July 2021

Given the large pipeline of projects, tunnelling will be an area of opportunity for both domestic and overseas construction companies over the next five years or more. Apart from road and rail construction, there are irrigation projects, hydropower projects, and metro projects on the anvil, and all of these require tunnelling expertise.

Thus, the tunnelling segment could generate revenue streams for EPC contractors, for technology and equipment providers, construction material supplies, etc. over the long term. A mix of different technologies are likely to be deployed, depending on the specifics of a given project, and a mix of different construction materials are also likely to be used. For example, TBMs will be extensively deployed in some cases, while the NATM will be used in others. Micro-tunnelling is also going to be an important technique. And the old-style drill-and-blast technology will continue to be popular as well.

Some of the upcoming projects present serious technical challenges due to being located in difficult geological zones, or congested urban areas. New and advanced construction materials are going to be required. This will drive demand for explosives, steel, cement, rock bolts, fibre and aggregates.

The market is fairly concentrated with a small list of domestic players controlling around 80 per cent market share, sometimes in conjunction with foreign majors that are exploring the possibility of entry through JVs. Along with domestic majors such as the Hindustan Construction Company, Larsen & Toubro, Afcons, Patel Engineering and Gammon India, overseas majors such as Strabag and SEW Infrastructure have a presence.

As in other infrastructure sectors, projects face challenges in implementation, leading to time and cost overruns. Poor knowledge of local geological complexities is one serious technical issue that often leads to unpleasant surprises. There is also a shortage of skilled manpower.

There are, of course, the endemic issues surrounding land acquisition, which hold up all sorts of infrastructure projects. In addition, contractual agreements are often opaque or ambiguous in their terms and conditions, leading to disputes and delays. Undefined pricing for extra items and deviations in design or construction requirements are also areas of concern. Slow litigation and arbitration compound problems in this area.

Better drafting of contracts, with clear and equitable terms and conditions, will be essential to speed up project timelines. The litigation and arbitration processes have to be accelerated. It is also imperative to resolve the persistent issues relating to land acquisition. These are larger policy issues. On its part, the construction industry has to improve the training and induction of skilled manpower. Better knowledge and understanding of geological constraints needs to be driven by more extensive use of modern technologies.

In sum, this is an area where policy review is necessary, along with changes in the operational norms for industry players. There is a great opportunity to improve quality and capacity of infrastructure by enabling the tunnel construction segment. It must not be missed.

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