Investment in Road and Highways will Drive The Construction Equipment Industry

The journey of the economy always travels by roads and highways in any economies in the world, so do in India. Therefore, National Democratic Alliance’s (NDA) government has given utmost priority to the infrastructure sector, especially road and highways in the country to improve economic growth to meet its target.

The Indian road network spread in around 33 lakh km and it is second largest in the world. Country’s 65 percent freight and 80 percent passenger traffic are carried by the roads. Despite National highways constitutes just around 1.7 percent of the total road network, but carry around 40 percent of the total road traffic.

In the Budget 2016-17, the government outlay Rs 2, 21, 246 crore for country’s infrastructure in ongoing financial year. Finance Minister Mr. Arun Jaitley planned the outlay of Rs 97,000 crore for road sector, including Pradhan Mantri Gram Sadak Yojana (PMGSY).  He approved nearly 10,000 km of National Highways in this fiscal and allocated Rs 55,000 crore for road and highways across the country and additional Rs 15,000 crore has to be raised by NHAI through bonds.

Such a huge investment to expand further road network in the country, will not only benefit infrastructure sector, but also going to change the construction equipment industry. Such a huge construction will require a big number of construction machineries and will boost the demand of new or used machines.

Road construction has jumped by 36 percent during April-September 2015 under various programmes of the road ministry as compared to during the same period of last fiscal. 2,446 km of roads and highways had been constructed between April and September 2015.

In 2014-15, government had constructed 12 km roads per day, which improved to 16 km per day in 2015-16 and the government has set the target of 30 km of road and highways from 2017.

Recently Minister of Road Transport & Highways Mr. Nitin Gadkari said his government targets to award Rs 1 lakh crore road projects in the North East region in next five years.

National Highways and Infrastructure Development Corporation (NHIDCL) which is a fully owned company of the Ministry of Road Transport & Highways has been awarded 109 projects in 13 states, including West Bengal, Assam, Nagaland, Manipur, Meghalaya, Mizoram, Sikkim, Manipur and Arunachal Pradesh. The length of the projects which are under various stages is 7,148 km.

In March 2016, the road ministry has asked all state government to submit the list of state highways, which could be converted into national highways. States have to send the proposal to road ministry with the detail of traffic plying on those roads; these roads will be developed under public private partnership (PPP) basis.

Government is not only working to improve state highways and national highways, but also trying to expand the rural road network under the scheme of PMGSY. Under the scheme 60,117 km road (spent Rs 18,832.92 crore) had been constructed in 2009-10 later the scheme suffered badly and declined, now the NDA’s government has decided to bring the scheme back on the track, the government has planned to invest Rs 27,000 crore and achieve the target of 45,000 km in  2016-17.

Ministry of Road Transport and Highways (MoRTH) has set the target to increase the highway length to 2 lakh km in years to come.  Ministry has also announced to upgrade Dwarka Expressway, which connects Dwarka in Delhi with Gurgaon.  Earlier this year, he had announced Rs 41,000 crore road projects in Telangana including two express highways. Last year in June, the government had approved Rs 4,720.92 crore highway projects in Madhya Pradesh and Telangana under highways building programme NHDP.

Such a huge investment in road and highways sector is expected to bring boom in the used construction equipment industry. A Sector which went through a bad phase until 2014 for the last few years, seem to be back on track and sale of construction machines will shoot-up. It is estimated that equipment sales will touch 96,700 units by FY 2018, in 2015 the sales has touched 68,200 units.

Indian Construction Equipment Manufacturers’ Association (ICEMA) estimated that the Indian construction equipment industry would grow to USD 5 billion by FY2019-20 from the current USD 2.8 billion.

ICRA Research (the Moody’s Investors service company) report said demand for Mining and Construction Equipment (MCE) industry to grow by 6-7 percent in 2015-16 and expected sharp growth of 20-25 percent in 2016-17. Further the report said, 2016 will be a promising year in most of the product segment.

Various reports also suggest that along with the Indian equipment market, the global construction equipment market will grow too.

It does seem road development in the country will set a new milestone in the world and bad phase of equipment industry will no longer continue.

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Note: Information in this article has taken from various sources, like MoRTH, NHAI, ICRA Research, ICEMA report and from the statements of Mr. Nitin Gadkari covered by national media.

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