Construction Equipment Rental Association (CERA)
Unlike developed countries like US, Japan, China etc, the Rental Equipment market of India is still in its nascent stage.
The global Construction Equipment Rental market is expected to reach $230 billion by 2025 at a 4.8% CAGR during the forecast period. However, in India, the market penetration of the CE Rental industry is very low as compared to that of many other countries. While in India, its market share is 7%, it is 65% in Japan, 55% in the USA, and 35% in China.
Market shares are indicative of the progress and pace of infrastructure development in the countries. Since India is projected to be among the top countries for infrastructure development and construction, there will be ample opportunities for growth, provided the CE Rental companies and the CE manufacturers work in tandem. In fact, it is important to strengthen the relationship between all the stakeholders such as the hirers, project owners, equipment manufacturers and financiers so that all can leverage their strengths and avail the emerging opportunities for mutual profitability.
India’s Construction Equipment Rental industry is facing many challenges.
Increasing investments in construction of roads, highways, smart cities, metros, bridges, and expressways, are set to boost the CE industry in the near term, and consequently, the rental market as well.
However, India’s Construction Equipment Rental industry has to contend with issues of delayed or stuck payments, lack of standardised practices, non-uniform entry tax in different states, etc. The recent fall of construction giants like IL&FS and ERA Infra Engineering, and the failure of many projects awarded under the Hybrid Annuity Model (HAM) to achieve financial closure, has been a setback too.
Due to the issues of GST input, the construction companies are themselves buying the equipment, due to which equipment hirers have been hit quite badly. CERA is talking to government authorities and construction companies for a mutually beneficial solution. So, for the next two years, at least, the rental companies will have to work in an environment that holds both uncertainty and promise.
There is a need for new models of hiring which will give more options and be beneficial to both the hirers and other construction stakeholders.
Currently, two types of rental models exist: dry and wet rentals. Dry rental is not very prevalent in India unlike the western countries. Dry rental gives control of the equipment in the hands of the lessee, and it has been observed that the equipment is not used and maintained in a standard way, and consequently, it cuts short the life span of the equipment. Wet rental is highly prevalent in India as it keeps the equipment under the control of the rental company in terms of operators and maintenance.
CERA was born with the CE Rental companies’ unanimous objective: ‘Let’s grow together’.
CERA was conceptualized and founded as there was no formal organisation to represent the CE Rental industry at the national level. CII and FICCI represent the construction industry in its entirety, but not specifically the CE Rental industry.
The CE Rental industry had a lot of scope for growth, but it was facing many issues that needed to be addressed. It was in this environment of hope and uncertainty that CERA was conceptualized and founded. I had been thinking about it for a long time, and one day, I floated the idea with the owners of rental equipment companies. Subsequently, CERA was born with the unanimous objective: ‘Let’s grow together’.
The first conference took place in New Delhi on 3 September 2016; it will ever remain witness to the birth of CERA when 17 founding members sowed the seeds of camaraderie and pledged to nurture the organization with a vision to constitute it as a most prestigious and the biggest equipment rental association. I take this opportunity to thank Harpreet Singh, Satvinder Singh, Tarun Soodan, Deepak Malik, Manoj Agrawal, Jai B Goyal, Kaushik Agrawal, Harsh Kapur, Angad Singh, Anand Singh, Hanu Parischa, Pavan Bagadia, J S Anand, Narender Singh, Grovin Khandelval, and Paritosh Manocha, for making my vision a reality.
CERA is transforming the unorganized rental industry into an organized industry.
CERA has come a long way since its inception; it is working to create and sustain an environment conducive to the growth and development of construction equipment and crane rental industries. With the formation of CERA, the rental market is moving towards standardization of business practices, guidelines, operating procedures, tariffs, salaries of operators, warehouse sharing prices, etc. Hirers are also taking up the responsibility of training their operators and technical staff. With these positive trends, there is a gradual transformation of the rental industry into a more organized one.
Sensitizing the industry about the need and benefits of becoming an organized sector is one of the significant works that CERA is doing. To a fair extent, we have been able to address the issues of work orders, payment recovery, operator training and hiring rates, in cooperation with the construction companies and contractors. We are creating a mechanism through our website, whereby CERA members can share empty yard space available for parking their equipment. This will curtail transportation and operation costs.
We have created a model agreement format for hirers and construction companies to prevent disputes. We are also working on a uniform tax levied for movement of construction equipment across states.
Dearth of skilled human resource is impacting adoption of advanced mechanized systems and technologies.
Due to the lack of skilled equipment operators, technical staff and drivers, contractors deploy unskilled or semi-skilled staff, who end up damaging the machine and causing a huge loss by way of machine downtime and repairs. As a result, hirers are wary of using machines with new technologies, even when such machines would increase their productivity.
It cannot be denied that new technologies such as Artificial Intelligence, GPS, drones, etc would make project work faster, more productive, and of better quality, along with easier supervision and coordination at site, bringing faster and more profitability. CERA is working on creating a certified, skilled pool of human resource in cooperation with several manufacturing companies like ACE, TIPL, and Amman Apollo.
We aim to establish CERA chapters in every state and reach hirers at district levels.
CERA is growing in strength and CE Rental companies and hirers are now aware of the work that we are doing to promote their businesses. They are calling us after they see CERA’s activities on social media or when they hear about us through word of mouth. There is no resistance from them for joining our Association, rather, there is a healthy inquisitiveness. We invite them to attend our workshops and conferences so that they can experience first-hand our activities and objectives.
We have members in West Bengal, Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Maharashtra, Punjab, Uttarakhand, Telangana, Andhra Pradesh, and Tamil Nadu, and next year, we will formally launch more chapters in these states. We have full-fledged regional chapters in West Bengal (head office: Kolkata), Maharashtra (head office: Mumbai), Gujarat (head office: Ahmedabad), and Delhi/NCR.
As a national organization, CERA is creating a sustainable environment, which is conducive to the growth and development of the construction equipment and crane rental industries.
CERA provides a national platform for rental companies, manufacturers of cranes and construction equipment, spare parts, filtration and lubricants, to come together, discuss and resolve important issues. The Association works closely with the government on policy issues, interfaces with thought leaders, and enhances efficiency, competitiveness and business opportunities in the rental industry through a range of specialized services and strategic global linkages. It also provides a platform for consensus-building and networking on key issues.
The moment a rental company becomes a CERA member, it gets connected to our network of rental companies across the country. We help resolve their disputes pertaining to delayed or stuck payments, illegal confinement of machines, etc, with the advice of our legal experts. Our studies have shown that such disputes arise due to the absence of standard work orders and hiring agreement formats. So, we have drafted a model hiring agreement as a first step to create a legal framework, which our members can use to avoid any disputes in the future.
NBM&CW December 2018
