribute 80% to the net job addition to India’s organized labor market. This will put these 8 metro cities in the high priority category to be considered for inclusion in the list of SMART Cities. Though the investment required to make these mega cities SMART will be huge, but these cities will be able to attract private sector investment due to enhanced economic activity and the ability of the city dwellers to pay user charges for better services. Every rupee invested in these cities will lead to a proportionate economic return due to increased productivity and economic efficiency gains. Hence investment in these cities makes good economic sense. Second in the list should be 47 Tier 2 regional cities with a population of more than 10 lakhs, which have significant economic and industrial activity. Cities such as Kanpur, Mangalore, Vizag, Indore, Ghaziabad, Asansol, Dhanbad, Gauhati, Jamshedpur, Ludhiana, Jaipur, Coimbatore, Kochi, Faridabad, Ranchi, Jabalpur, Bhopal, Surat, Vadodara, Nasik, Nagpur and so on. These cities are economically significant and have huge growth potential and if developed well, will also reduce the growth burden on 8 Metro cities. Third in the list should be 20 tier 3 industrial and economically significant towns, which are dependent on single industry and can diversify to enhance economic activity. These towns need basic infrastructure and facilities to attract investment to grow and diversify their businesses.
Focus
These are small cities with land availability for industry expansion and diversification. These include cities such as Moradabad, Saharanpur, Aligarh, Tirupur, Salem, Aurangabad, Bhagalpur, Nasik, Varanasi etc. Finally we should list 25 cities which do not fall in the above 3 categories. These will include centers of tourist attraction, heritage and pilgrimage towns. Capital cities in underdeveloped and remote Himalayan and North-Eastern states should follow a cluster and Network or Hub & Spoke approach and be developed keeping in mind potential economic opportunities for the region as a whole. The list for the first 100 cities should be made on the above objective criteria and state governments should be taken on board to ensure coordination and timely execution. It is an ambitious target to develop 100 Smart Cities, given the abysmal state of infrastructure, non-existent city governance structures, we have to be realistic in our expectations. We should prioritize and focus on low hanging fruits starting from 8 Metros which have the institutional capacity to plan, design, finance and execute better than other cities which would need education and hand holding from the center and respective state governments.
PLANNING & COORDINATION
State governments need to be persuaded to give more autonomy to selected SMART Cities in line with the 74th amendment Given that the provisions of 74th amendment haven’t been implemented by most state governments in letter and spirit, our city governments lack financial resources and are devoid of techno-managerial competence to plan and present their case to be included in the list of SMART Cities. Our cities lack urban planners, municipal administrators (most states do not
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have municipal cadre) and engineers to design and manage high-growth urbanization. Given that majority of our cities are governed by municipal commissioners who are not urban experts and most Indian cities do not have elected/empowered mayors, it is unfair and impractical to expect these cities to plan and present their case objectively and compete among themselves to be included in the list of SMART Cities. Having chosen 100 cities based on this objective criteria and their economic potential, state governments should be taken on board to handhold and support selected cities through specialized project management units. Efforts should also be made to persuade state governments to accord financial autonomy so that these cities can equip themselves in managing their own affairs in line with the provisions of the 74th amendments. Central government could use inclusion in SMART Cities list and subsequent financial support as an incentive for state governments to give these cities more autonomy to help them develop technomanagerial competence, improve governance for better service delivery and get accredited to float municipal bonds to mobilize their own financial resources.
