Clarity on focus and means of achieving targeted investments were lacking.

If the right conditions for global investment are created we can enter into partnerships with global players & service the Indian market as well as the global supply chain.

Sandeep Singh,  Managing Director, Tata Hitachi

Why rebooting the activities in the road sector is so important?

If you look at the package announced by the Government, there are some good pointers:

MSMEs

• With the redefinition of the coverage of MSMEs, a lot of our customers will come under its fold. This will help them in getting loans at a lower interest rate from banks as well as priority in payments from Central government departments - very crucial in current times.
• Apart from that they also have access to collateral free loans to the extent of 20% of their outstanding's in Feb at an attractive interest rate of 9.25% pa.
• There are other measures announced will also help them sustain and expand business.

NBFCs

• Special liquidity measures for NBFCs / HFCs / MFIs and NBFC Partial Credit Guarantee 2.0 scheme will infuse liquidity in them and aid lending to business

Mining

• The reform measures in terms of the opening of commercial coal mining, seamless exploration to production of both coal and other minerals, removal of distinction between captive and non-captive blocks will encourage more investment and drive demand for equipment in mining.

How do you assess the initiatives from the government / NHAI specifically to reboot the activities in the road sector?

Construction activities in major projects were allowed from 20th April and activities have started at most of the large national highway projects. We do see significant recovery in activity this month also. However, given the uncertain scenario, customers are cautious of purchasing new equipment.

Further a large number of labourers at most sites have returned to their native places and customers have to make do with whoever is available. If there are no operators / mechanics - they are unable to execute the projects.

There is still the issue of free movement of goods, especially cement - as it was most affected due to the lockdown. Hence the construction industry is very cautious and we see normalcy coming back only after monsoons.

As an equipment supplier to road projects what are the major constraints in today's context and how these pressure points can be eased out?

There are areas where more clarity is required. The investment figures as per budget are now doubtful, given the challenges in revenue collection. Hence clarity on focus and means of achieving these targeted investments were lacking in the announced package.

Further, a considerable amount of money is still stuck in disputes and although measures have been announced by the Ministry of Roads, there has been very little movement in payments to construction companies.

What is the scope and potential of leveraging the edge of digital tools in the entire eco-system of road sector?

Even before Covid19 broke, we have been selling most of our products with digital capabilities. Our EX-series excavators, Shinrai backhoe loaders and TL340 wheel loader are InSIte enabled and Zaxis series excavators have ConSite telematics suite.  These telematics products have enabled continuous communication with our customers.  Under the current circumstances we believe customers will greatly appreciate these digital technologies to get the best out of their equipment.

What are the reforms that you expect for the healthy growth of the road sector?

From a construction equipment standpoint, more than 90 % of the volume of machines manufactured in India is localized to an extent of 50 %. This is an average figure and some manufacturers have more localization. These include the equipment sold in the largest volumes such as hydraulic excavators and backhoe loaders.

A large base of vendors has been developed over the years of whom many are in the MSME category. In the first phase of supply constraint, these vendors were trying to ramp up their manufacturing capacities with infusion of capital, investment in Capex and employing skilled workers. Their ability to deal with demand volatility was severely tested. This time around, the challenges are completely different. Inadequate working capital, their supply chain disruption and depletion of skilled manpower are some of the key issues that need to be dealt with. The government has announced several steps to ease liquidity and provide ameliorating conditions for them to restore normal operations.

As far as global sourcing of components is concerned, one area where there is dependence on imports is precision components such as valves, certain motors, sensors etc. These can be easily manufactured in India with technology that is already available globally if the industry is sufficiently incentivized. Also, if the right conditions for global investment are created we can enter into partnerships with global players and service the Indian market as well as the global supply chain. We will have to grow our competitiveness to attract these opportunities against other countries doing the same. Some of the inherent common manufacturing disabilities that we have, such as land acquisition, cost of capital and logistics need to be addressed.

Another area where there is still import of some order is in low volume equipment categories as also very high value capital equipment which could be very specialized by nature. The key here is to unlock the potential of the domestic market and grow volumes to a level where it is commercially feasible to manufacture this equipment here as well as growing the export market to enhance volumes further. This will require a boost to the infrastructure plan and accelerated execution.

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