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India's Leading Infrastructur Companies 2013

 
 

 

Q. How has the sector performed in the last five years?

A. In the last five years, the sector’s performance was not evenly distributed and was erratic. However, this did not affect our organizational growth so much and we maintained the growth pattern.

Q. What are the key challenges faced by the construction sector? According to you, what steps should be taken to overcome these challenges?

A. There are quite a few challenges and the main one among them is the frequent changing of the priority of the projects’ executions by the customers in line with government plans and priorities. The companies need to plan in a manner to ensure that changes in the priority should not affect the executors’ scheme of things. The executor’s plans and mobilization of resources will have a bearing on the profitability, which is paramount.

Q. What are the key factors hampering the sector, specifically the timely completion of infrastructure projects?

A. The change in the priority has an effect on the fund allocation, which in turn affects the plan of the executors, the major hampering factor of growth. This results in delays in project completion. Time is cost and thus, this affects the bottom line of the executors.

Q. Do you anticipate any regulatory change in the construction sector in the near future?

There is a tremendous need for change in the regulatory mechanism and we defiantly envisage a change in the near future.

Q. Kindly provide your views on the outlook of the construction sector by 2020.

A. Indian Railway Plan:

  • Railway is planning 75 MW wind power generation
  • Railways will transport 1 billion tonnes in freight, up 38 million tons of freight in FY13 compared with last year
  • No increase in passenger fare
  • Indian Railways would set up ‘Debt Service Fund’
  • Average increase of 5% in freight rates
  • The initiatives taken to become a major heavy-haul carrier include running of long-haul trains, which has enabled Indian Railways to join another select club of Railways that run freight trains of more than 10,000 tonnes load
  • As a part of this initiative, 49 long loops, that could hold 1.5 km long trains, have been sanctioned this year, besides large-scale induction of ‘Distributed Power Systems’ to mitigate capacity constraints and improve wagon utilisation
  • The recently revamped participative policy enabling partnership with ports, large mines, industry, and investors addresses the specific concerns of private investors. The models seek to create a ‘win-win’ situation by ensuring payback of investment mainly through freight apportionment. An investment of up to 90,000 MINR is expected under these projects including 38,000 MINR for port connectivity projects, 40,000 MINR for coalmine connectivity, and 8,000 MINR for iron ore mines connectivity improvements
  • With the current estimates of growth of national GDP, the minister has kept a target of 1047 MT of revenue-earning originating traffic during 2013-14, which is about 40 MT more than the current year. The freight earnings target has accordingly been set at 935,540 MINR, a growth of 9%. The number of passengers is expected to increase by 5.2% and the earnings target has been kept at 422,100 MINR
  • Subsequent increase in the rates of HSD oil in January 2013 itself has added 33,000 MINR to the fuel bill of the Railways, taking away a substantial portion of the additional resources targeted. Further, electricity tariffs are also revised periodically
  • The increase in fuel bills during 2013-14 because of these revisions in 2012-13 alone would be more than 51,000 MINR. In the light of deregulation of the HSD oil, Railways’ finances need to be rationally insulated and to this end, a mechanism to neutralize the impact of fuel prices on operating expenses is required to be put in place. In the Budget 2012-13, the minister’s learned predecessor had proposed to segregate fuel component in tariffs as FAC
  • As then suggested, the minister has proposed that this component be dynamic in nature and change in either direction with the change in fuel cost, say twice a year. It is proposed to implement the FAC-linked revision in only freight tariff from April 01, 2013
  • In 2010-11 and 2011-12, Railways completed 709 km and 727 km respectively of new lines. However, during 2012- 13, it laid emphasis on capacity enhancement works such as doubling, traffic facilities etc. The Railways had to scale down the target of 700 km of new lines in the current year to 470 km due to inadequate resources

Dedicated Freight Corridor:

  • Land acquisition for nearly 2,800 km of the eastern and western freight corridors is almost complete
  • The Railways has already awarded the first major civil construction contract on the 343 km Kanpur-Khurja section of the eastern corridor. Further, it would award construction contract to cover up to 1,500 km on the two corridors by end-2014, by when the work would also commence
  • Preliminary Engineering-cum-Traffic Studies (PETS) have been taken up on four future Dedicated Freight Corridors.

Vision 2020 – A Blue Print for Railway Electrification Programme

Background:

Hon’ble Minister of Railways in her statement in the Vision 2020 document laid a strong emphasis on capacity creation, a key element of which includes electrification of rail lines. Item 3 on page (iv) of the Vision 2020 Document mentions that 33,000 kms of route would be electrified, meaning additional electrification of 14,000 kms in ten years needing an investment of about ` 12,600 crores during the next ten years.

As on March 31, 2010, 20059 kms of the total route kms was electrified, about 31.33% of the total route kilometers. In terms of the total track kilometers, the figure is higher at 44.40% indicating that electrification has been done predominantly on double line and busier sections of the IR network.

As on March 31, 2010, the balance of RE works left over is 4425 kms. The details of the same are in Annexure 1. The execution of these works is likely to go beyond 2015. In order that a systematic approach for electrification is followed, a blue print has become necessary.

Q. What are the prominent issues that have affected the investment in the construction sector? According to you, what strategies should be followed to tackle these issues?

The Indian economy has experienced its worst slowdown in nearly a decade on the back of global contractionary headwinds, domestic macroeconomic imbalances, and policy reversals on the fiscal front, as 2012 has been a challenging year for the economy. The year started with the news that the previous fiscal’s fourth quarter GDP had dropped to 5.5%. This coupled with low growth, macro-economic issues such as high fiscal deficit, expansionary subsidies, and worsening current account balance has added to the slowdown.

In the second half of the fiscal, the government proactively intervened with phased reforms to stabilize the economy. Measures were taken to reduce subsidies (oil, fertilizers), which would in turn lower the fiscal deficit. The government also took concrete actions to attract foreign direct investment (FDI) and to strengthen the rupee. However, impact of these policy reforms remains uncertain in the short term. Concerns continue to exist pertaining to the current account deficit scenario, prevailing supply side constraints, inadequate infrastructure investments, and long-term policy directions.

In the face of a perceivably weak macroeconomic climate, a well-planned economic revival policy is required to steer the Indian economy back on the growth path. Although the long-term prospects of the economy look promising, cautious optimism is the tone in the short to medium term.

Q. How does the company meet its financing requirements and which form of financing does the company prefer?

A. The company meets its financing needs through internal resources and institutional funding. The choice is of course institutional funding.