The biggest issue for the sector was to attract investors
India’s effort to build roads and highways has not been very commendable in last several decades. And that has resulted in creating huge backlog of road building work. Now, the country is trying to catch up with the past by accelerating the road building activities. Kamal Nath had once commented: “We are not building roads for tomorrow; we are catching up with the past.” Thankfully, the sector has started to receive good attention but it’s still a long way to go before the government can achieve the target of building 20 km highways a day.
The biggest issue for the sector was to attract investors which, many analysts say, has started to improve but it will still need massive investment. The government has taken up the task of construction and improvement of about 54,000 kms of national highways under the NHDP (National Highways Development Project), spending about US$80 billion in the next four years. It is expecting huge investment to come from private sector. With the entry of PE, debt and equity funds, the sector would see more inflow of investment in the future.
Good thing to happen to the industry is the participation of private players through BOT projects. This ensures two things— timely completion of projects; and proper maintenance of roads. Since the onus lies with the developers to maintain good conditions of the roads, they would be more committed to build good quality roads. The government is trying to expedite its project-awarding exercise. It has awarded 6,500 km during last one year since end-FY2009 in comparison to just 850 km during FY2009.
Road building equipment manufacturers are responding quite positively to industry’s need by availing all the latest technologies. The sector is now going through a transformational phase where contractors are looking to adopt cost-effective technology. With the entry of bigger players in the BOT projects, the sector looks to see good reform in terms...
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Serious attention will be given to transparency to attract investments, says the report
Most of the global real estate markets have showed slow improvement in terms of increase in transparency according to a report by Jones Lang LaSalle and LaSalle Investment Management. The 2010 Commercial Real Estate Transparency Index shows that Australia is the world's most transparent real estate market in 2010 with Canada at second place.
Whilst one third of markets globally registered no change or a deterioration, there are a number of bright spots, and real estate transparency continues to improve, albeit moderately, in the majority of markets, says the report. Interestingly - from the Indian perspective - India is amongst the top 15 improvers. The remaining nine are from Europe and five are in Asia Pacific. Turkey tops the league table of transparency improvers, and progress has been made in China, India, Poland, Portugal, Romania, Greece and Hungary.
Markets in Pakistan, Kuwait, Venezuela, Dubai and Bahrain have registered modest levels of declines. Jacques Gordon, Global Head of Strategy for LaSalle Investment Management, the independent fund management arm of Jones Lang LaSalle said: "The 2010 Global Real Estate Transparency Index suggests that the recent turmoil in global financial, economic and real estate markets has impacted on market behaviour, with real estate players focusing on survival rather than market advancement.
It is interesting to note that the most highly transparent countries experienced illiquidity and volatility over last two years, despite their positions at the top of the transparency rankings. That said transparency does appear to speed up the restructuring process.
Rosemary Feenan, Head of Global Research at Jones Lang LaSalle, said: Indian tertiary cities are benefiting from improvements in the availability of title records and moves such as the consistent application of building codes.
These approaches are...
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The picture is for representation only.
Human resource is probably the most neglected issue in the construction industry today. And the industry has started to feel the pinch now. One of the executives from a big infrastructure company I was talking to said that there are colleges which have stopped offering civil engineer courses. This, probably, all started with the IT boom that India begun to witness during the 1990s. A new trend emerged where large section of young students chose to opt for IT than civil engineering courses.
But lot has changed since then. Construction is now much happening sector in India. The whole country is literally in construction mood. Right from roads, highways, bridges, buildings to houses, the construction works are happening all across the country. But the industry has started to face severe crunch for skilled labours and engineers. We don’t have enough engineers today neither will have in nearest tomorrow because we have not started taking enough corrective measures. And it takes time to build engineers and architects.
There is urgent need for collective measures from both government agencies and private players to tackle the situation. Some private players have been focusing on human resource building by establishing institutions but that’s certainly not enough for a country which needs huge number of skilled manpower. We need to start building new institutes which can produce more number of engineers and project persons every year. Also, the existing institutes need to offer wider range of industry specific courses. A large number of labours and civil engineers still migrate to Gulf countries for jobs. We need to come up with lucrative packages and facilities to retain them with in India.
To sustain India’s growth story, we need to produce our own resources and not entirely rely on expats. Let’s begin today.
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skilled labour
River Narmada will be an important component in the Par-Tapi-Narmada link
The Chief Ministers of Maharashtra and Gujarat have signed two Memoranda of Understanding (MOUs) on May 3, 2010 for two river-linking projects in the two States. The MoUs were signed in the presence of the Prime Minister Dr Manmohan Singh as well as the Union Minister of Water Resources Shri Pawan Kumar Bansal.