EXECUTION & MANAGEMENT
Vision, policy and planning is in place but how about execution & management? SMART City as a concept is still new to most Indian practitioners and our approach to SMART Cities will need to be tailor-made to suit our specific circumstances. While practitioners, based on their experiences in other European and Asian cities, are attempting to define our needs and possible solutions, our policy makers are struggling to find optimal approach best suited to our unique and specific challenges. It is a problem with no easy solutions. No wonder, we still do not have a policy document and an objective criteria to select these cities. Now that the vision has been articulated by the political leadership, bureaucracy will put together the policy framework but the true challenge lies in the planning, coordination with various stakeholders, execution and monitoring. This would require subject matter experts and practitioners with experience in public policy matters, working in mission mode along with central & state government bureaucracy, city administrators and other stakeholders. Our infrastructure projects usually suffer from inordinate delays, cost over-runs and poor execution due to lack of planning, multitude of approvals and lack of coordination among various stakeholders. However when we empower competent practitioners, they are able to deliver world-class infrastructure in a timely manner. We can think of only 3 infrastructure 93
Urban Development
success stories over the last 2 decades - National Highway (NHDP), where Gen. Khanduri (a Military Engineering Services veteran) had the confidence of political leadership and an enabling act (NHAI) or Delhi Metro where Mr. Sreedharan (Indian Railways Engineer) took-up the challenge to deliver a world class Metro Network and recently UID where Mr.Nilekani (another Engineer and IT professional) delivered a robust system which is unparalleled in scale and scope. Another success story was that of C-DoT driven by Mr. Sam Pitroda in 1980s. To deliver on three ambitious initiatives of NDA Government, namely SMART Cities, Digital India and Make in India, which are inter-dependent and complementary with an end objective of higher economic growth leading to employment generation and better quality of life, GoI would need to focus on planning, coordination and execution by appointing and empowering committed practitioners who have the experience and passion to lead these initiatives as was in the case of C-DoT, NHDP, Delhi Metro and UID. This is how ambitious government initiatives get executed worldwide.
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About the Author RK Misra (www.rkmisra.in) is the founder director of Center for SMART Cities, a knowledge bank and repository of best practices in collaboration with leading global organizations. He is also founder of Indian Council for Public Private Partnership. He was part of team at Tokyo University which developed world’s First SMART City blueprint with SMART Transportation and Urban Management systems for Tokyo’s SMART City initiative in early 1990s and have been deeply engaged in urban issues of Indian including contribution to JNNURM policy formulation and several other urban infrastructure initiatives and task forces in various states. RK is a serial entrepreneur who founded global technology businesses in India and abroad before engaging in matters of public policy and governance on turning 40 in 2005. He is a BTech from IIT Kanpur and Masters from Tokyo University. He is a fellow of Harvard Kennedy School of Government and Aspen Institute USA.
ADVERTISERS' INDEX Company Name
Page No.
Apollo Inffratech ....................................................23 & 95 BKT Tires........................................................................ 17 ECGC Ltd......................................................................... 7 Electrotherm .................................................................. 55 EPC World Subscription................................................. 59 ESSAR Projects.......................................................... IFC EXCON 2015.................................................................. 43 H.V. Engineers & Designers .......................................... 21 IME 2016........................................................................ 67 India Warehousing Show 2015....................................... 91 Interarch Building Products ......................................... 9 J.K. Cement . ................................................................. 39 JCB India . ..................................................................IBC JSW Steel . .................................................................... 15 KIRBY Building Systems ............................................... 11 NORD Drivesystems ..................................................... 25 Parker Hannifin............................................................... 5 Power Build . ...............................................................BC Power Finance Corporation (PFC)......................12 & 13 Prince Pipes & Fittings................................................... 51 Rural & Marketing........................................................... 75 Safari Construction Equipments . .................................. 63 STP ............................................................................... 87 Tata BlueScope Steel .................................................... 19 The Big 5 Construct India 2015...................................... 79 Universal Construction Machinery & Equipment............ 33 VE Commercial Vehicles . ....................1 & 2 (gate-fold) WIN India 2015............................................................... 71 World of Metal 2015....................................................... 83 95 u EPC World u March - 2015
Spotlight
Energy
Switch to future
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ith its extensive manufacturing, implementation and service infrastructure in India, Neev Energy has pioneered numerous cutting edge products for energy saving. It has invested in establishing a robust operations value chain which starts from its extensive manufacturing facility located at Okhla Industrial Area in New Delhi. Today, energy saving has become a buzz word. In this direction, both the government and the private sector have identified LED lighting as a way to reduce power requirement. Neev Energy, with its strong R&D, offers products that are capable of huge energy savings. Its product portfolio which includes downlights, panel lights, LED bulbs, track lights, bay lights, tube light and strip lights. Interestingly, all the products capable of saving on an average of 70 per cent on power and long-life in excess of 50,000 hours. The products are durable enough to withstand to shocks and external impact.
