With the government's emphasis on infrastructure development gaining further momentum through this year's budget, the construction and mining equipment sector carries excellent potential for growth, reports Huned Contractor
The one fact that can be easily gleaned from a report titled 'Construction And Mining Machinery/Equipment: A Global Strategic Business Report' published by Global Industry Analysts, Inc, is that India is certainly placed in a highly positive position when it comes to the growth of the construction and mining equipment sector. Numerically speaking, this will translate into nearly 4.8 per cent growth by the year 2012, way above the average global growth rate. The reason is clear enough. In the current five-year plan up to 2012, around Rs 22.73 trillion is being invested in the expansion of the road and rail network, construction of new sea ports and airports and in improving energy and water supplies. The level of investment in the building and construction industry in India in 2008 was around Rs 8.94 trillion. Its growth rate from 1998 to 2008 was around 140 per cent. And even if the recent period of recession had stalled many a projects, the drifting away of the bleak clouds has once again put projects back on their tracks. "We are bound to witness a steady growth curve over the coming years in the construction and mining equipment sector due to favorable government policies," said Piyush Munot, Director, ZF India, at the inauguration of ZF's plant in Pune recently. ZF is a leading worldwide automotive supplier for driveline and chassis technology. According to Hans Georg Haerter, Chairman and CEO, ZF Friedrichshafen AG, "The new facility, spread over 2,500 sq metres, will be used to manufacture the rear axle of backhoe loader applications, to be followed by full power shift transmission systems."Construction and mining equipment cover a variety of machinery such as hydraulic excavators, wheel loaders, backhoe loaders, bulldozers, dump trucks, tippers, graders, pavers, asphalt drum/wet mix plants, breakers, vibratory compactors, cranes, fork lifts, dozers, off-highway dumpers (20T to 170T), drills, scrapers, motor graders, rope shovels etc. They perform a variety of functions like preparation of ground, excavation, haulage of material, dumping/laying in specified manner, material handling, road construction etc. These equipments are required for both construction and mining activity. With a wide production capacity and potential, India is perhaps the only developing country which is totally self-reliant in such highly sophisticated equipment.To provide a whiff of how big the market is in India, consider the fact that BEML (Bharat Earth Movers Limited), one of the biggest players in this space, had an order book of Rs 5,038 crore as on June 30, 2009 and, according to VRS Natarajan, the company's CMD, the revenue of the company in 2008 amounted to approximately Rs 3,000 crore, out of which about Rs 1,800 crore was from mining and construction equipment. In fact, such is the growing demand that India has begun to attract huge investments from foreign, especially German, companies to start manufacturing construction and mining equipment here. German manufacturers, for instance, supplied equipment worth around Euro 300 million (approximately Rs 1,950 crore) to India in 2008."We find an increasing number of German companies looking to India as a potential market and reputed companies like Hunger International, Argo-Hytos, Wirtgen, Putzmeister, Bosch Rexroth have either set up their manufacturing facilities in India or would be doing so in the near future," is what Rajesh Nath, Managing Director of VDMA India (German Engineering Federation), was quoted in a published interview. "The cost of production in India is substantially lower and even if one were to take into account productivity losses due to quality, there would still be a cost advantage of about 15-18 per cent," he added. Meanwhile, India's new mining policy is expected to attract more private investors and the proportion of mining in gross domestic product is expected to increase from 2 to 5 per cent. This will generate an estimated USD 250 million foreign direct investment in the country in the next five years. Meanwhile, with the government also focusing on the need to increase mineral and fuel reserves through scientific and systematic exploration, companies like Atlas Copco Geotechnical Drilling and Exploration are expanding their range of exploration and ground engineering drilling equipment and accessories manufactured and marketed in India. In 2007, Atlas Copco opened its Nashik facility to produce four models of blast-hole drills for the Indian market. During 2009, the company introduced its 351 cable feed system and its Predator drilling system, a package that applies innovation and proven technology to E&P drilling up to a depth of 2,500 metres. However, this is not to say that everything is hunky-dory in this sector. The one grumble often heard is that of a severe shortcoming in technological development and of a gap between the demand and supply of mining equipment in India. In an issue of Construction Update, Chavala Divaker, General Manager, Jharia Division, Tata Steel, is known to have quoted that India lacks a mining equipment company that can serve the industry with an indigenous fleet of high capacity and technologically advanced HEMM/mining equipment. "Mining equipment companies do import the latest technologies but manufacturing units in India are unable to serve clients with latest technology and they don't adopt or modify technologies to suit the tropical conditions in India," he said. Such elements are, however, being taken in the stride in view of the fact that the future looks bright indeed. To take an example, ZF India's new plant has an installed capacity to make 10,000 axles for backhoe loader applications per year and 10,000 full power shift transmission systems. "Our plan is to invest about Rs 120 to Rs 150 million through 2010 to 2011 and this will include the setting up another plant at Ranjangaon near Pune which will cater to the axle demands of the commercial vehicles and passenger cars' segment. We have a confirmed order book of 2,000 rear axles as of now and our major customers are JCB, Tata Constructions, Telcon, BEML, Greaves, Godrej Constructions and others in the off-road construction segment and Ashok Leyland in the commercial vehicle segment," Munot said. That just goes to show what lies ahead for this sector.(Photographs used are for illustrative purpose only)
Leading the pack
Prior to the 1960s, the domestic requirements of mining and construction equipment were entirely met by imports. Domestic production began in 1964 with the setting up of Bharat Earth Movers Ltd. In the private sector, the Hindustan Motors' Earthmoving Equipment Division was established in 1969 at Tiruvallur near Chennai with technical collaboration from Terex, UK for the manufacture of wheel loaders, dozers and dumpers. This factory has since been taken over by Caterpillar for their Indian operations. In 1974, L&T started manufacturing hydraulic excavators under license from Poclain, France. In 1980 and 1981, two more units, Telcon and Escorts JCB, commenced the production of hydraulic excavators (under license from Hitachi, Japan) and backhoe loaders (under license from JCB, UK) respectively. Escorts JCB has been taken over by JC Bamford Excavators Ltd (UK) in 2003 and is now called JCB India Ltd. Volvo and Terex Vectra are the most recent entrants in the Indian market. Volvo has set up their manufacturing unit in Bangalore. Terex Corporation USA and Vectra Ltd UK have formed a joint venture, which has started manufacturing construction equipment like backhoe loaders and skid steer loaders from May 2004 at Greater Noida with an investment of USD 12 million. Most of the technology leaders like Case, Caterpillar, Hitachi, Ingersoll-Rand, JCB, John Deere, Joy Mining Machinery, Komatsu, Lieberr, Poclain, Terex, Volvo are present in India as joint venture companies, or have set up their own manufacturing facilities, or marketing companies.In the mining sector, the leaders include Wirgten, Atlas Copco, Liebherr, Joy Mining Machinery, Hitachi, Komatsu, Terex, Ranson & Rappier, Bucyrus Erie and DBT. Out of these companies, DBT does not have any technology transfer and neither is it manufacturing in India. Joy Mining Machinery has a small operation in India to manufacture spares and provide sales support. However, these are the two leaders in continuous mining and long wall equipment in the world.