An increased focus on infrastructure development increases cement demand. This effect is prominent in emerging economies. ICR cover story focuses on infrastructure, which is the backbone of the Indian economy.
Those who travel across the United States by road usually never miss the amazing connectivity of roads within the states, making travel smooth and easy. It is more interesting and pertinent here to revisit the history of the cross connection of highways over there. The US President Dwight D. Eisenhower, who took office in 1953, understood the vital need of good roads. During and after World War II, he took to Germany´s Reichautobahnen network of rural superhighways, built mostly under Adolph Hitler, studied and envied by American engineers during the pre-war 1930s. The Eisenhower Administration ended in1961, but by then, 10,440 miles or 25 per cent of the 41,000-miles Interstate System had been opened to traffic. In those days, it was an astounding success. The network of highways in the US was aptly named in memory of the same President later on.
The Interstate Highway System increased the ease of travel-either for work or recreation-for Americans. The convenience to transport raw materials and manufactured goods between rural and urban areas caused reduction in costs and time for consumers and producers. All Americans have reaped the benefits from less expensive and speeder goods and services. The raw materials from farmers made it to market without spoiling, and gave the consumer a greater life on the produce. The Interstate Highway System created new sources of revenue to the States. In short, it became a success story and the same model is being followed in the other parts of globe. Today many countries have emulated the similar system of building roads as a part of infrastructural development. In the recent past, many nail-biting stories of China have been published about creating roads, bridges and other facilities including housing but the highway network in US is still the best of the lot. China, Singapore, Japan and nearby Gulf countries have similar stories to tell.
Now what is applicable to the US is equally applicable to India or any other country. The present Government, rightly so, has focused its attention on infrastructure development. It´s a well-accepted fact that the progress of economy has a strong relation with that of the development of infrastructure. The term ´infrastructure´ covers everything from road network, railways, power generation and distribution, to transportation of materials and men, housing etc. All of these creations will entail use of concrete, which is a major input to the construction activity. Therefore, infrastructure development will give a desired push to the cement industry. As expressed by NA Viswanathan, Secretary General of Cement Manufacturers´ Association, ¨the capacity utilisation of the industry is stagnated at 70 per cent only. Funds close to around Rs 90,000 crore have been locked up.¨ (Read full interview later)
Better connections through better roads
If we take a closer look at the stalled road projects in the country, restarting such projects will not only help the cement industry but it will directly provide employment to skilled and unskilled labour in large numbers and will support many ancillary-related business activities. In fact, our current Transport Minister has been able to speed up road construction from 2 km per day to 14 km per day with a promise that by March 2016 India will be constructing 30 km of road per day. If this happens, it will be huge achievement.
The roads and highways in the US have been [mostly] built with cement and concrete (CCR). The theoretical life of CCR is 25 years but what is obtained in the actual life is around 40 years. The experience of Mumbai about CCR has been showcased in many engineering forums. Today the specifications drawn up by corporation authorities of Mumbai have become a benchmark for other municipal corporations to follow. The Mumbai-Pune Expressway and later on the Yamuna Expressway are the best examples of concrete-paved roads. The roads constructed with CCR are called as ´Rigid Pavement´ and those made by bituminous material are commonly called as ´Flexible Pavement´ in civil engineering terms. Today there have been a lot of developments in CCR construction with use of advanced technology and different kind of materials. The thickness of road also is being designed taking into account the density of traffic and axel load. Some of the new developments have been to top-up the bitumen road with that of concrete pavement but the issue has been the thickness of the overlay and the bonding between old road and the new topping. The quantum of traffic moving on all these express highways prove their usefulness. The one which is under construction is Himalayan Expressway from Chandigarh to Shimla. In cities, road over road is one of the answers for traffic snarls. All such jobs are carried out with high strength concrete. Anilkumar Pillai of The RAMCO Cement has similar views about few projects in southern India. (Read his full interview later in the issue)
Railways: The heartline of Indian transport
Talking about railways, the industry for long has been supplying materials to satisfy the need of railway sleeper manufacturers, which have a very stringent specification to comply. Once upon a time, railway sleepers were used to be of wood but not anymore. The replacement with concrete sleepers has been very smooth all throughout the world. Also there is construction of railway stations and other utilities where cement is a major ingredient. Take an example of railway network being extended to Jammu and Kashmir that has used a considerable volume of cement for its work. Today the project is still not complete and continues. In the last five years at many state capitals, the respective State Governments have taken steps to kickstart metro projects for public transport. Once these projects reach a considerable pace, it will increase cement consumption.