96 u EPC World u March - 2015
Unique solution Let’s have a look how Neev Energy offered a cost effective solution to one of the largest chain of stores. QSR Limited (QSRL) is the one of the largest chain of stores operating through more than a thousand outlets in India across 150+ cities. Lighting plays a key role in this business, at one hand it creates the right ambience and acts as a functional requirement on the other. In order to tackle the increasing cost of power and wide spread power shortages the company’s management set up a task force to identify opportunities for cost savings while improving the quality of infrastructure in a number of stores over the next few years. The engineering team at QSRL reached out to Neev Energy to propose a cost effective solution to address the aforementioned challenges. It was proposed that the existing lighting be replaced by LED lighting. Neev started with the installation of LED lights at 10 selected stores and has since covered 25 per cent of the stores already. The management now plans to switch to LED lighting across all existing and upcoming stores over the course of the next two years. The post implementation audit revealed that the KWH consumption on an average has gone down by 60 per cent. The newly installed LED lights did not emit any heat and which led to a reduction in air-conditioning loads. Additional energy savings of 30 per cent were realised as a result. LED lights were expected to last 5-10 times longer than the usual CFL lights. This not only reduced the replacement costs of tube lights by 80 per cent but also reduced the associated manpower costs by 70 cent. On top of it, switching to LED lighting is helping QSRL gain credits, which is in line with QSRL’s objective to get a LEED certification for its properties.
Event Report
ConMac 2015
Uplifting the development in North-East The first ever show has emerged as the largest event in the North-East and will facilitate infrastructure growth in the region.
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ith government planning to run a mission for promoting ‘make in India’ the construction equipment industry eying huge opportunity. For the first time there was a mid level conclave and exhibition on construction equipment, which received high level response. Moreover, since it was a piggy back of Excon event, the industry players were a bit cautious. Inaugurating the show, Tarun Gogoi, Chief Minister of Assam said, “We are looking at setting up equipment banks in the state so that our contractors, big or small, or for that matter any other stakeholder, can avail of machinery on lease. Not everyone can afford to buy construction equipment that are expensive, which is why they need to be leased for a specific period and made accessible and affordable.” During his speech Gogoi also made it clear that his Government priority is to develop infrastructure. “Our thrust has been on infrastructure development. Construction equipment and technology play an important role, be it roads, bridges or buildings. I am happy that the CII has taken the initiative to organise such an event for the first time in the region. This thrust on construction equipment and technology and making them available to stakeholders here will go a long way in improving the economic condition of the region,” he added.
Exhibitors’ view The exhibition witnessed participation of prominent construction equipment players. Construction Equipment majors like CAT, JCB, Kobelco, Case New Holland, BEML, Writgen, Schwing Stetter, Ajax, Puzzolana, SREI Finance, JLG, Apollo, BKT, L&T, Universal Construction Machinery and Tata Hitachi had participated at the exhibition. It seemed that exhibitors were excited about the event. Speaking to EPC World, K Sunil Kumar, President & CEO, Universal Construction Machinery & Equipment Ltd, said,” For us, www.epcworld.in
North Eastern region is very very important. We are into concreting business and have a good presence over here. We feel all our products have immense potential in this region. So, we are very excited to be part of ConMac 2015.” He further added, “There are visitors from the PWD department, Govt representatives, and contractors at the exhibitions. I do not think, in North Eastern region, one will get a better platform other than ConMac to meet all these under one roof. At the end of the day, we have to ensure our connect with our customers, and we would like to use the platform. Not only to connect with our customers but also to showcase our product range and manufacturing capability. The uniqueness of our company is that we manufacture entire range of concreting equipment.” Similarly, Ravikiran Rao, Associated Vice President-Marketing (Construction Material), said, “This is one of the largest events as far North East is concerned. Definitely, the region is neglected part of our nation when infrastructure development is concerned. It’s a good platform to showcase what we are doing and what others are doing. I am happy to come here.” Expressing his views, P K Ganguly, Head Marketing-OTR, BKT, says, “Exhibition in such a scale being held for the first time in North-East. With our product basket for construction equipment it is necessary to reach our customers. The road connectivity with Guwahati from the rest of the country is very poor. And here lies the opportunity and also indicates huge opportunity for growth. Lot of leading developers from roads and construction companies are participating in ConMac. We will also store our tires in Guwahati through our distribution channel and reach our customers to remotest part of North East. This exhibition will provide us reach experience and learning. It is an unique initiative by CII and I wish they would continue to organise this ConMac.” The maiden edition of ConMac took place from February 27 to March 01, 2015, at Maniram Dewan centre in Guwahati. The exhibition, featured over 110 exhibitors of the world’s finest construction equipment and technology. 97
Spotlight
CASE Construction celebrates 25 Years in India CASE India kicks off its Silver Jubilee Celebration in India at ConMac 2015. In the last 25 years the company won several awards for its transparent and ethical business conduct.
