Spearheading services in IndiaJune 16, 2015
Shaleen Vaid, managing director OHCS Projects, talks to TOGY about India’s testing and subcontracting industries and the ways to further encourage the development of the country’s engineering, procurement and construction (EPC) sector. OHCS Projects was created in 2014 to specifically undertake EPC projects and do engineering fabrication.
How do you assess the need for testing services in India?
The demand for integrated testing services is increasing as India attracts more international investors and embarks on bigger projects in the energy industry. An integrated approach is required to meet these requirements along with increased technology transfers and the transition of existing labs into research and development centres. This is likely to be challenging as the country never had proper testing and laboratory facilities do calibration or destructive and non-destructive testing. Concepts such as regularly checking offshore platforms are still recent in the market.
How would you characterise India’s subcontracting industry?
India’s engineering and construction market has very low prices, which negatively influence the whole engineering chain, down to the subcontractors. As EPC companies are accustomed to taking contracts and jobs at losses, this influences their own rates to the subcontractors who are forced to quote very low to secure jobs. EPC companies are unable to play on material costs since those need to be certified by independent third parties, so they prefer decreasing the subcontracting rates they offer. As a result, subcontractors have to diversify their business or begin doing EPC work, so they can subcontract to themselves and control the quality and workforce of their own projects.
This trend is detrimental to the market, because it negatively impacts the quality of EPC works undertaken in India. Since the country has capital availability and a large pool of skilled engineers, there is potential to benefit from the ongoing competitive environment by compliance to quality standards and increasing prices.
What measures could be taken to further encourage the development of India’s EPC industry?
Land prices and acquisitions should be changed to make land more affordable to an EPC company, as any player involved in heavy engineering always needs a construction or fabrication yard. Setting up facilities in India is a challenge given the high land prices in states such as Maharashtra.
Maintaining sustainable steel production in India would be another way to further develop the sector by saving costs for EPC contractors. India is an important manufacturer of steel ore, which is a key material for any energy project as it is the main raw material for any asset such as an offshore platform, a refinery or a power plant. The availability of steel in India is now allowing the engineering and construction industry to source its steel ore directly from the local market, not from other markets such as China, decreasing the costs of projects.
How can developing India’s inland water network benefit the country’s EPC industry?
Developed countries such as the US have developed strong and reliable inland water networks that allow contractors to use inland water channels to transport their equipment and decrease their transportation costs. This trend has yet to take off in India. The country should be moving in this direction. Construction companies traditionally require flat bottom barges with a minimum draught of 3 to 5 metres, which can be accommodated within the country’s inland waters. One issue associated with the development of Indian inland waters that needs to be addressed is the height of old bridges that do not allow any kind of barge to navigate through the waters.
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