Power and irrigation development for infra growth
One such example in the power and irrigation sector is the Sardar Sarovar Dam project in Gujarat, which has been benefiting many states. The project had a voluminous consumption of CCR till date. The project is resulting in generation of power, providing water through one of the longest lined canals to farmers and bringing in multiple benefits to rural India. It is important to note that this was one of the most controversial and strongly-opposed projects in the recent past but it still continued and is bearing fruits. The dam, canals and reservoirs had large consumption of concrete.
In today´s times, the housing sector [even counting the high-rise and low-rise buildings] is one of the major consumers of cement. With the Government announcing house for everyone by 2022, gives a lot of opportunities to cement and construction companies to come out with economic solutions. The right technology and the correct product mix will be the ideal approach to face the challenge. Today for speedy construction, precast is a proved technology in the Scandinavian countries where the climatic conditions are adverse. However in India there are very few takers for this technology. Factory-made concrete elements are much superior in quality and are even economic but this is still not appreciated in our country. Except in the construction of bridges and some external facades of high-rise buildings, precast technology is sparingly used in housing. Mass housing is the right platform for pushing precast technology. The MIVAN technology, which is getting foothold in the metropolitan region of the country, may turn out to be one of the answers. (Read report on MIVAN technology in this issue)
Costal road project, development of ports and airports, Swatch Bharat Abhiyan and creation of toilets, a new airport in Mumbai, etc. are few of the steps taken to improve infrastructure. Typically, building airports, docks require different kind of skills and very end of technical inputs. Companies like L&T, GVK and GMR have proved themselves across the globe. DK Sen of L&T Ltd shares his views on the infrastructure development in India. (Read full interview later)
Despite a lot of positives, there are also many hurdles for implementing and completing the projects. While talking to many infrastructure players, it was brought out that the Government pushed couple of projects despite having indications of difficulties in land acquisition. There has to be a clear-cut solution found before the award of the contract. When the new Government came in power, around 280 projects, which are close to 90 per cent of road and highway contracts, were stuck, blocking money worth Rs 3 lakh crore. Imagine even if 50 per cent of these projects get a green signal, what a boost it will give to economy and in turn to the cement industry. Why cannot we collectively think that at least one of the road projects is completed on time, forget about completing before time?
The other major problem is with Build Operate and Transfer (BOT) projects. With change of political bosses, the agreements entered into by the respective State Government´s with contractors are not being followed in letter and spirit. The classic case is that of Reliance Infra, a company which has built metro line in Mumbai. For fare fixation, the Government has appointed a committee only when it was pushed to wall by the Bombay High Court, leave aside taking a call on fare revision. If the BOT project owner has to move to the court for every legible matter then no one would like to undertake BOT projects. Under the circumstances how the multinational players would show interest in BOT projects. In short, the agreements have to be followed in letter and spirit in spite of the change of Government.
Another major hurdle is availability of finance. In today´s scenario, the bank provides advance loan for infrastructure project for up to a tenure of five years maximum. The contractor has to change the financier every five years when the project is on and there is always an element of uncertainty when you change the financing bank. The terms of loan also get modified. If the project is stalled, no bank would like to finance such project. It is imperative that the framework of financing the infrastructure projects more particularly the one that are going to take more than five years of timeframe to complete, needs a relook. There are business models available in other countries for such financial bottlenecks, which need to be customised to our requirements. The similar views are echoed by Praveen Sood of HCC Ltd (Read full interview in this issue). Incidentally HCC is one of the corporates that has experienced the heat.
The third major problem is that of dispute resolution. Especially when a large number of people are affected by an infrastructure project, the number of dissatisfied elements is substantially high and leads to enormous delay due to cross litigations. The result is cost escalation and never seeing light at the end of the tunnel. There need to have a mechanism to settle such disputes like that of fast-track courts or through arbitration. All the three bottlenecks will have to be addressed through the act of parliament where the present government is already facing an acid test. Let us all hope that the Government is able to sail through rough weather to provide sustainable solution.