Dimitrov Krishnan, President, ICEMA
“A prerequisite for the growth of the construction equipment industry of India is to have sustained demand for equipment so that the industry can plan its production and operation with a clear implementation roadmap.”
Dimitrov Krishnan, President, ICEMA & MD, Volvo CE India

India has now become the third largest construction industry in the world after USA and China. As president of ICEMA and head of one of the world’s largest equipment manufacturers – Volvo - where do you see India’s CE industry stand today in terms of manufacturing capabilities, technology, innovations, and services, vis a vis the developed markets?
Most of the global CE industry players have their presence in India, where they have also established their R&D facilities and are offering their global technology. In the coming years, their Indian facilities could become their export hub for selected CEVs. As regards the domestic CE manufacturers, they too have invested substantially in setting up their R&D facilities (at par with global standards) to innovate and develop state-of-the-art technologies for CEVs.

For India’s construction to be at par with world standards, what are the grey areas that the fraternity and Government should look at?
A robust project monitoring system needs to be established to ensure speedy implementation of the NIP. The rollout of programs like PLI, Components Champion etc. for the CE industry must be initiated to attract global manufacturers to set up their manufacturing bases in India for major aggregates and components for CEVs. In addition to this, export tax incentives must be implemented.

There is also a need to create strategically located component manufacturing parks with common testing and R&D centers for CEVs and provide an easy governance mechanism for the CE industry to comply with regulations.

Do you think India has the potential to progress to the 2nd largest construction equipment industry in the world by 2030?
With the renewed focus of the Government of India on infrastructure development and the subsequent rise in its planned expenditure for the same, demand for construction equipment is expected to increase at a fast pace during the current decade. More than US$ 1.44 trillion worth of investment has been planned for various projects under the National Infrastructure Pipeline (NIP) of which about 90% has been allocated for projects in roads & highways, railways, urban infrastructure etc.

Since these are amongst the key end-user segments of equipment, the demand for construction equipment is expected to get a major boost with the implementation of these projects, which could enable the industry to become the second-largest construction market in the world by 2030.

What are the challenges that the CE industry is facing and how can they be resolved?
Some of the challenges being faced by the Indian CE industry include the ambiguity in the implementation timeline or roadmap for executing identified infrastructure projects. A prerequisite for the growth of the CE industry is to have sustained demand for construction equipment which helps the industry to plan its production and operation accordingly. So, a clear implementation roadmap with timelines would be critical to support the growth of the CE industry.

Another major challenge is the high dependence of the industry on import of products like precision components, hydraulics, undercarriages, and electricals/electronics. Given the capital-intensive nature of the industry, there is a need to incentivise investment in mother technologies under the Government’s AtmaNirbhar Bharat initiative through incentive schemes such as PLI (Production Linked Incentive). This will help the CE Industry realize its targets outlined in the Vision Plan 2030. ICEMA has developed a PLI proposal for the CE industry which has been shared with all relevant ministries for review and consideration.

The Indian Construction Equipment industry registered an 8% year-on-year quarterly growth in equipment sales in the second quarter of the current financial year (Q2’FY22-23), as per the Quarterly Industry Data released by ICEMA. What equipment sales do you predict for 2023-24 and beyond, considering both ongoing and upcoming big ticket infra projects and the elections in 2024?
The Indian CE industry has witnessed remarkable growth over the past decade with sales having increased from 50,000 units in FY14 to 98,000 by FY19. The growth over the past couple of years has also been steady compared to the economic volatility observed due to the COVID-19 pandemic during this period. However, with the Government’s renewed focus on infrastructure development, the demand for the construction equipment is expected to increase at a fast pace in the current decade. The Indian CE industry is likely to see a growth of 8-10% year on year.

the real estate sector

The hot topics in CE industry across the world are: ‘Way to zero emissions,’ ‘Road to autonomous machines,’ ‘Smart construction equipment’, electrification, digitalization’ etc. Where do you see India’s CE industry stand today in terms of its efforts in adopting these new trends as a way towards sustainability?
Globally, there has been immense focus on Climate and Emission Reduction related commitments, especially in diesel intensive sectors such as Mining & Construction, which drive off-highway/construction demand.