C
ASE Construction, a brand of CNH Industrial, kicks off its celebration of 25 years in India with the participation in ConMac 2015, one of the most important construction equipment exhibitions in India. Organized by the Confederation of Indian Industry (CII), the show took place at the Maniram Dewan Trade Centre, in Guwahati from 27th February to 1st March 2015. ConMac 2015 was held in North East India, a region with tremendous potential for the construction equipment industry due to investments in excess of ` 60,000 crore (USD 10 bn) planned for infrastructure development projects. The exhibition therefore provided CASE India with a perfect platform to start its Silver Jubilee celebrations and showcase its market leading product range, which includes Loader Backhoes, Vibratory Compactors, Motor Graders and Skid Steer Loaders. At its stand in ConMac 2015 CASE India also launched its new own brand Rockbreaker, displayed on the recently launched 851EX Loader Backhoe. The CASE 851EX runs the reliable and proven 96 horsepower S8000 engine developed by the company’s sister partner FPT Industrial. The engine delivers a powerful performance and fast response time, enabling operators to maximize productivity. This, coupled with the exceptional fuel savings of upto 13% resulting from the after cooler system, makes the S8000 Series a reference in the market as the most fuel efficient engine in the country. Speaking on the occasion, Abhijit Gupta, Managing Director, CASE India, at the Inauguration of the ConMac event, said, “The people of North East India have always been extremely appreciative of the products and technology offered by CASE India. Therefore it’s no wonder that we enjoy our highest market share in this region. We also reciprocate this trust by remaining extremely responsive to the needs of our 98 u EPC World u March - 2015
discerning customers in North East India. As a step in this direction we recently launched 851EX Loader Backhoe in the 96 HP category with our own market leading FPT Industrial engine intended to suit the requirements of our customers in the mountainous terrain in this region. We launched this machine with the first sale in the state of Assam in North East India. He also added, “Now in our 25th year in India, we kicked off the celebrations at ConMac with the introduction of our own branded Rockbreaker and trenching bucket, which have been a growing demand from our customers in this part of the country. These new introductions are testament to our continued efforts to anticipate our customers’ needs and provide state of the art products that result from the high quality research output, evaluation of customer feedback, and our traditional strengths of high quality standards, policy and practices. They enrich our product offering that brings to our customers the innovation.”
Service in North-East CASE India serves its customers in the important North East region, through an extensive network of 6 dealers with nearly 20 customer touch points covering its 7 states. It is well equipped to serve customers even in remote locations and provide easy access to prompt and efficient sales and after-sales support. Over the past 25 years, earlier as a technology provider, then as a joint venture partner of an Indian company, and finally as a wholly owned subsidiary of CNH Industrial, CASE India has consistently remained a market leader in the Vibratory Compactor segment and the only company to have sold over 7,500 units in India. With more than 20,000 Loader Backhoes sold in the country, CASE India is also a Top Tier player in this product segment.
“We are entering extreme mobility” When mud or sand have swallowed the road, the only way to stay out of trouble is to keep moving. This is where the highly controllable driven front axle in the Volvo FMX is hard to beat. And even harder to beat now that it is completely redesigned to increase ground clearance and give the truck a real off-road approach angle.
