Overview

Positive outlook for segment with increased emphasis on infrastructure development

Tunnel development in India is driven by investments in the hydropower, railway, road and highway, metro rail, and water and sewerage sectors. While the railway sector was the first to undertake tunnel development, the maximum number of tunnels has been developed in the hydropower sector. Tunnels for the supply of water received a boost post-Independence, with the launch of large programmes for the exploitation of water resources. The road and highway sector has witnessed limited tunnel construction and that too mainly in hilly regions. Metro rail tunnelling is a recent phenomenon and has been spurred by the decision to develop efficient public transport systems in densely populated cities.

Over the course of the last five years alone, the tunnelling industry has made rapid strides with over 230 km of tunnels completed and another 980 km currently under construction. The scope of tunnel projects has also expanded given the growing urbanisation and rising demand for better infrastructure.

As of April 2016, the tunnelling segment in India comprised over 1,580 tunnels spanning a total length of over 2,700 km, of which over 35 per cent are still under construction. The hydropower sector has the biggest share in the pie, with 55 per cent of the total tunnel length (completed and under implementation) developed. The other sectors – railways (17 per cent), water and sewerage (15 per cent), metro rail (9 per cent) and roads and highways (4 per cent) – have seen limited development of tunnel length.

In the past four-five years, the industry has witnessed an increased uptake of projects with record-breaking tunnel lengths. India’s longest rail tunnel, the 11 km Pir Panjal tunnel was operationalised in Jammu & Kashmir in 2013. In the hydro sector, the Nathpa Jhakri and Shanan hydel projects in Himachal Pradesh (tunnel length of 27.3 km and 140 km respectively), the Hirakud Phase I project in Odisha (27 km) and the Rangit project in Sikkim (30.7 km) have been completed.

India’s longest road tunnel, the 9 km Chenani-Nashri tunnel on the Jammu-Srinagar national highway is now under construction. Construction work is also under way on the 8.8 km Rohtang tunnel (Leh-Manali highway), which, once completed, will be the world’s longest road tunnel built at an altitude ranging from 9,840 feet to 10,170 feet.

A state-wise analysis of completed and ongoing projects shows that Himachal Pradesh is the leader in terms of tunnel length, accounting for 25 per cent. The other leading states in the country in terms of tunnel development are Maharashtra (14 per cent), Jammu & Kashmir (13 per cent), Sikkim (10 per cent) and Arunachal Pradesh (9 per cent).

Tunnelling methods and techniques have also evolved over the years. Various infrastructure sectors deploy different methods of tunnelling depending on the geology of the location, soil conditions, contracting terms and conditions, tunnel length, etc. Some of the commonly used tunnelling techniques are cut-and-cover, New Austrian Tunnelling Method (NATM), drill-and-blast, and tunnel-boring machines (TBMs). Mechanised methods like those using TBMs are gaining prominence with increased tunnelling activity in congested urban spaces, primarily for metro and urban water supply projects. TBMs have been successfully used for constructing metro rail projects such as the Delhi metro project (Phases I and III), the Bengaluru metro project Phase I, the Chennai metro project Phase I and the Kolkata metro project, as well as water supply and sewerage tunnels in Mumbai. The Kishanganga hydro project in Jammu & Kashmir also used TBMs for the construction of a 14.6 km tunnel. Adoption of the NATM is also slowly gaining traction. The technique is increasingly being used to construct road and railway tunnels. However, conventional methods like drill-and-blast, boring, cut-and-cover, etc. are still the preferred techniques for development of tunnels across sectors.

Further, the structure of the tunnelling industry has been constantly evolving, with the entry of new domestic and foreign players. Domestic companies are either acquiring equity stakes or entering into agreements with foreign players to meet the increasing demand. On the global front too, consolidation and business expansion has been a key feature of the industry.

Some of the diversified domestic players active in the tunnelling segment in at least three sectors are the Hindustan Construction Company (HCC), Patel Engineering Limited and Larsen & Toubro (L&T). Most of the other players are involved in only one or two sectors. Some of these are ITD Cementation, IL&FS Transportation Networks Limited, Coastal Projects Private Limited, Jaiprakash Associates Limited, Pratibha Industries Limited, Afcons Infrastructure, Unity Infra Projects Limited, Soma Enterprise, and Lanco Infratech. Several international players have also tied up with domestic players to undertake tunnelling projects. These players are Kumagai Gumi, Skanska International and Civil Engineering AB, Itochu, Samsung Corporation, Shimizu Corporation, Continental Engineering Corporation, Dywidag, Italian-Thai Development Public Company, Shanghai Urban Construction Group (SUCG), Transtonnelstroy, China Railway Group, Metrostroy, OJSC Mosmetrostroy, etc.

Domestic players are also entering into joint ventures (JVs), tie-ups and strategic alliances with global players to bring the latest technology and practices to the country, with the aim of securing the tunnelling expertise of these foreign players. For instance, India-based Coastal Projects Limited and Italy’s SELI have signed an agreement of exclusive mutual cooperation, wherein SELI will assist Coastal Projects with services and supplies for its TBM projects. In return, SELI will secure a turnover equal to 34 per cent of the project value. Some of the other JVs are HCC and Samsung Corporation (Korea), Soma Enterprise and Continental Engineering Corporation (Taiwan), Era Infra Engineering Limited and Metrostroy (Russia), Gammon India and OJSC (Russia), ITD and ITD Cementation (Thailand), L&T and SUCG (China).

The tunnelling equipment market is witnessing strong growth. According to India Infrastructure Research, this market, including TBMs, is estimated at Rs 400 billion-Rs 700 billion. Of this, TBMs have a share of 55 per cent, excavators 10 per cent, drill-and-blast equipment 2 per cent and other equipment 33 per cent. The TBM market is expected to see higher growth, at 25 to 30 per cent year on year, in terms of equipment sold. While TBMs are mostly purchased by contractors, the rest of the equipment in the sector is taken up on a lease basis.

The modern equipment industry is dominated by foreign players. Specialised equipment such as TBMs, road headers and shutter systems are supplied by foreign companies like Herrenknecht (Germany), Robbins (USA), Okumura (Japan), Atlas Copco (Sweden), etc. TBMs are supplied by Herrenknecht, the Hitachi-Zosen JV, Okumura, Robbins, Shanghai Tunnel Engineering Company Limited and SELI-Kawasaki. Other traditional equipment like excavators, loaders, crawler cranes and other types of cranes is supplied by both Indian and foreign players.

The way forward

The outlook for the tunnel development market is rather positive and will be largely driven by the central government’s focus on infrastructure development. With several project awards coming up across sectors, India’s tunnel infrastructure is expected to expand significantly ensuring that India remains one of the fastest growing tunnel markets in the world. It is estimated that at least 4,000 km of tunnel projects will be awarded in the next five years.

As the market matures, bigger players are expected to bid for tunnel projects. Tie-ups between contractors and foreign equipment providers are expected to increase. Also, contracts are expected to use advanced technologies and methodologies to enhance productivity and ensure timely completion of projects. Overall, as new players enter the market, competition is set to increase.

Given that the tunnelling industry has begun to use modern technology for construction, almost all upcoming tunnel projects will be of much higher value than in the past. There is also greater room for adoption of international standards in tunnel design and construction. Nevertheless, there are some outstanding issues like geological complexities, inadequate investigations, deficiencies in contract documents, complexities of the Himalayan region, safety risks, delayed decision making, etc. that may pose risks for the sector and need the urgent attention of all key stakeholders.

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