Sachdeva of CERA: Earthmoving equipment is staple of construction industry
What is the rental market scenario in earthmoving equipment?
The rental market size in India has grown in last four years from less than 10 percent to over 25 per cent now. Mordor Market Intelligence report has projected India’s construction equipment rental market to register a CAGR of about 5.1 per cent during 2020 – 2025. The equipment rental market can be segmented based on product into earthmoving machinery, material handling machinery, and concrete and road construction machinery. Earthmoving machinery such as excavators, backhoe loaders enjoy enormous demand around the world as it has a wide application in construction and mining.
The report also shows that Indian construction rental market is currently dominated by material handling equipment as compared to earthmoving equipment. However, earthmoving sector in equipment rental market will continue to grow.
The rental penetration in India has grown to over 25 percent in last 5 years and is undergoing transformation towards becoming organised and adopting standardisation. Rental companies have now young and advanced fleet equipment with new technology, artificial intelligence and Telematics.
How is equipment financing doing for earthmoving equipment?
Financers contribute to the growth of any construction equipment market, as the segment is capital intensive. However, equipment rental industry needs more support from them in the form of promoting the rental concept and in return they will be able to sell the equipment more to rental companies and we can mutually support each other.
Financers should also consider relaxation periods or holidays on EMIs and interest during crisis time in industry such as pandemic. NBFC’s in particular should lower down their rates of interest and should offer flexible EMI options.
What are the major challenges faced in the earthmoving equipment segment?
As far as equipment rental sector is concerned, the major challenge currently in earthmoving equipment segment is stagnant rental tariff despite the fact that we are working on thinnest possible margins and cost of maintenance, work force, logistics gave gone up by 25 per cent. Second is of delayed recovery of payments. Many times, it is stuck to the extent that it never comes. This puts burden on rental industry as we all have to GST even if the payment is not realised. We have asked government for reforms in GST too. The government should support the industry by levying GST on reverse charge basis, making the service receiver liable to pay GST, or should make GST a liability on the service provider after the company has received payments.
We also had recently had a meeting with NHAI and urged them for reform in tendering process to safeguard the interests of the construction equipment rental industry as it employs lakhs of people. For delayed and stuck payments, CERA has also written to MSME to make strict laws or regulations to secure payments of companies.
What are the key maintenance practises followed in earthmoving equipment?
CERA advises and keeps educating thee equipment rental industry for following key maintenance practices for their earthmoving machinery.
1. Clean your earth-moving machinery: It is a perfect way to keep earthmoving equipment safe and running. Dirt, grime, and debris accumulate on and in parts of the equipment, which can damage parts and machine can malfunction. Therefore, it is important to clean the machine and its parts thoroughly and regularly as earthmoving equipment has to do difficult and dirty work, which can alter the performance of the machine. However, cleaning should be done in a way as prescribed by OEM.
2. Train employees to operate earth-moving equipment: Unskilled operator can damage the equipment and can put own safety or of other workers at risk. Therefore, to protect your employees and equipment, all workers should be properly trained to operate earth-moving equipment.
3. Lubricate your equipment carefully: Heavy earth-moving equipment and associated parts and tools will malfunction or become damaged if they are not lubricated properly. Moving parts and components need lubrication because the frequent movement causes friction. We also advise to use right oil and lubricants as prescribed in manual.
4. Preventive maintenance and regular inspection: Regular equipment inspections go hand-in-hand with preventive maintenance. Both save unnecessary breakdowns and save costs for a rental company. Therefore, we also advise rental companies to use telematics and equipment management software. Small problems that are not repaired may eventually become bigger problems and incur costs and losses.
5. Use the right spare parts and tools: First, do not use spurious spare parts. Second, do not use them if they do not fit or are not compatible. If you do this, you put your machinery at risk. Employees are also at risk. Always read manufacturer's manuals, and find the right spare parts and tools.
Please share more information on the investment made in the Indian market in terms of manufacturing facility, etc.
OEMs now have good manufacturing facilities in India and investing in the research and development and modern technology. Even the foreign companies are manufacturing in India now. I visited the Schwing Stetter facility this year near Chennai. It is an IoT-enabled, energy efficient global manufacturing facility spread over 52-acre site at an investment of Rs 300 crore.
How do you look at the future of earthmoving equipment?
Earthmoving equipment is a staple of the construction industry, with a whole fleet of different machinery being used on earthmoving projects. Earthmoving equipment and road construction equipment account for close to 70 per cent of India's construction equipment market. Its market will keep growing over the next few years too because of increasing government spending on infrastructure development including roads, highways, tunnels, bridges, metro rails, flyovers and commercial complexes.