“Net Zero” commitments by 2050 are now fast making their way to India as well and are likely to gain momentum with announcements at the recently concluded COP27 summit. For CEVs, CEV Stage-IV emission norms and Phase-I safety requirements have already been implemented and CEV Stage-V emission norms and Phase-II safety requirements will be implemented from 1st April 2024, at par with global standards.

ICEMA is closely working with the concerned Government departments in drawing up a clear roadmap for use of Alternate Fuels (CNG, biodiesel, Hybrids, Electric and Hydrogen) for green infrastructure development. For driving the non-fossil fuel technology for CEVs, incentivization is required from the Government. A scrappage policy also needs to be introduced with a view to reduce the adverse environmental impact of older CEVs.

According to BloombergNEF, the number of countries with a hydrogen strategy doubled last year to 26, and there are plans for the same in countries like U.S., Brazil, India, and China. How do you see use of hydrogen in India considering Reliance’s plan to make India a hydrogen hub and have a roadmap for a mega green & clean energy business with an investment of INR 75,000 crore in the next three years?
Major technology shift towards Electrification, Hydrogen fuels and Biofuels, driven by climate goals will become non-negotiable in India also. CEVs that remain carbon neutral for their lifetime need to be encouraged and incentivized by the Government. Globally, regulations and standards are prevailing for the regular commercial vehicles; but are yet to be formulated for CEVs.

As a proactive measure, ICEMA is working closely with MNRE and SIAM for formulating the draft roadmap and regulations for implementation of Hydrogen as an alternate fuel for CEVs. However, the requisite technology for Hydrogen Fuel Cell Vehicle (H2FCV) and Hydrogen – Internal Combustion Engine (H2ICE) for CEVs are already available with the collaborators / technology partners of major OEMs present in India.

How is ICEMA looking to support the growing rental segment with the help of associations like CERA, APAOI and COAOI?
India’s equipment rental space is still evolving; it currently accounts for a small share of the overall construction equipment market. However, it has a huge potential to grow. ICEMA is engaging with associations such as CERA to explore the possibilities of creating awareness about the rental market in India by sharing platforms with the rental fraternity, offering them opportunities to showcase their services and promote their businesses.

ICEMA’s ‘Vision’ includes plans to increase exports to about 25% of the total business of the industry by 2030. What are the challenges and the way forward to make this a reality, and what support can the government give?
The CE Industry Vision Plan 2030 envisions the industry growing by three times its current size to become a US$25bn industry by 2030. CE exports at 9-10% of the current turnover, are projected to grow to 15% by 2030, touching US$3 bn.

India’s CE Industry exports are currently only 10-15% of its total production versus the global benchmark of 25-30% in competing countries. India accounts for just 1.2% of global CE exports; its largest markets are EU + UK and USA, in addition to developing markets like Africa, Middle East, ASEAN, and Australia.

We need to propel CE exports to 15-20% of the overall production. Recommended measures could be by promoting the Made in India label in developed and targeted markets through a consistent digital media brand building campaign. This can be done by the Export Promotion Offices at Indian Missions in select / target countries, while Business Attache in Embassies can co-ordinate B2B meetings - LATAM, CIS, Middle East to help facilitate exports from India. Government to Government promotions wherein overseas investments made by banks should give preference to deploy Indian products. Having a Shipping Regulator for a clear policy will bring more stability.

The CE industry of India faces many manufacturing disabilities that puts it at a disadvantage when compared with the global manufacturing hubs of China, Japan and Korea. What are the key factors behind this and the solutions?
India has tremendous cost disadvantages because of the high cost of power, logistics cost, the cost of regulatory compliances, and the cost of raw materials, especially steel. Steel in China is 0.9 X / kg, which is a difference of 10% approx; which translates to a cost disadvantage of approx. 5% at product level. Optimizing input costs of steel, regulating the unabated price rise, and relaxing or removing the tariff and non-tariff import barriers on steel, will ease availability and increase the competitiveness of downstream Industries.

Another factor is the logistics costs due to a poor and insufficient port infrastructure. There is overdependence on Mumbai and Chennai ports, which results in congestion due to city limit issues and other local challenges. Ensuring private ports to grow faster, for example, developing Katupally and Ennore to handle more cargo vs Chennai, especially for RORO vessels and container cargo, would be a solution.

