By Rahul Arora & Abhinav Mishra.The EPC market size in India has witnessed continued expansion over the past lustrum. Much akin to other financially stable countries requiring substantial infrastructure development, the Indian sub-continent has always provided a host of investment and participation opportunities to engineering, construction and supply-side players across the globe, especially with the government’s growing interest in the development of renewable energy..Under the budget of 2017-18, a rather voluminous inflow of investments has been allocated to the infrastructure sector. Expectedly therefore, the Engineering Procurement Construction (EPC) vertical of the sector is poised to gain from this measure as construction works would form an integral part of the utilization of such investments..EPC companies should keep an eye out for the highways sector considering that the total proposed length of roads built from 2014-15 till the current year (including that under the Pradhan Mantri Gram Sadak Yojna (PMGSY)) is about 1.4 lakh km; and further, as the highway sector is going to witness close to INR 64,900 crores in budgetary allocation in this financial year. Moreover, 2000 kms of coastal connectivity roads has been identified for construction and development. In view of the Ministry of Road Transport and Highways (MoRT&H)’s continuous emphasis on the EPC model of highways development since 2015 along the Hybrid-Annuity Model of-late, EPC companies are likely to fare well in this sector (with the support of domestic and foreign lending entities who have been reluctant to assume risks in the highways sector in until the recent past)..In the renewable sector, an additional solar power capacity of 20,000 MW has been proposed for the year 2017-18, in addition to the already proposed capacity of 100 GW[1] before the year 2022 under the JNSSM. Although the renewable energy sector as a whole has been witnessing increased activity, the aforesaid capacity addition should increase visibility on the participation of EPC companies in the development of solar power projects in India, especially on the equipment supply side as the basic custom duty and countervailing duties on supply of equipments in relation to the renewable sector have been decreased..The Railways sector too is likely to provide a host of participation opportunities to EPC players as expenditure for the sector has been pegged at approx. INR 1,31,000 crores, with seventy (70) railway projects being identified for construction at the start of the financial year itself. Further, with the enactment of the new Metro Rail Act, greater involvement of EPC players is on the cards..Disputes between EPC contractors and project owners are a common sight in India. As a matter of fact, this has been quite a deterrent to foreign private participation as foreign investors, project developers and EPC contractors have always been apprehensive of the likelihood of stepping into unviable ventures. The center had announced its plans to introduce the Public Contracts (Resolution of Disputes) Bill back in the year 2015; though the same has been in the pipeline for a good while now. With the unveiling of the 2017-18 budget, there is now clear foresight on the fact that measures to the effect of resolution of disputes arising in relation to public works would be incorporated under the Arbitration and Conciliation Act, 1996, aimed at safeguarding the interests of the stakeholders involved in the infrastructure and especially in the EPC vertical thereof..Notably, the EPC stocks have witnessed an upward movement with the unveiling of this budget, thus showing the positive sentiment among the sector stakeholders in general. Interestingly, whether the government will follow up on its tall promises and how quickly it will do the same will go a long way in determining the road ahead for the EPC market in India..[1] http://pib.nic.in/newsite/PrintRelease.aspx?relid=122566.Rahul Arora is a Partner and Abhinav Mishra is an Associate at HSA Advocates.
By Rahul Arora & Abhinav Mishra.The EPC market size in India has witnessed continued expansion over the past lustrum. Much akin to other financially stable countries requiring substantial infrastructure development, the Indian sub-continent has always provided a host of investment and participation opportunities to engineering, construction and supply-side players across the globe, especially with the government’s growing interest in the development of renewable energy..Under the budget of 2017-18, a rather voluminous inflow of investments has been allocated to the infrastructure sector. Expectedly therefore, the Engineering Procurement Construction (EPC) vertical of the sector is poised to gain from this measure as construction works would form an integral part of the utilization of such investments..EPC companies should keep an eye out for the highways sector considering that the total proposed length of roads built from 2014-15 till the current year (including that under the Pradhan Mantri Gram Sadak Yojna (PMGSY)) is about 1.4 lakh km; and further, as the highway sector is going to witness close to INR 64,900 crores in budgetary allocation in this financial year. Moreover, 2000 kms of coastal connectivity roads has been identified for construction and development. In view of the Ministry of Road Transport and Highways (MoRT&H)’s continuous emphasis on the EPC model of highways development since 2015 along the Hybrid-Annuity Model of-late, EPC companies are likely to fare well in this sector (with the support of domestic and foreign lending entities who have been reluctant to assume risks in the highways sector in until the recent past)..In the renewable sector, an additional solar power capacity of 20,000 MW has been proposed for the year 2017-18, in addition to the already proposed capacity of 100 GW[1] before the year 2022 under the JNSSM. Although the renewable energy sector as a whole has been witnessing increased activity, the aforesaid capacity addition should increase visibility on the participation of EPC companies in the development of solar power projects in India, especially on the equipment supply side as the basic custom duty and countervailing duties on supply of equipments in relation to the renewable sector have been decreased..The Railways sector too is likely to provide a host of participation opportunities to EPC players as expenditure for the sector has been pegged at approx. INR 1,31,000 crores, with seventy (70) railway projects being identified for construction at the start of the financial year itself. Further, with the enactment of the new Metro Rail Act, greater involvement of EPC players is on the cards..Disputes between EPC contractors and project owners are a common sight in India. As a matter of fact, this has been quite a deterrent to foreign private participation as foreign investors, project developers and EPC contractors have always been apprehensive of the likelihood of stepping into unviable ventures. The center had announced its plans to introduce the Public Contracts (Resolution of Disputes) Bill back in the year 2015; though the same has been in the pipeline for a good while now. With the unveiling of the 2017-18 budget, there is now clear foresight on the fact that measures to the effect of resolution of disputes arising in relation to public works would be incorporated under the Arbitration and Conciliation Act, 1996, aimed at safeguarding the interests of the stakeholders involved in the infrastructure and especially in the EPC vertical thereof..Notably, the EPC stocks have witnessed an upward movement with the unveiling of this budget, thus showing the positive sentiment among the sector stakeholders in general. Interestingly, whether the government will follow up on its tall promises and how quickly it will do the same will go a long way in determining the road ahead for the EPC market in India..[1] http://pib.nic.in/newsite/PrintRelease.aspx?relid=122566.Rahul Arora is a Partner and Abhinav Mishra is an Associate at HSA Advocates.
