‘Massive infra spend by the government to drive strong growth for the CE industry’

G Balachandar | Updated on: Apr 24, 2022
Dimitrov Krishnan, Co-Chairman, CII EXCON and President, ICEMA 

Dimitrov Krishnan, Co-Chairman, CII EXCON and President, ICEMA  | Photo Credit: Photographer: Frank Pinckers

 

Chennai, April 24 

With the government looking to spend $1.3 trillion by 2023 on sustainable infrastructure development, the mining and construction equipment (CE) industry will be the major beneficiary of the infra focus. Amid supply chain and commodity price hike challenges, the industry is gearing up for the 11th edition of EXCON, described as South Asia’s largest construction equipment and construction technology trade fair, which will take place in Bengaluru during May 17-21, 2022. Dimitrov Krishnan, Co-Chairman, CII EXCON and President, Indian Construction Equipment Manufacturers’ Association spoke to BusinessLine on the revival in the CE industry, demand drivers, highlights of the upcoming EXCON, among others. Excerpts. 

Can you take us through the construction industry’s performance in the pre-Covid and post-Covid phases? 

The peak of the construction equipment industry was in 2018-19, just before the election year of 2019. We saw the industry peak at a volume of 100,000 units. The election year also impacted us as an industry. We were also impacted by the IL&FS meltdown that happened in 2018, which had a cascading impact for finance. In 2020, we were expecting the industry to pick up but then due to Covid things changed dramatically. In the post first wave, we saw that the industry was slowly picking up and it bounced back very strongly in 2020-21. We had a peak of business volume in the Q4 of FY2021. Then the second wave came and slowed down the industry throughout the year 2021. We saw a reasonably muted business volume from October to December quarter in 2021, which was generally supposed to be a stronger year but it was weaker by about 25 per cent. In the January-March 2022 period, we have seen some recovery coming. From the construction activity perspective, the road construction rate from April’21 to January 2022 was roughly 20 to 21 km per day. In February 2022, we saw a very steep increase with road construction reaching 48 km per day and in March 2022 it was even higher at about 77 km a day. So on a full-year basis, the recovery has happened on road construction rate to about 29 km per day for the year 2021-22. As of now, we see a good increase in activity levels. 

What are some of the key government infrastructure projects that will drive demand? 

The government did do a lot of new things. The NIP (National Infrastructure Pipeline) was announced at the beginning of last fiscal. National Monetisation Plan was rolled out sometime in Q2 of FY22. Then came Gati Shakti programme. Also, a single-window clearance system and National Bank for Financing Infrastructure and Development were created. So, we have seen a lot of structural activity in infrastructure space. We will see the impact of all of this coming in during this and next fiscal accelerating the activities, thereby driving a lot of demand. 

How are commodity side issues impacting the momentum in the industry?  

One big challenge is the huge increase in commodity prices. So, there will be a supply-side issue this year for sure. And that is something which we are all seeing as globally supply chains have been disrupted. Also, Covid waves are impacting different parts of the world. Shortage of shipping lines and materials is causing challenges. After all, the global supply chains are necessary to keep industries running in every country including India.

How interesting will this year’s EXCON be in the face of revival in construction activities? 

I would say EXCON 2022 is rightly positioned in May because the business activity is starting to pick up and this is the time when people are starting to think about buying new machines. We also expect FY23 to be one of the strongest years for the country. Not just because we are seeing the recovery as of now but also because of the infra focus that has been rolled out during the budget this year with a 35 per cent increase in the outlay for infrastructure. This will be starting to have its impact as we pass through the first two-quarters of this fiscal. So I think this edition of EXCON is timed up very nicely. We will see many people looking at a new type of equipment or looking at new buying activities later this year due to a lot of the road projects that have been awarded in February and March as they will have to take off during the year. We are expecting 70,000-75,000 visitors.  

What is the growth outlook for the CE industry in this fiscal?  

We should see at least 20 per cent growth compared to the previous fiscal for sure. It could be higher. The government has increased the allocation of the budget by 35 per cent in infrastructure covering road construction, railways, and also many other related infrastructures such as the river linking project. So, this ncrease needs to get absorbed on the execution side and that is a more difficult challenge. Because getting an infrastructure project off the ground means that you’ve got to have a project pipeline that is already mature enough to be tendered and then started. Government has an intention to develop 25,000 km of national highways this year, which is a hugely tall order because the highest we have ever done is 13,000 km, which was in 2018. So how will we get to that momentum? March is a good indication, where 5000+ km of tendering has happened. So, we should see 20,000-25,000 km of tendering this fiscal. It should happen within the first 6-9 months of the year so that we can see some execution. Thus, overall we see very tremendous activity and will see a minimum of 20 per cent growth, while it could also go up to 30 per cent. Last year, we did about 80,000 units. This year, we should cross 100,000 units, which will probably be the highest volume done so far. 

Published on April 24, 2022
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