We expect the growth momentum to continue in the long term.

Arvind Garg,
President,
ICEMA.

ICEMA has been closely interacting with the Government in preparing for the adoption of BS IV.

ICEMA, the only association in India   representing earthmoving, mining and construction equipment industry has grown tremendously during the course of last five years.  Almost all the leading manufacturers are active members of the association.   ICEMA functions through various panels such as Technical Panel, Industry – Government Interface Panel, Membership Panel, Market Data & Analytics Panel,   Finance Panel, etc.   “The road map for the association  is  to  make  this  body  as  a point of reference for the ECE industry in India  and  to make  the association a truly  representative  body  for construction equipment industry in India and abroad,” states Arvind Garg, President, ICEMA. In an exclusive interview with EQUIPMENT TIMES Garg speaks about the growth opportunities of the CE industry, and throws light on the preparedness of the industry to meet the challenges.

How do you assess overall growth trends in the CE space in the last couple of years?  What is the CAGR expected in the coming years?

The construction equipment market in the country has seen an average growth of about 25% over the last couple of years after a de-growth for over 2-3 years between 2013 to 2015. During the last financial year FY17-18, the industry peaked to record the highest ever sales of various categories of machines. The demand growth is quite strong even this year and is expected to be sustained at about 25% this year also. The government plans to spend substantially on infrastructure development. The budgetary allocation in FY18-19 is expected to be $92 billion up by 21% from $76 billion in FY17-18. This means that the spending on infrastructure development will be close to 10% of the GDP. This focus by the government will definitely drive infrastructure development and hence the growth for the construction equipment industry.

The key sectors driving growth are roads, irrigation and railways with some traction in the urban development too. The road sector has been the key demand driver. The NHAI construction per day has jumped from 23kms/day in FY16-17 to 28 kms / day in FY17-18. The government aims to reach 40kms / day in FY18-19 which is likely to be met. New marquee projects like Bharatmala, elevated express highway are going to be game changers in the development of roads. The budgetary allocation for MORTH in FY18-19 is up 9% from Rs 64,900crore to Rs 71,000crore. There is a specific focus on rural road development under PMGSY. We have already seen 1.7 lakh kilometers of rural roads constructed in the last four years. The budgetary allocation for rural roads in FY18-19 is higher by 12% as compared to the previousyear.The  railways has also seen a substantial growth in budget allocation by 16% and a 25% growth in new line addition.

We see major projects like the DFCs and Diamond Quadrilateral gaining momentum. The Sethubharatam project is also going to help the demand for CE in the railways sector.The irrigation projects under the AIBP and PMKSY are also moving as per government plans and driving demand.

During Excon, ICEMA commissioned a study by Feedback Consulting who have spoken to around 1000 stake holders, policy makers manufactures, customers , etc. and the trend as per the study report suggests a positive growth of about 12-16% Y-o-Y for the next few  years  as well.

Do you expect any slowdown as
the general election is approaching in 2019?

The current award of projects is expected to sustain the demand for the next couple of years. These projects have also got the necessary financial closures. With infrastructure development on the top of the mind of all political parties, we expect the momentum to be sustained irrespective of the election outcome. However, during the period for the election code of conduct, there could be issues on the fund flow due to some restrictions which could affect the pace of project execution. The industry will definitely need the support of the government spending on infrastructure to keep the demand positive during this period.

What has been the impact of the roll out of GST from ICEMA’s point of view?  Has it really brought in the positive changes as has been expected?

Any new reform is likely to have some teething problems but the GOI has efficiently handled the GST roll out. Initially some of the equipment faced challenges with high rates of GST which hampered sales for about four months. But the government was fast enough to respond to our requests from the industry and corrected the tax rates.The elimination of entry tax, octroi and several other taxes have made movement of goods seamless within the country thus encouraging contractors to take up projects at any location in the country. The introduction of e way bill has further improved the logistics of equipment and we can now see equipment shipment times coming down by 20% on an average.

While some more improvements are still needed on the systems and procedures, we are confident that we will get quick solutions. Overall the GST has definitely brought in positivity to the industry.

Do you think majors sectors other than Roads and Highways have still not got the due focus? What is your assessment on the growth prospects from ICEMA’s point of view?

While the fact remains that roads and highways are the key demand driver, there has been a positive demand in several other sectors also.

In Airport development, The UDAAN scheme has given a new dimension to air travel in the country. 43 cities are expected to be mainstreamed on India’s flight connectivity grid. A dozen airports where limited but irregular flights operate will be connected. As many as 31 destinations that are not operational despite the existence of airports will become active.The AAI plans to spend over USD 3.2 billion between 2018-22 to build new terminals and expand capacity of existing ones. This will drive demand for CE in this sector.