The PM congratulated the two CMs and said that the development of water resources in an integrated manner was the need of the hour. He also emphasised on the need for adoption of various short term and long term measures.
This development can be seen as a boost for the River-Linking Project that hasn't seen any action for a really long time. In fact, even the PM remarked that the signing of the MoUs between Maharashtra and Gujarat will strengthen people's belief in the continuation of the River-Linking Project.
What the MoUs entail: The MoUs refer to the Par-Tapi-Narmada and the Damangaga-Pinjal links which are part of the west-flowing rivers' inter-linking scheme. The Memoranda says among other things that Detailed Project Reports(DPRs) for the joint inter-linking river water management would be prepared before May 1, 2011. The Par-Tapi-Narmada link will transfer surplus waters available between rivers Par and Tapi in Gujarat to the deficit areas of North Gujarat.
It will transfer 1350 million cubic metres through a 402Km long canal by gravity. The total enroute irrigation benefits envisaged are 1.88 lakh hectares in Gujarat. Besides, there is also a provision of generation of 32,5 MW of electricity. Maharashtra will benefit from the Damangaga-Pinjal link through augmentation of water supply for Mumbai city. The Gujarat Government would be entitled to utilizing remaining spilling...
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I was discussing the SC verdict on the RIL Vs RNRL case with somebody. "But you don't track the oil & gas sector do you?," he asked me. "Well, the oil & gas sector is very much part of the overall infrastructure industry in the country," I replied. "Oh, is it? I thought oil & gas was out of the purview of infrastructure," he said. I wasn't really surprised. While we all agree that infrastructure development is essential for India's economic progress, there are differences about what constitutes infrastructure and what doesn't. Even the Planning Commission (Secretariat for Infrastructure) acknowledges that "there is no clear definition of infrastructure according to the current usage of the term in India." It would be interesting to note how various 'authorities' in India have defined infrastructure.
Here is Dr C Rangarajan Commission's Notion of Infrastructure (2001): The Commission indicated six characteristics of infrastructure sectors, (a) Natural monopoly, (b) High-sunk costs, (c) Non-tradability of output (d) Non-rivalness (up to congestion limits) in consumption, (e) Possibility of price exclusion, and (f) Bestowing externalities on society.
Based on these features (except b, d and e), the Commission recommended inclusion of following in infrastructure in the first stage:
• Railway tracks, signalling system, stations
• Roads, bridges, runways and other airport facilities
• T&D of electricity
• Telephone lines, telecommunications network
• Pipelines for water, crude oil, slurry, waterways, port facilities
• Canal networks for irrigation, sanitation or sewerage.
The...
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clarity in understanding
Wheels of revival
In what is definitely a good news for the country's economy in general, a new survey from CII shows that India's manufacturing picked up momentum in the period April-March 2009-10. The comprehensive CII m-ASCON survey for the period April-March 2009-10 covering more than 100 sectors reflects impressive growth across sectors.
Revival of growth is evident in almost all industrial groups under manufacturing sector including basic goods, consumer durables and capital goods. As per the Survey, Capital goods and Consumer durables have been the key drivers of growth.
"While we have witnessed a remarkable revial in industrial growth in 2009-10, it is critical that this moves to a higher growth trajectory to sustain 9% plus GDP growth. Early announcement of the comprehensive manufacturing policy aimed at encouraging the expansion of manufacturing sector is an urgent need of the hour," said Chandrajit Banerjee, Director General, CII.
The CII survey revealed that out of 105 sectors covered, 30 of them had registered excellent growth rate of more than 20% in April- March 2009-10 compared to just 8 sectors in April- March 2008-09. The number of sectors registering high growth rate have also increased from 15 in April-March 2008-09 to 25 in April-March 2009-10.
Sectors registering excellent growth (more than 20%): Passenger cars, LCVs, Natural gas, phosphate Fertilizer ,cutting tools, Earth moving and construction equipments, tractors, Air conditioner ,color T.V, microwave oven, etc.
Sectors registering high growth (10-20%): Aluminum, cement, motor starters, capacitors, auto components, ball and roller bearing, electric motors, computer hardware and rubber...
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A high ranking on the ease of doing business index means the regulatory environment is conducive to the operation of business
I recently came across some interesting numbers while going through the Doing Business Survey 2010 undertaken by the World Bank. The Survey basically provides objective measures of business regulations and their enforcement across 183 countries. Countries (economies) are ranked on their ease of doing business, from 1 – 183, with first place being the best. A high ranking on the ease of doing business index means the regulatory environment is conducive to the operation of business.
