Challenging Times: Covid impact and upcoming opportunities for contractors

Covid impact and upcoming opportunities for contractors

The railway sector accounts for around 12 per cent of the Rs 1.11 trillion investmen­t under the National Infrastructure Pipe­line for the five-year period 2020-25. A major portion of the envisaged investment comes under the category of long-haul rail projects. In addition to this, Indian Railways (IR) has plan­ned some mega projects for implementation on an engineering, procurement and construction basis, thereby presenting considerable op­portunities for various stakeholders, es­pecially for big-ticket projects including the dedicated freight corridors (DFCs) and the high speed rail (HSR) corridors.

For contractors, the experience has been mixed. While the sector had been on a high-growth trajectory and the pace of infrastructure creation was at an all-time high, the Covid-19 pandemic and the subsequent restrictions hal­ted project execution, leading to cost inc­reases and contractor woes.

A look at the experience of contractors, the key projects executed, the issues and challenges faced, and upcoming opportunities in the sector…

Experience so far

Larsen & Toubro has been in the infrastructure sector for over three decades. The heavy civil infrastructure (HCI) and transportation infrastructure (TI) units of the company are executing certain sections of the country’s first HSR corridor, the Mumbai-Ahmedabad High Speed Rail (MAHSR) project. As part of the C4 package, the HCI unit will be constructing a 237.1 km long stretch involving viaducts, stations, depots and major river bridges, besides other auxiliary wor­ks. This package represents 46.6 per cent of the total length of the corridor, making it the longest amongst all the packages. It will have an elevated stretch from Zaroli village on the Maharashtra-Gujarat border to Vado­dara station with stations at Vapi, Bilimora, Surat and Bharuch in Gujarat.

Meanwhile, the company’s TI unit will be implementing the C6 package of the MAHSR project, an 87.57 km stretch representing 17.2 per cent of the total length, running elevated from the outskirts of Vadodara to the outskirts of Ahmedabad in Gujarat with one station at An­and/Nadiad. The package involves the cons­tru­ction of viaducts, major river bridges, a station, ma­intenance depots, and other auxiliary works.

The 508 km long project will overall cover 155.76 km in Maharashtra, 4.3 km in Dadra & Nagar Haveli and 348.04 km in Gujarat with 12 stations en route. On completion, the HSR corridor will operate at a speed of 320 km per hour, covering the entire distance in approxi­ma­tely two hours with limited stops and in th­ree hours with all stops.

Afcons Infrastructure Limited, a core infrastructure sector player for over five decades, has only recently ventured into the railway sector. The company is implementing a number of key railway projects including the construction of tunnels and bridges. One such project involves the construction of 16 railway bridges across 250 km in Jammu & Kashmir. These bri­d­ges will join to form the ambitious Udham­pur Srinagar Baramulla Railway Link (USBRL). The company has to work in harsh weather conditions, precarious terrain and a tumultuous socio-economic climate. The USBRL bridges use slipform technology to construct hollow, rectangular, circular-tapered piers. The 103.45 metre pier P5 is a part of Bridge 39 along the Katra-Dharam section. This is also one of the tallest piers to be built in the history of IR.

In addition to the 16 bridges, Afcons is constructing the much-talked about Chenab Rail­way Bridge, which involves constructing a number of tunnels along its alignment. The arch closure of the bridge was completed in April 2021. The 1,315 km long bridge will be the highest railway bridge in the world, at 359 metres (1,178 feet) above the riverbed level. The bridge is being developed with a design speed of 100 km per hour and will have a lifespan of 120 years. The company is using sophisticated equipment for project implementation including flux core arc welding equipment mounted on trolleys, computer numerical control cutting machines and ultrasonic testing machines.

Ircon International Limited, a leading turn­key construction company, has been involved in a number of big-ticket railway projects. The co­m­pany, in collaboration with Dineshchandra R. Agrawal Infracon Private Limited, recently won a contract worth Rs 34.3 billion for Pack­age C7 of the MAHSR project. The scope of work includes the design and construction of the civil and building works, including testing and commissioning, on a design-build-lumpsum price basis for a double-line HSR corridor involving Ahmedabad station, Sabar­ma­ti station, via­duc­ts and bridges, crossing bridges (excluding fabrication and transportation of steel truss girders) and associated works from chainage km 489.46 to km 507.59. Besides, Ircon Inter­national has emerged as the lowest bidder for Package T 2 under the MAHSR project. The scope of work includes the design, supply and construction of track and track-related works including testing and commissioning on a design, build lump sum price ba­sis for a double-line high speed rail corridor bet­ween Zaroli village at the Maharashtra-Gu­ja­rat border (156.6 km) and Vadodara (393.7 km) in Gujarat and Dadra & Nagar Haveli. The firm has quoted Rs 51.42 billion for the aforementioned works. Meanwhile, the company completed 100 km track linking works in the Vaitarna-Sachin section of the western DFC in July 2021. The 74 km Kharsia-Dharamjaygarh section of the project was commissioned on June 21, 2021.

Megametro Engineering Private Limited has been associated with metro construction projects for the past two decades. The company has recently ventured into management and design consultancy services as well. It has been invol­ved in different phases of the Delhi Metro.

Over the years, the contract conditions have evolved and been modified to favour contractors. Earlier, the risk and responsibilities were unevenly distributed between the execution agency and the contractors. However, with chan­ges in the contract conditions, the risks and res­ponsibilities are now being shared more evenly between the execution agency and the contractors. That said, there still remains plenty of room for improvement since some of the issues faced by contractors still remain unaddressed.

Impact of Covid-19

The outbreak of Covid-19 has led to unprecedented challenges for contractors. Despite be­ing allowed time extensions by the implementing agencies, contractors have faced a plethora of challenges, ranging from logistical issues to issues in procuring raw material and equipment, high overhead expenses, and mass mi­gration of labourers to their native places (during the first wave of the pandemic). Productivity levels have also been impacted by the need to adhere to social distancing norms. Further­mo­re, the road to recovery has been longer than anticipated for contractors.

Overall, the pandemic has resulted in an average delay of six to nine months in project execution, resulting in huge overhead expenses for which the contractors have not been fully compensated. Despite the lifting of the nationwide lockdown, construction works have been affected for a longer period than anticipated due to restrictions imposed by the local authorities.

The way forward

While the pandemic has adversely impacted pro­ject execution, the sector outlook remains positive given the big-ticket projects being impleme­nted. Projects such as MAHSR, the new DFCs, the semi-HSR projects, the regional rapid transit system corridor and the 100 per cent electrification initiative will present considerable opportunities for contractors in the times to come.