The increased focus on infrastructure development in the country has helped drive tunnel construction activity in recent years. Tunnels play an important role in the setting up of hydropower projects, development of urban mass rapid transit systems, improvement of road and rail connectivity and upgradation of water supply and sewerage systems.
The tunnelling industry in India is led by domestic and a few foreign players. The market is dominated by the presence of a few big players that hold almost 80 per cent market share. These contractors have a presence in key tunnelling segments such as hydropower, railways, metro rail, roads and highways, as well as irrigation, water and sewerage. Some of the top contractors across sectors are the Hindustan Construction Company (HCC), Larsen & Toubro (L&T), Afcons Infrastructure Limited, Patel Engineering, and Gammon India. It has been observed that the joint venture (JV) model is the most preferred method for project implementation. Of late, some foreign players such as Strabag and SEW Infrastructure Limited have entered the tunnelling segment in the roads and highways, irrigation, water and sewerage sectors by forming JVs with large domestic companies.
Sector-wise participation
HCC dominates the tunnel construction market in the hydropower, irrigation, and water and sewerage sectors. It has completed more than 160 km of tunnel works in the hydropower sector, while another 16 km is under construction. Some of the major projects undertaken are the Chamera III hydroelectric project (HEP) Stage III and the Nathpa Jhakri HEP in Himachal Pradesh. Other key players in the hydropower sector are Jaypee Associates Limited, SEW Infrastructure Limited and Gammon India Limited. HCC has developed eight water supply tunnels of 61.63 km, one irrigation tunnel of 84.59 km and one sewerage tunnel of 2.6 km. Meanwhile, works on 36.83 km of irrigation tunnels are under way. Other contractors engaged with water supply and irrigation tunnel works are Jaiprakash Associates Limited, Shanghai Tunnel Engineering Company, and Megha Engineering and Infrastructure.
The tunnel construction market in the roads and highways sector is also dominated by a handful of key contractors. These include Navayuga Engineers Private Limited, L&T and HCC. An important project being undertaken by L&T is the construction of two tunnels with a total length of 6.9 km under the Mumbai coastal road project. The recently completed Rohtang Tunnel road project has been developed by a JV of Austria-based Strabag and its Indian subsidiary, Afcons Infrastructure. Six tunnels of 10.58 km under the Pandoh bypass to the Takoli project are being constructed by Shapoorji Pallonji Pandoh Takoli Highway Private Limited. Previously, IL&FS Transportation Networks Limited developed a large number of road tunnels. These include the 9 km Chenani-Nashri project on the Jammu-Srinagar highway, which is also the longest in India and the longest bidirectional highway tunnel in Asia.
In the railway sector, there is a fragmented market structure, with some big players in JV with other players as well as a number of small players. The sector is dominated by the L&T-Afcons Infrastructure JV. It has completed the construction of 92 tunnels with a total length of 83.6 km under the Konkan Railway project. Another important tunnel work of 21 km under the Mumbai-Ahmedabad high speed rail corridor has been awarded to L&T. Other important contractors in the railway sector are ITD Cementation India Limited, IRCON International, Navayuga Engineers Private Limited, ABCI Infrastructures Private Limited, Continental Construction Corporation Limited, SEW Infrastructure Limited and Abir Infrastructure Private Limited.
The metro rail sector has witnessed the largest tunnel projects being developed by JVs between tunnel contractors. L&T has been actively engaged in metro tunnelling works, either individually or by forming JVs with other domestic or foreign players. Important projects being executed by L&T include the Delhi Metro Phase III project (Janakpuri West-Botanical Garden), and the Hyderabad, Chennai, Kochi and Lucknow metro systems. Afcons Infrastructure Limited has undertaken works for a 14.12 km tunnel under the Delhi-Ghaziabad-Meerut Regional Rapid Transit Project. Other important players in the sector are HCC, ITD Cementation, J. Kumar Infraprojects and Soma Enterprise Limited. The foreign players in metro development include China-based Continental Holdings Corporation and Russia’s OJSC Mosmetrostoy.
Pain points
The future of the tunnel development market is promising. However, like all other infrastructure projects, tunnelling projects face various challenges in implementation, which lead to time and cost overruns. Even though project execution has improved over the years, it has much scope for improvement. Among the biggest challenges faced by contractors are the geological surprises and complexities that continue to hamper the pace of tunnel construction. The poor and insufficient investigation results in contractual delays and disputes, which create further hurdles for contractors.
It has been seen that construction contracts mostly have unclear terms and conditions and a skewed risk sharing mechanism. The contracts are drafted on age-old norms and leave room for ambiguity between the implementing agency and contractors. The slow litigation and arbitration process results in projects getting stalled and hefty cost overruns for the developer. Undefined pricing methodologies for extra items and deviations in the design or construction requirements also pose a challenge for tunnel contractors. It is essential to draft well-planned and balanced contracts, which should have an equitable risk allocation. The contractor should be treated as a partner in the execution of the project. In the case of any unforeseen circumstances, timely decisions help in faster implementation of the project and prevent timeline extensions.
Another major issue faced by contractors is land acquisition. Contractors are unable to initiate construction work in areas where land has not been acquired on time. Some projects that have faced implementation delays are the Kochi metro project, the Katra-Banihal railway project, the Koteshwar hydropower project in Uttarakhand and the Rangit II hydro project in Sikkim.
The lack of skilled workers for manning high-tech equipment such as tunnel boring machines also poses problems for tunnel contractors. Other issues faced by tunnel contractors include safety of workers, lack of dumping sites, especially in cities, and the adverse impact of tunnelling activities on the environment.
Future outlook
In the next two to three years, the tunnelling sector will offer abundant opportunities across multiple sectors, given the large pipeline of projects. According to India Infrastructure Research, the maximum opportunities will be in the irrigation sector, followed by the hydropower sector, metro rail, and roads and highways sectors. Thus, the tunnelling segment holds immense promise for EPC contractors, technology and equipment providers, construction material supplies, etc. over the long term.
Going forward, Indian and foreign JVs are expected to continue to bid for the construction of tunnels while more players enter the market. However, it is imperative to resolve persistent issues such as delays in land acquisition, contractual issues and lack of skilled manpower. It is also critical to carry out adequate investigations using advanced technologies to reduce geological uncertainties and risks, and ensure timely and effective execution of projects.