Burying bureaucracy

When Cranes Today last visited India, in 2013, the country was reeling from the effects of the 'Coalgate' corruption scandal. The so-called 'scams' revolved around the allocation of coal mining blocks to private companies for captive uses, primarily power generation. The result was that the company's power generation struggled, and bureaucrats were reluctant to take any action-such as approving public sector spending-for fear of being perceived as being corrupt.

In 2014, the right-leaning BJP won an outright majority in parliament, pushing the Congress party, the country's dominant party since independence, into opposition. The election of a new government, seen as less tied to the country's sprawling bureaucracy and friendlier to business, has been welcomed by the country's construction sector.

As this article was being completed, the new government released its first budget. In line with the BJP's 'business friendly' image, the budget cut corporate tax, but, by assuming revenue gains from GDP growth and part privatisation of some state assets, promised spending on a series of giant power plants, overall infrastructure, new schools, and, in the country's separate railways budget, major improvement to trains and railways.

Cash flow crisis

Under the Congress party, government had consistently promised major spending in infrastructure projects. At the same time, investors in the private sector were enthusiastic about residential and commercial construction. However, over the last two years, projects have failed to complete, keeping investors' cash and public spending tied up.

Sorab Agarwal, executive director of Indian crane builder ACE, says, "I feel that a lot of policymakers don't understand what is causing this. All the big private groups, in 2011-12, had spent a lot of money on a lot of different projects: power, construction, all sorts. A lot of the money they have spent or borrowed has not been put to use. All this debt has not been productive. Now, most of these projects are stuck because of cash-flow and regulatory issues." There are many blocks to project completion. Large parts of India are still agricultural, with much of the country's land owned by small landowners. That has meant that projects are often delayed by land acquisition issues.

Rajinder Raina, general manager, strategy and business development, Escorts, says the BJP is working to make this process easier: "Under the current prime minister, where they are asking people to sell land, they make sure at least one person in the family gets a job or resettlement to new land. So they are guaranteed some return. The new generation are not into farming so much, so they are happy to be resettled or to get a job."

The structure of government projects makes these acquisition problems even worse. T R Bharathan, governing council member of the Indian Construction Equipment Manufacturers' Association (ICEMA), explains:

"What used to happen, is you'd get a 100km road. The contractor would plan equipment for the whole stretch. But then the government will only plan for it to be built in 30km stages, [with separate tenders]. And if there is an acquisition problem over 1km, it will stop the whole project. Now, the government will buy the land first, then put out the tender so the contractor can plan properly."

The other bureacratic issue is the slow pace of approval of projects. Khalid Aziz, vice president of Pearey Lall & Sons (PLS), says, "The projects are there, but they have not got clearances. The government has got to let these projects begin. A lot of reforms have to be done in the energy sector, in the mines. The power needs in India are increasing, we need to increase our mining and energy capacity. Once this happens, a lot of cranes will be sold."

The end result of these sort of bureaucratic hurdles is that investors are reluctant to put cash into new projects, and when they do, struggle to get a return for subsequent reinvestment. ACE's Agarwal says, "In the last two to two and a half years, investors who could've done much more, are now just watching and waiting on their money. The projects haven't started working, the money is stuck. It's not the investors that have caused the trouble, it's the system."

Escorts' Raina says, "It is now coming to a point where the government has no option but to move forward, or the PPP projects will collapse."

Agarwal continues, "The new government is working very fast to make drastic changes to the regulatory environment. Their focus is on today's needs, not how things were 20 or 30 years back. The response, the supportiveness of government, has grown drastically."

India's crane industry also faces issues of supply and demand. Tushar Mehendale, general manager of Electromech, Zoomlion's JV partner for crane production in India, says, "The real estate market had been one of the main buyers [of tower cranes].

There has been oversupply in some parts of the market. But we believe it's a temporary blip, and will soon right itself. Because of the overall malaise of the economy, growth hasn't happened, and has reduced investment income. In India, people like to invest in real estate. A lack of growth elsewhere has caused problems."

Cranes Today found most Indian executives broadly enthusiastic about the BJP and its approach to business. But overseas crane builders were more cautious in their approach.

For example, Mehendale says, "The new government is at least acknowledging there are problems that need to be solved. The old government was like an ostrich with its head in the sand. They've started looking at how to elimate issues, to facilitate foreign investments."

Eric Etchart, president, Manitowoc Cranes, says, "We're very impatient to see the Indian market rebounding. The new government is probusiness, everyone has a lot of expectations."

But, Raman Joshi, Manitowoc's EVP for Greater Asia, adds, "We're just waiting for things to start happening. The last two years were spent waiting for elections, then speculating about the elections. Now that's over and there's a new government in place, now is the time to see some activities. A lot of statements and promises have been made, we're waiting for that to materialise."

Liebherr's David Griffin is similarly cautious, "The Indian market, in the lead up to the election and after, has been slow. The show's really for us a check of the atmosphere, based on the election and the uncertainty that goes with it." Time to pay for safety Historically, the crane industry in much of the world has had to compete with cheap manual labour. But the impressive overall growth of countries like India means that is no longer a realistic alternative.

