What are the typical challenges faced by EPC contractors whilst executing large projects?
Our company, KEC International Ltd is a diversified global infrastructure EPC major and a world leader in power transmission space. We have presence in five key business verticals— power T&D, cables, railway, water and solar.
Myriad challenges engulf EPC contractors constructing transmission lines traversing geographical boundaries including topography, geo-political situation of the region, inadequate manpower, getting timely approvals and clearances, lack of enhanced government support and incentives for exports and inadequate testing facilities.
Acquiring land (right of way) and getting timely clearances is a herculean task for the contractor. Significant time of the contractor is lost in obtaining approvals from various levels before the final approval is granted. Due to this, the project completion schedule is completely disrupted leading to cost overruns for the contractor. In some cases contractors are compelled to even take an altogether different route for erecting the line than actually planned, thereby resulting in enormous time and cost overruns.
Another critical issue is that the transmission line industry in India is not treated as infrastructure industry, depriving transmission line contractors of benefits that other sectors like roads, railways and ports enjoy. Transmission lines being an important part of overall infrastructure development should be covered under the infrastructure sector and be granted the Infrastructure Industry status.
What support would EPC contractors expect from government agencies whilst executing government projects?
I would say we do get a lot of co-operation and support from government agencies/utilities/ SEBs with regards to obtaining clearances etc. In spite of this, clearances still take significant time as approvals have to be taken from many authorities, local bodies and ministries before the final approval is granted.
Ideally, support should in the form of the government agencies themselves obtaining the clearances before awarding the projects to the EPC players. The plug-and-play model wherein all sanctions are supposed to be in place before the projects begins, as is being done for five ultra mega power projects (UMPPs) announced during the Union Budget 2015-16, is a good way of resolving these issues and has to be adopted for transmission line projects as well.
Besides enhanced support from the Indian government is also required on the exports front as large number of Indian companies are successfully executing projects overseas. We ourselves have around 55-60 per cent of our order book consistently coming from foreign markets. The Indian Government should extend support to domestic players on lines as enjoyed by our foreign competitors in their respective countries, like China for example. Also, in the recently announced Foreign Trade Policy 2015-20, the government of India has done away with lot of benefits, e.g. withdrawal of incentive support which is needed in order to facilitate and expedite the growth of exports.
For developers, how does the EPC route prove better than other modes, e.g. divisible contracts?
For developers, EPC route is always better as reputed EPC players like us who are operating in this industry for around seven decades, not only possess excellent project management capabilities but are also well versed with the nuances of effectively managing EPC business. Hence we are in a better position to negotiate procurement deals resulting into procurement benefits for the developers.
To elaborate, with EPC route the project execution is in safe hands as EPC contractors are turnkey project management specialists who are responsible to deliver the complete project to the owner/ developer for an agreed price and at an agreed date i.e. the developer in return for a guaranteed price is assured of time and quality. Also, the EPC route does away with the multiple coordination and controls required in divisible contracts.
Today, the EPC route is the most preferred and dominant form of secured construction contracts adopted by developers across the globe.
How do you rate opportunities available for EPC contractors to groom into developers, across infrastructure segments?
With government paving the way for private participation in infrastructure segments in an enhanced way, I foresee enormous opportunities for EPC contractors to groom into developers. Many companies in the rad sector have already grown into developers. However, they have not been very successful as EPC contracting and ownership of assets are two different models of doing business.
Which project would you regard as amongst your most challenging EPC projects in recent history?
Many of our projects are challenging projects involving project execution in extreme climatic conditions and hostile environments like deserts, forests, mountains, oceans, rivers and snowfields etc. KEC is acknowledged globally for its credibility and reliability in executing challenging projects. Here, I would like to share details of two of our challenging projects:
Our prestigious river crossing project with mid-stream towers in Haldia, West Bengal was one of the most challenging and remarkable projects executed by KEC. On account of the high wind velocity helicopters could not be used and instead we used specialized barges and cranes to build the towers. Consequently, this project powered by our immense technical capability and superb execution skills, established an electric transmission line across the Hooghly River, a vital trade and commerce passage of east India. This is probably the tallest ever transmission line tower erected globally; its height is 775 feet, about 75 per cent of the Eiffel Tower. It is a first of its kind in India.
Another project that comes to my mind is the 765/400kV GIS substation project in Thiruvalam, Tamil Nadu. The project involved many challenges, including heavy rock blasting and construction of complex GIS Building, including a difficult 500 mm thick floor in which metal plates were embedded etc. Using the most advanced techniques and well integrated supply chain systems, we completed the project within the scheduled time, with GIS construction done in a record four months, along with bus duct erection.