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Construction : Web Exclusive | February 2014 | Source : Construction Update

We are happy with the cuts in excise duty announced by the Honourable Finance Minister

… says Amit Gossain, President, Indian Construction Equipment Manufacturers' Association (iCEMA). He further adds that the industry will gain the much needed momentum if the Government accelerates project execution, in an exclusive interaction with MANAS R BASTIA post the Interim Budget. Edited excerpts:
Let’s begin with your comments on the cut in excise duty in the Interim Budget.
We, as a construction equipment (CE) industry, are happy with the cuts announced by the Honourable Finance Minister. This will certainly support this important industry that helps build infrastructure but is down by over 30 per cent in the last two years.

The announcements in the Interim Budget are favourable. Cut in excise duty from 12 per cent to 10 per cent and withdrawal of exemption from CVD on six road construction equipment will give some relief to the industry.

However, given the importance of the industry, the capacities already created and its ability to generate more employment and entrepreneurs, excise duty reduction should have been higher, to the tune of 4 per cent. Apart from that, the industry will gain the much needed momentum if the Government accelerates project execution. While India's vast infrastructure needs are growing,  this presents enormous opportunities for the industry. However, the gap between the demand and supply is constantly widening. We need a faster mechanism to resolve issues like financial closure, land acquisition, environment and forest clearance, etc.

What is the impact of the current economic slowdown on the demand for construction equipment in India?
The demand for construction equipment has certainly gone down in the past couple of years due to the overall economic slowdown. Although there was a slight improvement in December 2013, January 2014 saw another dip over the previous month.

However, the road construction sector continues to do comparatively well supported by Pradhan Mantri Gram SadakYojana (PMGSY) and other smaller district roads as well as road maintenance. As a result, the road construction equipment segment is showing steady improvement and remains the only segment that is growing marginally.

Which segments in this sector have been affected the most?
The whole Indian CE industry is facing the heat. The demand for equipment has gone down, be it the material handling equipment, concreting equipment or the earthmoving equipment sector.

Which sector specific issues need to be addressed on priority?
The industry will have to overcome a few challenges to meet the potential. Setting up of the Cabinet Committee on Investments (CCI) to de-bottleneck and fast track big ticket infra projects is certainly a positive step.

Draft Public Authority (settlement of disputes) Bill 2013, which seeks to set up an institutional mechanism that can provide speedy resolution of disputes related to public contracts, or PPP (public-private partnership) project, is another initiative from the Government.

There are some critical sector specific issues that need to be addressed, especially if we are to realise the true potential of PPP. First, the Government should ensure that all projects are awarded to the private sector only after securing key sovereign clearances and setting up of an independent PPP Commission for PPP regulations should be considered.

Successful implementation of these policies and regulatory reforms will create a conducive environment for growth.

How do you see the path forward?
We are optimistic about the long term growth prospects of the CE sector. Given the growing number of infrastructure projects in the pipeline and the investments planned by the Government, we anticipate the second half of 2014 to bring in some favourable results.

The latest background paper released by AT Kearney indicates that given the investments planned by the Government, infrastructure spending is expected to grow from 7.2 per cent of the GDP in 2012 to 9 per cent by 2017. This is likely to spur the demand for construction equipment, and if the industry's full potential is realised, the result can be a $16 billion to $21 billion industry by 2020.

Several reforms such as setting up of CCI, Draft Public Authority (for settlement of disputes) Bill 2013, etc, have been initiated by the Government to put the economy back on the growth trajectory. However, we are yet to see some on-ground activity.

Your views on ensuring the right skilling for the industry…
Skilling of manpower is another core area for the Government. Although the country has a vast pool of young manpower, lack of skilled manpower is a big concern for the industry. Hence, iCEMA (Indian Construction Equipment Manufacturers' Association) has submitted its proposal to National Skill Development Corporation (NSDC) for setting up Sector Skill Council for the CE industry. In addition, NSDC is also tying up with companies and setting up skill centres to bridge the manpower gap.
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