ACE's Agarwal says, "Labour is becoming expensive, it's difficult to handle and troublesome. People are getting educated, they don't want to work on construction sites. In all the big metro cities now, no building site starts without a tower crane. Whatever scarce or expensive labour is there, doesn't want to work without a tower crane."

Just as site workers are demanding the tools for safer, easier, work, so are site owners. One spur to development in the crane industry has been a rash of accidents the new Delhi Metro project.

Rajinder Raina, of Escorts, says, "The Delhi Metro Rail Corporation (DMRC) laid down the norms. After the accidents, we learned from the mistakes. Pick and carry cranes were totally rejected, because of the terrain and the accidents."

As well as the DMRC, other site owners and project leads are demanding safer cranes. Raina says, "The traditional pick and carry cranes were primarily adaptations of tractors. These are no longer accepted at major project sites: Larsen & Toubro (L&T) and Reliance do not allow them. That has forced us to change the platform of the crane."

Escorts, and rivals ACE, have developed a new generation of safer cranes for lifting and material handling, based on new designs rather than adaptations to tractors. These cranes have a lower centre of gravity and front cabs.

Escort's new range is the TRX series, launched three years ago. Raina says, "The TRX platform and drivetrain is different, so the geometry is different. The load is at all times centrally placed. The capacity and reach is higher, with up to 23t capacity and up to 19m height on the TRX 2319."

At bC India, ACE was showing a crane from its SX series. Agarwal says, "Our new 14t pick and carry is called the SX150.

These cranes are as safe as telehandlers now, most are fitted with an SLI with cut off, and proximity sensors on the outside. The front mounted cab offers better visibility. It's more of a yard crane, less about travelling speeds. That reduces the cost."

Reliance is both one of India's biggest companies, and the owner of one of the country's (and the world's) biggest refineries. The third upgrade to its Jamnagar refinery, know as J3, will improve the plant's ability to produce ethylene and other petrochemicals.

On its sites, it demands international standards of safety.

This demand pays off for higher-end crane and component manufacturers. Agarwal says, "At J3, we have about 750 of the 15t pick and carry cranes: a lot were bought by Reliance, and some by contractors. We have about an 80% share of all Reliance pick and carry crane use."

Escorts too has seen demand from major projects like this. Raina says, "On Reliance J3, we have more than 300 cranes. Then at the Essar refinery [close to Reliance in Gujarat] we have 100 cranes, of 15t capacity."

The demand for safer cranes also benefits global crane builders. Yutaku Goto, president, Kobelco Cranes India, says, "Our biggest customer is Reliance. They have 200 crawlers at J3: around 80 are from us."

A focus on safety also creates opportunities for component and accessory managers. Avalon is an Indian manufacturer of crane safety systems, such as load moment indicators. Rupesh Gupta, MD, says, "If [an LMI] is enforced by the user, then it is taken. The Delhi Metro, relies on L&T. Tata won't allow a crane to be operational without an LMI. But, still a lot needs to be done, in markets where people are taking safety casually. Crane manufacturers are selling at the lowest price possible, they think adding an SLI will add to the price. It's only used when the user is enforcing it. It's not about going and convincing the manufacturer, it's about convincing the user."

Gupta's approach is to make the argument for safety direct to crane owners and users. He says, "What we do, is speak to those who hire these cranes, and promote safety. I've been giving training sessions to customers, showing what is needed to create a safe working environment. The market has been addressing these needs, but it takes time to come to a reality where safety is taken seriously."

One way Avalon is hoping to encourage take up of its safety systems is by explaining how they can offer benefits beyond safety. It is doing so by integrating its SLIs and other sensors into a new asset management and analytics system, Kube.

Gupta says, "Kube is our asset management system, which comes with data analytics. The SLI collects data once a day from a dozen sensors, and sends it to the server. We then use the data for reporting, and for analysis. "Crane manufacturers want to know how the equipment is working. Crane users want to know how they can better get productive efficiency. The owner of the crane can track where the crane is. They can use it for fuel theft control, and prevention of misuse. We can identify the operator of the crane, see if he is not using it properly. We can then help plan training schedules for him. "Right now, we're only in India, but by the end of 2015 we will take it to the world market. Major OEMs have shown keen interest in these products. Indian second tier manufacturers don't have this, it's a cost intensive investment: we can run the server, reporting,

and analtsis for them. We can offer predictive failure analysis. "Along with data analysis, there can be various advantages to understanding the buying pattern of the user: who is buying a crane, who is using it efficiently, so we can give good marketing analysis on the users.

"All of the systems we're selling today have in-built telemetry. So we can collect their data. We can then do the analysis, and sell this to them. So we give away the solution, but we can sell the analysis. It's a deferred realisation model, as it takes us a year to actually get the data."

Crane design and innovative system are not the only way to promote site safety. Equally important is operator training. However, here, India has for a long time been held back by its government.

While Gupta advocates for SLIs and finds innovative ways to persuade customers of their benefits, they are, he says, a legal requirement: "There is a mobile crane standard that says you needto have a safe load indicator. It hasn't been enforced by the authorities, because of the costs."