Most of the destination routes from India are through transhipments, which add to the cost and lead time. Since turnaround times are high, vessel calling costs are significantly higher. As per an industry association report, unit cost per container move in India is US$127.65 on an average compared to US$76.27 in Colombo (Sri Lanka), US$71.86 in Jabel Ali (Dubai), US$49.39 in Port Klang (Malaysia) and US$82.40 in Singapore. For example, while the default port is Chennai, at times, due to congestion, the shipment is pushed to Ennore / Krishnapatnam, which leads to abnormal vessel calling charges. There is a cost differential between ports to the extent of 10-15%. Freight cost as percent of product cost is 10% due to the size of the equipment, which is quite significant.

Customs processes for exports need to be simplified; ease of doing business must also be improved along with speedier clearance, documentation and addressing delays in IGST refunds.

India needs to pursue more bilateral FTAs with countries with large markets in this region. RCEP gives a leverage to China, Korea, and Japan to access ASEAN and Pacific region markets. FTAs with EU, UK, and US need to be pursued with a specific focus on manufacturing, as setting up manufacturing base out of India could be attractive for these countries in the future. We also need to review existing FTAs where India faces a comparative disadvantage (w.r.t CE).

Lack of precision component manufacturing eco-system in India has led to a high dependency on import of precision components, so we need to develop a favorable environment to attract manufacturers from EU, Japan, and Korea. Higher domestic industry volume will help position India as a country with cost advantages in the long term. Schemes like PLI, Components Champion, and global sourcing would help attract global manufacturers to set up their manufacturing base in India.

Another issue is the lack of regulation for some product segments, which puts some of our products at a disadvantage in global markets. While for a few segments, the technical regulations and emission norms are at par with global standards, the Off-highway equipment or non-roadable Mobile Machinery are still not regulated; so, we need to bring in regulations to enhance their acceptability in global markets.

We not only need to work towards meeting the climate change related objectives, but also to position Indian manufacturing at par with industries in the West in terms of technical standards and emission norms.

ICEMA has signed a Cooperation Agreement with bauma CONEXPO India during Bauma 2022 in Munich. How is ICEMA going to support and promote the show to be held in Greater Noida from 31 Jan’22 to 3 February 2023?
ICEMA has a long-standing cooperation with bauma CONEXPO INDIA. Continuing its partnership, it has recently signed a Cooperation Agreement with bauma India aiming to bring industry stakeholders together to network, explore business opportunities, and showcase latest innovations at the event. With a growing membership of leading OEMs, suppliers and financiers, ICEMA continues to work towards creating and providing networking platforms to CE stakeholders for better outreach and business promotion.

How do you see the contribution of shows like bauma India in improving the technological and business status of the Indian CE sector to global standards? What will be your message to the attendees?
bauma CONEXPO INDIA has been playing a pivotal role in the inculcation of new construction technologies. The event will witness latest machines and new product variants being manufactured by Indian and international companies. This provides an ideal opportunity for the industry to exchange technical knowledge and the best practices with their counterparts.

Exposure to the vast product offerings from the Indian CE industry will encourage higher mechanization levels in the Indian construction sector and will also help develop a robust manufacturing ecosystem in the country. This initiative will strengthen India’s position as a major potential exporter of construction equipment to global markets.

How advantageous is the location of the Greater Noida venue for holding bauma CONEXPO?
Greater Noida India Expo Centre and Mart is spread over 58 acres of land and has a unique combination of Trade Mart with Exhibition & Convention Facilities, Lawn, Business Centre, Restaurants, Transportation facilities and sufficient Parking Area for over 4,000 cars and 30 Buses/Trucks inside the complex.

The Greater Noida Industrial Area is located at the intersection of the Western & Eastern dedicated Freight Corridors and is the gateway to the Delhi-Mumbai Industrial Corridor (DMIC). It lies within the National Capital Region of India’s capital city and is adjacent to Noida, which is one of the largest industrial townships in Asia. The integrated township is shaping up as India’s smartest city.
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