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t’s hard to believe the construction segment manager in his clean white shirt has just come home from a mud bath in Brazil. Until he starts talking about the new 8×6 and the redesigned front axle. “The 8×6 has been available for some time, but now it is part of our standard offer, which means shorter delivery times for customers. Strictly speaking, it’s a six-wheel-drive with an extra axle for increased load capacity. But with the new front axle it’s becoming a very useful vehicle in borderline conditions – as is the 6×6 and 4×4,” says Jonas Odermalm. Steeper hills and deeper ditches: The front drive axle has been relocated 100 millimetres closer to the front. This gives the truck a far better approach angle, but also means it can be combined with the full range of chassis components and engines. From crown and pinion to bearings, the axle is completely new. Its design makes it stronger, more streamlined and provides better ground clearance. “Previously the lowest part was the parallel rod, but this has been integrated behind the axle beam. So now the
www.epcworld.in
lowest point of the vehicle is the sturdy axle casing. When fully laden the truck has significantly improved ground clearance. Together with the new approach angle, this makes it very versatile on uneven terrain,” explains Jonas Odermalm. Lower fuel consumption: While permanent all-wheel-drive is the common solution for construction trucks, Volvo prefers to let the driver engage it – as and when needed. Jonas Odermalm recalls from research carried out in the desert, “It’s really only needed between two and five percent of the time. This means that 95 percent of the time All-Wheel-Drive is a waste of fuel – unless it’s an FMX and the driver can choose when to apply it.” Free rolling: With a switch on the dashboard the driver can revert to rear wheel- drive when conditions allow. This means direct transfer between the engine and rear drive axle, so the other wheels are free rolling – and consuming less fuel. On top of this, there is less wear and tear on the front axle. When things get extreme: In the six wheel- drive trucks the first thing you need is an inter-axle differential lock – diagonally locking two of the rear drive wheels across the bogie. According to Jonas Odermalm, this is enough for many situations. “If things start getting really slippery you engage the driven front axle. This gets you out of most situations – now we are entering extreme mobility.”“Then we have what is commonly known as the Oh Shit! button. Pressing this locks the front differential making it very hard to steer the vehicle – but allows you to get back onto dry land.” On and off : When asked about the attraction of this type of mobility, Jonas Odermalm is quick to respond. “We let the driver determine when more drive axles are needed. I think it’s appreciated by drivers of all sorts of vehicles: 4×4 service vehicles for road maintenance,6×6 tippers working on desert oil pipesand 8×6 dump trucks in quarries.’’He adds, “Of course, it wouldn’t be so attractive without our reputation for durability and reliability.” 99
NATIONAL India Steel 2015
India Warehousing Show 2015
World of Metal
Concrete Show India
Aquatech India
Express Logistics & Supply Chain Conclave
Date: 16 - 18 April 2015 Venue: Hall 5, Mumbai Exhibition Centre, Mumbai Industry: Steel www.indiasteelexpo.in
Date: 07 - 09 May 2015 Venue: Bombay Convention & Exhibition Centre, Mumbai Industry: Construction www.concreteshowindia.com
Date: 01 - 03 July 2015 Venue: Pragati Maidan, New Delhi Industry: Logistics www.indiawarehousingshow.com
Date: 11 - 13 August 2015 Venue: Pragati Maidan, New Delhi Industry: Urban Infrastructure www.aquatechtrade.com
Date: 13 - 15 September 2015 Venue: Bombay Exhibition Centre, Mumbai Industry: Construction www.wom-expo.com
Date: 24 - 25 September 2015 Venue: Taj Lands End, Mumbai Industry: Logistics www.elscconclave.com
Power-Gen India & Central Asia
Watertech India 2015
CII EXCON
Smart Cities India 2015
The Big 5 Construct India 2015
WIN India
Date: 14-16 May 2015 Venue: Pragati Maidan, New Delhi Industry: Power & Energy www.indiapowerevents.com
Date: 20 - 22 May 2015 Venue: Pragati Maidan, New Delhi Industry: Urban Infrastructure www.smartcitiesindia.com
Date: 02 - 04 September 2015 Venue: Pragati Maidan, New Delhi Industry: Water www.watertechindia.com
Date: 10 - 12 September 2015 Venue: Bombay Exhibition Centre, Mumbai Industry: Construction www.thebig5constructindia.com
Date: 25 - 29 November 2015 Venue: BIEC, Bangalore Industry: Construction www.excon.in
Date: 09 - 11 December 2015 Venue: Pragati Maidan, New Delhi Industry: Automation www.win-india.com
