Real Estate

Construction companies find it tough to restart work with labourers’ reverse migration

Venkatesh Ganesh Mumbai | Updated on April 16, 2020

Construction companies are finding it tough to restart work with the majority of migrant workers stranded in different parts of the country.

With the Ministry of Home Affairs (MHA) issuing guidelines wherein the lockdown will be partially lifted post April 20, companies have decided to adopt a two-pronged strategy. The first is related to workers and the second aimed at using more machines wherever possible

“There are some migrant workers who stay in and around the plants. We have seen to it that they have sufficient supplies,” said Vimal Kejriwal, MD & CEO, KEC International. KEC has five plants in India, which include three tower manufacturing plants and two cable making plants. Typically, blue collar workers in these plants are partially outsourced from third party companies.

However, Kejriwal is more concerned about the supply chain and logistics which is completely broken as of now.

“Procuring raw materials is going to be a challenge, in addition to fixing supply chain and logistics,” pointed out Kejriwal.

Others also evinced similar concerns. “We have spoken to transporters, procuring materials such as aluminium and steel, and are making arrangements to see to it that migrant workers come back to work,” said a senior executive in a road construction company. He expects around 7-10 days for workers to come back.

Around 60-65 per cent are in reverse migration mode, with 30-35 per cent on lockdown at site in labour camps, according to a KPMG report. The Indian construction industry employs over 4.9 crore people, close to 12 per cent of the nation’s working population.

Import factor

There is also the import factor. Some of the critical offshore equipment are being sourced from overseas. These are either in manufacturing or dispatch phase. Deliveries of such equipment to site locations will be impacted.

KPMG has estimated that there is a likelihood of at least two to three months of project over-runs, and cost escalations could be in the range of 4-5 per cent of the total project cost.

The time and cost overruns have a cascading effect on another area. Construction productivity gets impacted during the monsoon period. This current period until June-July, when monsoon sets in over most parts of the country, is critical for the sector to not lose high productivity, stated KPMG.

The productivity enhancements that the West have relied on are automation and widespread use of machines. “In the project sites there is very low tech penetration. Mechanisation and digitalisation will increase, going forward, and there will be a re-balancing of the workforce,” said Kejriwal.

The tech mandate could also come from clients who may ask for social distancing rules, and staggered labour working hours to ensure business continuity. They may also seek to explore off-site, modular construction technologies to optimise time and resources while enabling controlled working environment for labourers, KPMG stated.

All this comes at a time when the engineering procurement construction (EPC) sector was already in choppy waters with order inflows declining over the past few quarters. “The Covid-19 crisis has dropped another bombshell, with the lockdown likely to lead to revenue loss and fall in margins due to inadequate fixed cost recovery,” said Parvez Akhtar Qazi of Edelweiss Research.

Published on April 16, 2020

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