In a similar way, many in the industry would like to see improved certification of operators, but are waiting for government to enfore it. Manitowoc's Joshi says, "We have tied up with ICEMA, which is working with the National Skill Development Corporation of India, trying to put some safety standards in place. It's been almost five years. We've put in ideas, training for operators, owners. But it's a government initiative."

At ICEMA, Bharathan is more optimistic that certification will be properly implemented. He says the process is now underway: "We have just started our own Infrastructure Equipment Skill Council, funded by the National Skill Development Corporation of India, a government body. This is an offshoot of ICEMA. IESC is an entity that is now framing the structure for operator training. "We don't have skilled people. IESC will develop standards for creating opportunities at lower levels, more skilled people, that can drive the industry. Small truck drivers will get into loader and excavators, and start working as operators. Employers need a classification for who is a driver and who is an operator. IESC is making standards, and these will be recognised by the government through the Skill Development Corporation. "If you don't have IESC certification for your employees, finance companies won't fund you, insurance companies won't insure you. This has just started. Over the next five years, we aim to certify 200,000 operators. There will be a series of different grades, through regulated studies. Higher levels will be equivalent to a degree. "We'll be delivering

training through equipment manufacturers and private third party institutes. They will have to have accreditation. IESC will create and set standards, approved by NSDC."

While ICEMA works with government and industry to get certification adopted, companies like Manitowoc are working to make sure their own customers' employees are properly trained. Joshi says, "We have a training school in Pune, and almost every customer has been encouraged to send operators. Today we have trained more than 400 people.

"We tell crane users the operator should be educated enough to read signs in English (we're also trying to put some signs in Hindi). They must understand the crane. The operator has to be savvy, knowledgeable, educated enough, to understand where to draw the line."

Parts and components In a country like India, where cranes are often bought used and job sites are a hard journey from crane manufacturers' service depots, parts supply is often taken on by third party companies.

Shanparts was founded in 1947. Shantilal Mehta, partner, explains, "First of all, the cranes are used. So they are not able to get warranty claims from manufacturer. Crane owners are forced to have their own set up for repair. The cranes tend to be small. They have the skill to do that, with our kind of parts.

"Our business is to find the replacement part in place of the OEM. Mostly our parts come from Korea, China, Germany, or Italy."

The company is expanding, and looking to build its business internationally. Mehta says, "We have warehouses in Mumbai and Calcutta, and now one in south India, in Cochin. We will have more. We have now set up a facility in the Free Trade Zone in Mumbai, so we want to now expand our business to overseas markets as well. The nearest would be the Gulf, and countries neighbouring India, like Pakistan, Malaysia, China, Myanmar, Vietnam."

A company like Shanparts faces two main obstacles as it looks to grow. Mehta says, "The primary challenge for us is the supply chain. It is not as powerful as it should be.

"Secondly, bank interest is very expensive, so that makes our inventory build up poor. We want to find a JV partner. If we have a good JV partner with a lot of money to invest, we can do more business."

While Indian banks' and investors' reluctance to lend holds back Shanparts' development plans, they also help the company's business. Mehta says, "When people are not buying new cranes, they need to repair old ones."

As well as parts for repairs, India also has a flourishing local components business. Winch House, based in Bangalore, is a subsidiary of Italian hydraulics manufacturer SAI. K S Sanjay, chief marketing officer, says, "SAI started in 1989. Winch House started in 1995, and has been in India since 1999.

"We manufacture the winches in India. We're one of the country's leading manufacturers of winches, with almost a 30% market share. We work across segments, but mainly in construction and material handling."

The company uses tecnology from SAI in Italy for its motors and gearboxes, building the winches in India. Around 70% of its material handling market share goes, Sanjay says, to the country's small pick and carry sector.

Winch House is, like Shanparts, looking to expand into new markets. A new division, Winch House Africa, has built its business in the marine and offshore mining markets.

Another major component supplier for India's domestic crane manufacturers is Simpsons. Part of the Amalgamations Group, the 160-year-old company has been building diesel engines in India since the 1950s. The company was the first overseas licensee for Perkins. Since 1998, it has developed its own engines.

Today, it produces 180,000 engines a year, from 10-100hp for tractors, earthmoving, concrete, genset and mine segments. R Senthil Kumar, general manager, marketing, says, "Simpsons sales are around USD300m. Our customer base includes our own group companies, as well as Cummins, JCB, Atlas Copco, New Holland, and Escorts. "Escorts and ACE both use Simpsons. We have a 90% market share in engines for Indian cranes. Our 3.3l engine is very popular for the material handling industry: forklifts, 9-14t cranes. We also support tower cranes, anything up to 100hp.

"We have engines now waiting US Tier 4 Final and Stage 4 for the EU. We're supplying around 15,000 engines for exports: North America, Western Europe, Turkey, Latin America, South Africa. "Our focus for the coming years is to support our compete solution: powertrains, for construction equipment, metal handling, earthmoving, segments, all within Simpsons."