INTERNATIONAL IFBA Kassel
The Turkey-Eurasia Mining Show
Buildtech 2015
InterSolar South America
PV Korea
International Mining and Resources Conference
Date: 11-13 June 2015 Venue: Kassel, Germany Industry: Logistics www.ifba.eu
Date: 01-03 September 2015 Venue: Expo Center Norte, Sao Paulo, Brazil Industry: Energy www.intersolar.net.br 100 u EPC World u March - 2015
Date: 08-09 September 2015 Venue: Conrad, Istanbul, Turkey Industry: Mining www.terrapin.com
Date: 09-11 September 2015 Venue: KINTEX, Goyang, South Korea Industry: Energy www.exposolar.org
Date: 07-10 October 2015 Venue: Putra World Trade Centre, Kuala lumpur, Malayasia Industry: Construction www.tradelink.com.my
Date: 10-12 November 2015 Venue: Convention & Exhibition Centre, Melbourne, Australia www.imarcmelbourne.com
News & Products
GAIL receives Sustainability Reporting Award
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AIL (India) Limited has received the Sustainability Reporting Award during India Corporate Governance & Sustainability Vision Summit & Awards 2015 organised by the Indian Chamber of Commerce. The award was conferred for GAIL’s Sustainability Report for FY 2013-14, which was the first report among Public Sector Enterprises of India to receive the coveted ‘A+ Application Level’ statement by international organization Global Reporting Initiative (GRI). This was the fourth Sustainability Report published by GAIL and was based on the theme ‘Care, Share & Grow’. The Stakeholder centric report offered a holistic view of GAIL’s business, highlighting
GAIL’s Sustainability performance during the year while taking along the stakeholders. The ICC Corporate Governance & Sustainability Vision Awards acknowledge and reward companies that have taken positive steps to manage and measure their economic, environmental and social impacts and performance and have integrated sustainability into their core business models. In turn, these awards provide a platform to highlight leading examples of sustainable practices and performance to inspire and motivate others to adopt similar policies and practices and transparently communicate on their performance.
Intelligent 3D substation design gaining momentum
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growing number of utilities, power generation owner-operators, and engineering organizations who design, construct, and upgrade electric substations have recognized the efficiency of intelligent 3D substation design and standardized on Bentley Substation to produce designs with fewer errors, less rework, and a dramatic reduction in manual drafting. ElectraNet Engineering Lead Draftsperson David Caldwell explained,“Bentley's state of the art tools enable us to coordinate designs inputs from various sources more efficiently so we have a clearer understanding of the entire project, increase our collection of accurate data, and reduce costs.” “After initial pessimism, I am a Substation convert,” admitted Mark Peffer, chief engineer, Eskom Holdings (Pty) Ltd. “Bentley Substation is efficiently integrating most aspects of design into one clever little machine that may put me out of work one day.” “Working smarter rather than harder and longer is the key to staying at the top of an increasingly sophisticated and competitive engineering design market. Nowhere is this better illustrated than in the use of 3D design technology for electrical substations,” noted Barry Grib, project manager, Electrical www.epcworld.in
Substations and Transmission, Aurecon. PowerChina Hubei Electric Engineering Corporation, Digitalized Design Center Electric Control Team Leader Wang Wei said, “As an intelligent substation demonstration project of a new generation, Xiandong 220kV Substation bravely used digitalized design, employed Bentley platform as its technical solution, built a digitalized model for the whole station, broke the traditional design mode and greatly improved the quality of design products. Data information was inherited and transmitted across the engineering full-lifecycle with 3D technology, which will inevitably lead to the overall improvement of project design, construction, and operation management.” With its ability to accelerate designs up to 40 percent, intelligent 3D substation design implemented with Bentley Substation has quickly become the standard design practice for leading utilities and EPCs in countries all over the world, including the United States, China, Australia, South Africa, Malaysia, India, Canada, and Spain. 101
News & Products
Essar Steel Algoma returns to profitability