To be honest, it wasn't pleasant to see India ranked 133 in the most important "Ease of Doing Business" category. Speaking in terms of our industry, if India is to meet its infrastructure investment targets of Rs40 lakh crore + for the 12th Plan, it is imperative that we attract huge FDI. And attracting FDI is directly linked with several things - a key factor being ease of doing business. We definitely need to create a better business environment. The Doing Business Survey reflects this.
As mentioned on Doing Business website, the survey serves as 'a kind of cholesterol test for the regulatory environment for domestic businesses. A cholesterol test does not tell us everything about the state of our health. But it does measure something important for our health. And it puts us on watch to change behaviors in ways that will improve not only our cholesterol rating but also our overall health.' Very important.
Following are India's rankings across categories just for reference. I have also gleaned out China's rankings to put things in a perspective. These are mentioned in brackets just after India's rankings. Next to that are the top three rankers across all categories.
Categories - India's ranking (China's Rankings) - Top three rankersmore...
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India: 'Gateway' to the new world
According to a new report titled 'Emerging multinationals: The rise of new multinational companies' from emerging economies from PricewaterhouseCoopers (PwC), the global landscape is all set to undergo a major transformation. And - no surprises here - the key changes will be driven by Asian giants India and China followed by Singapore, Russia, Malaysia and South Korea.
The report says that India will produce 2219 new multinationals between 2010-2024. This is indeed an interesting development. One must also notice that while Indian MNCs are increasing their global footprints, a lot of foreign MNCs are setting up their shops here. My colleague Indrajeet Saoji (Our Business Head) who was in Munich for bauma 2010 last week said that he was amazed to see the growing interest of European and North American companies in India. "Right from the taxi driver in Germany to the CEOs of big firms, all are talking about India's growth story," he told me after coming back.
Going back to the PwC report, the number of companies from emerging markets choosing to set up operations abroad has increased in the last five years, in part due to the rapid pace of globalisation and the revolution in information and communications technologies.
The report suggests that this trend is expected to continue over the next 15 years, as new multinationals from emerging economies rise in prominence on the global economic stage. India is expected to produce the most new multinational companies, overtaking China as the emerging world’s largest source of new multinationals. Over 2200 Indian companies are projected to open operations outside the country over the next fifteen years. Jairaj Purandare, India Leader for Markets and Industries, PricewaterhouseCoopers said: “It is encouraging to know that India will replace China as the largest source of new multinationals in the...
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The burning issue
Growing insurgency from Maoists has put up a serious challenge for steel and mining companies planning to expand their operations in India. The country is heavily banking on these sectors to support its economic growth. Major companies such as Tata Steel, JSW Steel, Posco, ArcelorMittal, NMDC and Vedanta Aluminum besides others have ambitious expansion plans in mineral-rich states like Chhattisgarh, Bihar, West Bengal, Jharkhand, Orissa, Maharashtra and Andhra Pradesh. But the growing incident of violent attacks in the recent past has jeopardized their plans. The land acquisition process has also become very complex in India which further aggravates the problem. According to some estimation, delays in approvals for land and mine have stalled more than US$80 billion worth of projects in India that would double steel output.
The government seems to have not been able to address this problem properly that has accumulated over the period of last several decades. Interestingly, Maoists enjoy strong sympathy from a large section of intellectuals in India. They argue that these people who are mainly tribal have been living in marginalized condition for many years without much of the developments reaching to them. They are not willing to vacate these mineral-rich locations, fearing this will uproot them from their homeland. On the other hand, government says they want to bring the tribals and affected villagers into main stream by rehabilitating them. Sadly, India has a very poor record when it comes to implementing welfare schemes.
The government has very difficult challenge ahead as it looks divided over how to deal with this problem. Many feel the use of arm against these tribals who are part of this country will have serious repercussions in the long run. But there is another section of people who feel violence should be dealt with counter-violence. In between, the price is being paid by ordinary people and the companies who want to put up their...
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The Minister has been very positive about the regulatory bill. Pic courtesy: PIB
The Union Minister of Urban Development Shri Jaipal Reddy has openly opposed the service tax imposed on the real estate industry. His Ministry would soon seek withdrawal of service tax imposed on the real estate sector by the Finance Minister in the Budget Proposals for 2010-2011.
Mr Reddy has argued that the real estate sector still needs time to completely come out of the recessionary blues. The Minister said this while speaking at the recently held National Conference on Indian Real Estate organised by Assocham. He was responding to a query raised by Mr KP Singh of DLF on issue for review of service tax.
The Minister was also categorical on the issue of Regulatory Bill saying that it would completely eliminate night operators from the real estate sector as also prevent the sector from indulging into unnecessary profiteering. These are indeed welcome steps and Construction Week truly appreciates the proactiveness and genuine concern shown by the Hon. Minister.
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