Not A Big Lift

Crane Renting

Delhi Metro Railway's Phase-III project has made little impact in pulling up crane hiring business in Delhi and national capital region (NCR). However, the project has brought some comfort to the crane manufacturers during the prevailing lull period.

Delhi Metro Railway's third phase, an expansion of 140km, entailing an investment of Rs.35,242 crores has got numerous lifting requirements going by the nature of the job for constructing underground and elevated corridors. However, it has made little impact in lifting the business sentiments of crane rental companies based in Delhi and national capital region (NCR). For rental companies, the project which will connect Delhi's two major arterial roads, the ring road and the outer ring road including the satellite city of Faridabad, deploying cranes at the third phase sites is altogether a commercially loss making proposition which very few can afford to get into.

This can be explained with numerous reasons. First off, the project has coincided with a period when there is an excess supply of units in Delhi-NCR market, far in contrast to the phase-1 and 2 construction periods, when rental companies made hay, as the market faced an acute shortage of mobile and crawler units. General boom in infrastructure across the country, expansion of Reliance's petrochemical unit at Jammnagar along with large scale greenfield capacity additions of sugar mills in Uttar Pradesh saw a major migration of crane rental companies from Delhi-NCR to the other parts of the country. While spiraling demand drove the exodus, it was the better rental rates that enticed companies to look beyond DMRC projects.

Mobile and Carwler Units
Excess supply of mobile and crawler units have brough down rental rates in Delhi NCR. A QUY 90 Zoomlion 2009 built unit working at DMRC's third phase project

Shortage of new units was further contributed due to the extended delivery schedules for mobile cranes with order books of cranes manufacturers being tight; this was because of then on the backdrop of steep demand in European, American and other Asian markets. Used crawler and mobile units also came at premium and extended availability owing to construction boom in Middle East.

Nonetheless, with the 1st and 2nd phase projects being extremely time bound, much as like the 3rd phase, eastern India based contractor, Senbo working in the second phase left no qualms even in bringing a Kobelco rough terrain crane, very seldom seen outside European and Middle East markets at a premium for the job requirements. There had also been instances of other contractors hiring advanced cranes at a premium. The second phase saw deployment of advanced hydraulic Hitachi-Sumitomo crawler lattice boom cranes along with trendy bigger booms. There were even good numbers of new, much adored, Tata TFC multipurpose duty cycle cranes, during the construction of the Central Secretariat–Huda City Centre link, carried mainly through cut and cover construction method. According to senior DMRC sources, the total number of mobile and crawler cranes that worked at the second phase touched 400 units at the peak time of mobilization.

Skewed Bargaining?

That was the immediate glorious past when rental rates ruled at its peak in Delhi-NCR. Not anymore. Rates have now moved deeper south, led by oversupply of units that is beyond the controllable jurisdiction of an oligopolistic market situation. Recounting the past rates, Mr. Hardeep and Mr. Manmohan Singh, owner of Delhi based mobile crane renting entity, Arjun Enterprises, that supplied cranes during DMRC's second phase construction says, "For a 150-ton mobile unit, hiring rates have currently plummeted to Rs.6-7 lakhs per month as compared to Rs.11 lakhs during 2003. For 80-100-120 tonner, rates are hovering between Rs.4.50 and 5.50 lakhs per month for the units which commanded anything between Rs.7.50 and 8 lakhs during 2003 and immediate subsequent years."

What has been the reason for the steep slide has? While excess capacity in Delhi-NCR market could be believed to be one of the major reasons that have pulled down rates. However, could the oversupply be so acute in Delhi market that have hammered down the rates or perhaps the prevailing unit capacity composition that have been responsible in bringing down the rates drastically?

Tata-TFC
Newly delivered Tata TFC 280 working at CC27 Munirka package of DMRC's third phase extension.

Both the reasons seem to be equally responsible. Senior DMRC sources mention, "With many crane manufacturers setting up their manufacturing and marketing facilities in India along with supporting distribution channels, securing new cranes for our job site requirements has not posed great difficulty." However, further examining the general composition of the Delhi-NCR crane rental market, it will be seen that the growing population of mass segment comprising, lighter class of mobile and crawler units has really made bigger contribution in significantly pulling down the hiring rates.

"According to Mr. Jayakara Kalmadi, Product Manager, Cranes and Senior Manager, Business Development, Telcon, "80 tons crawler units generally constitute 60% of the crane composition of Delhi-NCR market". At the moment 20-25 Tata Friction Cranes are being deployed at Delhi Metro Site due to its unique proven capability to withstand heavy duty operation. TATA Hitachi reported to supply at least 8-10 new units of TFC 280 to this project in through new or existing rental companies in the current financial year."

For mobile units, according to Mr. Martin Seibert, Director Sales and Services, Crane India, Terex India Pvt. Ltd., "The composition is more or less of the similar order."

Mobile Units Sales
Manufactuers have reported high sales of mobile units to the rental companies.