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ssar Steel Algoma Inc. signaled its return to profitability reporting a net income of CDN $ 26.8 million for the three months period ended December 31, 2014, as compared to a net loss of CDN $ 38.6 million for the same three months period ending December 31, 2013. The gain is attributable to higher shipments coupled with higher selling prices and lower costs. EBITDA for the quarter was CDN $70.6 million and CDN $168.2 million for the nine months period ended December 31, 2014. EBITDA is a non-GAAP measure of profitability, used by management as an indicator of the operational health of the business. The company successfully completed a comprehensive recapitalization and refinancing during the quarter, resulting in a deleveraging of the balance sheet by more than US$200 million and an approximate US$47 million reduction in
annual cash interest expense. Shipments for the quarter were 618,538 tons, up 4.7% as compared to the same three month period ended December 31, 2013. Average realized sales returns improved in the quarter by 15.8% and by 19% for the nine months ended December 31, 2014 over last year’s comparable periods. Essar Steel Algoma Chief Executive Officer Kalyan Ghosh commented on the quarter’s results, “The recapitalization was a significant and important milestone this quarter. While we are seeing some near-term softening in market fundamentals we are confident our balanced product mix and low cost position provide a sound foundation for strategic reinvestment in optimization and growth in the months and years ahead. In the interim we remain focused on sustaining a safe and reliable operation during the winter season.”
OMRON displays new concepts and products for Smart Meters at ISGW 2015
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MRON's Electronic and Mechanical Components business arm displayed its prowess in the field of development of electronic components for smart meters at the India Smart Grid Week - 2015 (ISGW). ISGW- a conference cum exhibition organized with the support of Ministry of Communication & Information Technology, Ministry of Renewable Energy, Ministry of Power, Ministry of Urban Development and Ministry of Science & Technology. Apart from smart meter solutions, the OMRON booth also showcased its industrial automation applications utilized by the panel builders in the field of electricity generation. Commenting on the participation Vinod Raphael, Country Business Head, OMRON Electronic & Mechanical Components Division, India, said, “Power is an indispensible element of the infrastructure of a country, playing a key role in driving its economy. Reports manifest that though India operates as the fourth largest power system in the world, our per capita consumption of electricity is one-fourth of the world average and one-third of our population have no access to electricity. Some of the key factors contributing towards this issue are technical and non-technical losses including power pilferage. Omron is working towards creating products and solutions in optimal energy management to address these issues which will be truly beneficial to the Indian society in the long run.”
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News & Products
Dr Arup Basu elected chairman of CII Maharashtra State Council
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r Arup Basu, President and CTO, – New Businesses & Innovation Centre, Tata Chemicals Limited has been elected as the Chairman of CII Maharashtra State Council. And Sunil Khanna, President & Managing Director, Emerson Network Power (India) has been elected as the Vice Chairman of CII Maharashtra State Council. Their names were announced at the first meeting of the reconstituted State Council held in Mumbai. Dr Basu said “CII Maharashtra is committed to fulfilling the Hon’ble Chief Minister Shri Devendra Fadnavis vision to make Maharashtra the preferred investment destination and thereby transform the state into a competitive manufacturing hub. Our key area of focus would be engaging with the State government to bring in higher ease of doing business.” This year, CII Maharashtra has taken up the theme "Accelerating Growth in Maharashtra: Focus on Manufacturing, Innovation, Skill, Entrepreneurship (MISE)" for 2015-16. Following the Hon'ble Prime Minister Shri Narendra Modi’s clarion call to Make in India and Hon'ble Chief Minister Shri Devendra Fadnavis' thrust on enhancing ease of business, the spotlight is now on manufacturing in the state. CII Maharashtra wants to work towards transforming the state into a global manufacturing hub with special focus on ease of doing business, innovation, skills and entrepreneurship.