Under the port development Sagarmala project the Government of India  is entailing setting up of new mega ports, modernization of India’s existing ports, development of 14 Coastal Employment Zones (CEZs) and Coastal Employment Units, enhancement of port connectivity via road, rail, multi-modal logistics parks, pipelines and waterways and promote coastal community development. In the current year, we are expecting a commencement of 67 projects worth USD 38.62 billion. The benefits of this project to the CE industry will be seen after a couple of years as the road connectivity and port development starts taking pace.

There is a significant activity in the irrigation sector in the states of Telangana, AP, Karnataka, Maharashtra and MP. As per NABARD, the government has released more than Rs 65,000 crore so far for 93 prioritised irrigation projects under Pradhan Mantri Krishi SinchayeeYojana (PMKSY) through long-term irrigation fund or LTIF. 75 projects have been completed and the projects under the AIBP are on track and a significant number of CE are deployed in these projects. We also see traction from other sectors like urban development and mid mining.

There are many innovative products and technology being introduced by many OEMs. However, these are not adopted as they are not mandatory / or not specified by the concerned agencies. What role can ICEMA play to bring in / updating specification with regard to equipment?

Today most of the OEMs have started to implement the information communication tools on the machines to give the customer benefits of digitization. We are also now exploring alternate fuels. We are also looking at the possibilities of introducing hybrid technologies which will significantly improve fuel efficiency and reduce emissions. Will the eco system to adopt such technologies is yet to develop in the country, we are keeping ourselves prepared to introduce these in the country.

ICEMA is working with the GOI to facilitate introduction of such technologies. During Excon, we had a day long conference on the latest technologies available globally and several OEMS from across the globe made presentations on such offerings like hybrids, intelligent machines and autonomous equipment.

What are the major challenges the CE industry is facing in today’s context?

The industry had a very bad patch during 2012-2014   when it faced acute crisis due to demand contraction   and poor capacity utilisation of most of the equipment manufactures.  With the various initiatives from GOI, the demand for construction equipment grew well. The present trend of growth is expected to sustain in the next couple of years.

We need to now work closely with the government and extend support in making viable changes in the existing policies   for infrastructure development in the country.   One of the challenges for the industry is the availability of skilled of operators and skill development of people handling CE.   Infrastructure Equipment Skill Council which was promoted by ICEMA   has been making all efforts in imparting training of operators for the last three years. But a lot needs to be done in this direction.

Another challenge for the industry is to adopt the latest available technology available globally into the Indian industry to meet the specific demand in the projects. ICEMA has been closely working with the Government in setting up an independent test and certification centre at Pune.  The centre would greatly help the industry in adopting right kind of standards and technology.  Other challenges   include   implementation of next stage (BS IV) of emission norms and industry’s adoption of the same in a specific time frame.  ICEMA has been closely interacting with the Government in preparing for the adoption of BS IV which will be progressively implemented from
2020 onwards.

What is the current capacity utilization and what growth do you expect overall in capacity utilization?

The CE industry comprises of various equipment categories namely

• Earthmoving Equipment
• Concrete Equipment
• Mid mining
• Material Handling
• Road Machinery
• Material Processing

Each of these categories has different class of equipment in different sizes. Most of the equipment markets are growing well. Many of the manufacturers are expanding their capacities which mean that they are envisaging full utilization of their capabilities and also looking at a good prospect in the future.

What is the current situation with the rough draft of CMM Act?

DHI has had a series of discussion with ICEMA in building consensus on the draft CEMM Act. Most of the ICEMA’s inputs have been addressed in the draft.   DHI is in the process of now seeking inputs from various stakeholders on the draft Act and address the concerns.

ICEMA had also announced setting up a test centre together with DHI? What is the progress in this regard?

ICEMA  in collaboration with DHI and ARAI  is now in the process of preparing the  Detailed  Project Report   (DPR) for  setting up the test centre at Pune. ICEMA has been closely interacting closely with ARAI   on a regular basis. A number of working committees have been set up involving   OEMs and ICEMA / ARAI representatives for collecting specific details of various test facilities, labs, civil engineering, etc.   The work for Phase I would actually commence on the basis of DPR and funding from the government.

DHI had in principle agreed to regulate the import of used equipment sometime in 2015. Is there any progress in this regard?

Import of used equipment continues to be regulated by the GOI policy implemented some time back and I am not aware of any changes in the recent past. Used cranes are still being imported from China, Taiwan, etc.

What is your vision on ICEMA under your guidance and what is road map for the betterment of the Association and its members?

The Association has grown tremendously during the course of last five years.  Almost all the leading manufacturers are active members of the Association.   ICEMA functions through various panels such as Technical Panel, Industry – Government Interface Panel, Membership Panel, Market Data & Analytics Panel,   Finance Panel, etc.    ICEMA is the only association in India   representing earthmoving, mining and construction equipment Industry.  The road map for the association  is  to  make  this  body  as  a point of reference for the ECE industry in India  and  to make  the association a truly  representative  body  for construction equipment industry in India and abroad.

We are also partnering and supporting the GOI initiatives like Make in India, PMKVY and Skill India initiatives.

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