Even during the past few years, the mass composition along with bigger units of 150+ tons was altogether held by, not so large number of rental companies in Delhi-NCR as compared to western market. However, the recent years have witnessed spurt of good numbers of newer entrants in the rental market of Delhi-NCR, in lighter mass crawler and mobile segments. Few of the entrants are JNPR Infra, MSC Cranes, Vishwakarma Enterprises, Metro Cranes, SP Equipment and GT Innova. GT Innova and SP equipment have deployed 1 number each Tata TFC 280, 80 tonner crawler crane at package CC27 Munirka site of DMRC third phase.

While the emergence of new entrants is a positive development for manufacturers but they have made inroads into the mass market that was erstwhile dominated by heavy weight like Apollo Cranes, Janak Cranes or Arjun Enterprises who also possess capacities beyond 150 tons. Entrants of the new players in the mass category, perhaps reinforces the fact that bargaining power has greatly skewed in favour of the crane hirers in DMRC third phase projects, thus lowering the rates down. However, this has been in contrast for higher capacities, largely supplied by rental companies from outside Delhi-NCR. DMRC sources confirm that higher rentals cost are required to be paid for new cranes and for the specialized ones coming from outside Delhi-NCR by contractors.

Cranes Requirement
More numbers of cranes will be required as the jobs picks up.
The downward pricing trend in mass segment in DMRC or other projects in Delhi is affirmed by Mr. Arun Mahajan, Director, Apollo Cranes. He says, "Competition has become stiffer in lighter categories with new players entering the scene." Competition resulting in giving stronger bargaining power to users is endorsed by Mr. M. Singh, Owner, MSC Cranes, suppliers of ECEL and ACE slew rough terrain cranes to DMRC's Munirka site. He says, "The rates are low at Rs.1 lakh per month. Little profits are left after paying highly skilled operators cost required on stiff safety requirement clauses by DMRC and bank installments.

Skilled operators are strictly required to be employed by crane rental companies as because DMRC exercises monitoring of safe worthiness of the crane, competence of the crane operator and rigging team as well as enforcement of practice of lifting study by lifting in charge. This is primarily done to ensure that the quality of services remains appropriate in accordance with the stipulated standards set by DMRC.

While quality of services required for the project by DMRC will be supreme based on safety considerations and avoidance of time over runs, lower rates are likely to prevail during the third phase as more number of idle units gets into the job. The crane population composition of the market is also well likely to maintain its status quo in the near future preventing any rate escalation. This is as because as no major power plant reconditioning programme being planned by the Delhi government in near future or not much is heard about major industrial capacity addition in Delhi-NCR region.

Dearth of projects requiring medium or heavier lifting units will make capital based bigger crane rental with stronger financial positioning in future buy units beyond 120 tons and above will prefer to deploy their units outside Delhi, thus making the case strong for hiring rates of lighter class units to remain subdued in the coming years. Arjun Enterprises has recently acquired one used 150 ton mobile, well reconditioned unit from Australia, to deploy it at upcoming refineries in Rajasthan or for power and bridge projects in Uttarkhand rather than Delhi-NCR where according to the company, rates are better and payments are prompt. There have been reports of few 250 tons used mobile units entering Delhi also from Australia very recently.

Munirka-Package
The third phase extension characterises enermous job complexities. A P&H unit for grab application working at CC 27 Munirka Package.

The capacities of mobile and crawler cranes working at the third phase vary from 12 tons to heaviest 500 tons. According to DMRC, the approximate number of heavy capacity above 100 tons + or beyond working at the third phase project presently stands at 20 units. Cranes being supplied to the contractors for the third phase belong to both crane rental companies from Delhi-NCR and from other parts of the country. However, major percentage of cranes coming at site is from rental companies belonging to Delhi and NCR, informs DMRC sources.

Silver Lining

While the project did not have any catalytic results in pulling up the hiring rates, however, it has brought some cheer to the crane manufacturing companies. Telcon has reported to sell at least 5-6 units of TFC 280, 80 tons crawler units to the new rental companies.

Brisk business has also been reported by Escorts Construction Equipment Ltd, "Newer safety stipulations for the third phase, completely banning usage of pick-n-carry cranes has allowed us to book good number of new orders for our slew TRX series mobile cranes that can perform extremely well at undulated sites without toppling, owing to its articulated chassis mounted design," says, Mr. Sheetal Malik, GM, Sales, ECEL. He claims, "90% of the slew cranes working at DMRC' third phase projects has been supplied by us." Sales of sizeable units have also been reported by Action Construction Equipment and Indo- Farm equipments limited for its slew cranes to rental companies working in the project.

Escorts Construction Equipments Limited

The present number of units working at DMRC's third phase is 152 comprising both mobile and crawler units. The population is well likely to increase as the job picks up, necessitated by wide nature of lifting and erection jobs for elevated and underground corridors. The lifting requirements would range from tandem lifting of precast concrete girders erection of launching gantries, lowering and retrieval of tunnel boring machines, removal of tunneling muck and lowering of tunnel liners etc.

Large number of cranes would definitely be used for wide nature of jobs at the fabrication yards to move precast girders, segments, fixtures, and other loads. However, whether the evolving job complexities, as the project gathers momentum and the large volumes of work will be able to lift up the hiring rates till 2016, when the project is slated for completion, that is also when crane manufacturers and hirers forecast rates will pick up will be anybody's guess.

NBMCW May 2013

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