Mitsubishi Electric showcases environmentally efficient equipment at IETF
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itsubishi Electric India recently exhibited a variety of eco-friendly & energy efficient products and technologies at the 21st edition of the International Engineering and Technology Fair 2015 that was held from 26th to 28th February at Pragati Maidan, New Delhi. Mitsubishi Electric booth, presented the company’s initiatives to become a global, leading green company contributing to low-carbon, recycling-based societies, etc. The exhibition was centred on products and technologies that help reduce the environmental pollution impact by saving, controlling and monitoring energy. The company exhibited most advanced technologies like RV-7FL robot model which runs on single phase with ease of use. A prototype of GOSATwww.epcworld.in
2 satellite which is the 2nd generation product from the GOSAT family, the world’s first satellite dedicated to global greenhouse gas monitoring was also on display. A wide range of Mitsubishi Electric’s energy saving products and technologies like Semiconductors and Devices, Air Conditioners, Elevators & Escalators, Transportation Systems, Factory Automation and Industrial products were also on display and caught the viewer’s attention at IETF 2015. It is important to mention here that Power Mitsubishi Electric Semiconductor & Devices are a key component in power electronics products for contributing to the realization of a low-carbon society; they have led to a reduction in power loss and significant energy saving for power electronic devices. 103
Recognition
Shetty awarded the Highest Civilian Honor by the Royalty of Belgium
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he founder and visionary Executive Chairman of Allcargo Logistics Ltd, Shashi Kiran Shetty has been conferred with the highest civilian honor by His Royal Highness King Philippe, King of the Belgians. Shetty was awarded with the ‘Distinction of Commander of the Order of Leopold II’, making him of the very few global Indians to receive this honor. At the felicitation ceremony held recently in Mumbai during the Annual Port of Antwerp reception, over 300 top representative of India’s corporate
fraternity including the shipping and logistics industry were present to witness this decoration. Representing the port of Antwerp were Marc Van Peel, Chairman, Eddy Bruyninckx – Chief Executive Officer and H.E. Karl Van Den Bossche – Consul General of Belgium in Mumbai. His Excellency Jan Luykx the ambassador of Belgium to India presented the honorary medallion to Shetty during the evening. This decoration has been awarded for Shetty’s glorious efforts in strengthening business relations between Belgium and India, particularly due to the economic initiatives of Allcargo and ECU-LINE. Spanning a marvelous career of over four decades, Shetty is the pioneer and a visionary who has taken India’s logistics industry on a global scale. Under his leadership today Allcargo is India’s largest logistics company in the private sector listed on BSE & NSE. With presence in over 90 countries and over 200 offices globally Allcargo is India’s truly multinational whose consolidated revenues are expected to cross over USD 1 billion by end of this financial year. Speaking on the occasion Shetty said, “As an Indian and as a global citizen, this is one of the proudest moments in my entire professional life. Receiving this honor for the first time in India’s maritime industry makes me feel extremely privileged.”
Mumbai’s International Airport ranked among world’s best 5 airports by Size
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VK-managed ChhatrapatiShivaji International Airport (CSIA) has emerged as one of the top performing airports in the annual ACI Airport Service Quality (ASQ) Awards for 2014, as announced by Airports Council International (ACI). This is the fourth consecutive year that CSIA has been rated among the top five airports worldwide in the 25-40 million passengers per annum category. CSIA had also won the award in the year 2010 in the 15-25 million passengers per year category. These awards, which are regarded highly in the aviation industry, are testimony to CSIA’s continued excellence in customer service. The award is the latest feather in CSIA’s cap, which already boasts of some very prestigious awards including the Golden Peacock Award for its Pranaam GVK Guest Services. Commenting on this achievement, Rajeev Jain, Chief 104 u EPC World u March - 2015
Executive Officer, Mumbai International Airport Private Limited, said, “We started off with a vision to be among the best airports in the world, and this award is validation of the fact that our efforts towards establishing world-class service quality are headed in the right direction. We would like to thank all our passengers and everyone who toasts us as the pride of Mumbai. We will continue to serve you better and delight you always.” The ASQ Survey, on which the awards are based, is the airport industry’s standard for measuring passenger satisfaction. The survey rates each airport’s performance in 34 key service areas under eight major categories including access, check-in, security, airport facilities, food and beverage providers, and more. The results of the survey allow airports to track and analyze their performance vis-à-vis other airports around the globe.