The road construction industry in India is undergoing a paradigm shift, with a greater thrust on infrastructure development. A robust demand, increased investments and significant policy support are changing the face of the sector. The selection of equipment and construction material will depend on factors such as availability, transportation costs, project location, manufacturing capabilities and local taxes.
According to industry reports, the size of the construction equipment market in India is estimated at around $6.5 billion in 2020. This is based on a 10-12 per cent contraction, primarily due to a 39 per cent decline in the first half of the year as a result of the pandemic-induced slowdown. The Indian construction equipment market is broadly segmented into earthmoving, material handling, concrete mixing, and road construction equipment. In terms of equipment, the demand for all-purpose and lower-cost backhoe loaders has recovered much faster since the pandemic than the demand for other expensive equipment like excavators. The National Infrastructure Pipeline initiative, worth Rs 111 trillion and encompassing 7,400 projects across sectors including roads, is a major demand driver for construction equipment. The pipeline is to be implemented from 2019-20 to 2024-25.
The Ministry of Road Transport and Highways (MoRTH), along with the Indian Construction Equipment Manufacturers’ Association, released the Vision 2030 Plan of Construction Equipment Industry in January 2021. It proposes an action plan focusing on quality and cost competitiveness to help India become a manufacturing and export hub for construction equipment. The production-linked incentive scheme will help India become a manufacturing and export hub and promote self-reliance through the development of a robust domestic supply chain. The Indian industry’s export competitiveness can be increased by exploring free trade agreements with high export potential destinations, aligning export incentives with global best practices, optimising input costs (steel) and conducting targeted marketing campaigns.
The transportation sector is highly dependent on the growth of the material market, which includes steel, cement, bitumen, etc. The requirement of a particular type of material will depend on its availability, transportation costs, project location, manufacturing capabilities and local taxes. India is the second largest producer of cement in the world. India’s cement demand decreased from 389 million tonnes (mt) in 2019-20 to 375 mt in 2020-21, registering a decline of 3.6 per cent due to the demand erosion from consumer industries like infrastructure and building construction. India’s installed cement production capacity stood at 545 mt as of 2020-21, accounting for over 7 per cent of the global installed capacity. Going forward, capacity utilisation is likely to improve to around 64 per cent in 2021-22.
As per the Petroleum Planning and Analysis Cell, bitumen demand is projected to cross 7 mt in 2021-22 and reach 7.4 mt by 2022-23. This is likely to be driven primarily by recent road development programmes launched by the government, including the Bharatmala Pariyojana, Char Dham Pariyojana, district connectivity and Northeast connectivity. Nearly 90 per cent of the bitumen produced in the country is utilised for the construction of roads and the remaining 10 per cent is used in the aviation and waterproofing segments. Bitumen production declined by 2.8 per cent in 2020-21 over 2019-20, but its consumption increased by 6 per cent in 2020-21 to 7.11 mt.
Construction aggregates consist of coarse particulate materials, which include sand, gravel, crushed stone and other recycled concrete. The demand is expected to increase by 30 million cubic metres per annum. With this, the demand for aggregates will also increase proportionately. According to India Infrastructure Research, the demand for aggregates would be worth about Rs 516 billion by 2025-26 (based on the construction opportunity in the road sector, the primary consumer of the material, and a share of 7.75 per cent of aggregates in the total construction cost). Aggregate suppliers will definitely benefit from the development of new projects.
The pandemic has led to an increase in steel, cement and bitumen prices. Steel prices are estimated to have gone up to Rs 65,600 per tonne in 2021 from Rs 35,000 in 2020 while the price of cement has gone up to Rs 420 a bag from Rs 280. As a result, construction costs for infrastructure projects have gone up by at least 4-5 per cent. In view of the increase in steel prices, which can impact the cost of building national highways, MoRTH has emphasised the need to relook at all conditions that could be restrictive, without impacting the quality of material used for highway construction.
High export realisations and low risk of imports over the near term are likely to keep prices high. Besides, with the second wave, partial lockdowns across states have led to disruptions in construction activity. Therefore, the increase in cement prices is likely to be sustained in the near term supported by a significant uptick in construction activity in the road sector. As per industry reports, the high input costs due to the increasing crude oil prices are likely to result in the moderation of EBIDTA per tonne in 2021-22 by Rs 220-Rs 270 to stand at Rs 1,050-1,100 per tonne.
Alternative materials are being experimented with for the construction of roads as natural material like bitumen is exhaustible in nature. Bitumen, also known as asphalt, is used for coating roads. Using less bitumen could potentially save on cost and resources. Shredded plastic is being used to replace a certain amount of bitumen, significantly saving cost. The construction of a regular road requires 10 tonnes of bitumen per km, while a plastic road requires 9 tonnes of bitumen and 1 tonne of waste plastic for coating. When plastic is used as a binder, the quantity of bitumen that is typically utilised for laying roads can be reduced by 6-8 per cent.
According to the Indian Roads Congress (IRC) SP 98-2013 guidelines on the use of waste plastic on hot bituminous mixes (dry process) in wearing courses for road construction, there are many plastic waste items that can be used for road construction. These include plastic carry bags, plastic cups, and plastic packaging for chips, biscuits, chocolates, etc. As of July 2021, 703 km of national highways have been constructed with waste plastic in the wearing coat of flexible pavement. Guwahati got the first road constructed by using 1.24 mt of plastic waste. The road has been constructed in the Narangi Military Station area of the city.
Further, an eco-friendly construction material geopolymer concrete (GPC), which is an alternative to portland cement concrete, is being used. GPC is an inorganic polymer composite commonly formed by alkali activation (activators such as sodium hydroxide and sodium silicate) of industrial aluminosilicate waste materials such as fly ash and ground granulated blast furnace slag. Its unique properties are high early strength, low shrinkage, freeze-thaw resistance, sulphate resistance and corrosion resistance. Moreover, GPC may not require water for curing. In July 2018, MoRTH issued guidelines to further promote the use of geosynthetics in road construction. Under the guidelines, the state governments have been advised to include various types of geosynthetics in their schedule of rates so that the estimated cost of the project including geosynthetics can be worked out. In addition, the National Highways Authority of India has carried out a study with the Indian Institute of Technology, Hyderabad, for the use of geotextiles in pavement construction.
The way forward
Going forward, flexible pavements (bitumen based) will continue to be developed at the national highway level. The key demand drivers for aggregates will be the upcoming and recently awarded road projects. In addition, demand will come from projects like the Bharatmala Pariyojana, the Setu Bharatam programme, the Pradhan Mantri Gram Sadak Yojana and road development initiatives in the Northeast and at the state level. Several cities across the country are constructing roads using plastic waste. This innovative technology is efficient, cheaper and requires less maintenance. Further, in the road equipment sector, loaders, motor graders, compaction rollers and pavers (sensors and slipform) will be in demand.