Sales of construction equipmentare expected to grow 10-15% to a record high in 2017, driven by the government’s focus on infrastructure building. Sales of equipment such as backhoe loaders, excavators, earth moving machines and pick-n-carry cranes had peaked in 2011at 52,500 units. Volume came close to that last year.
The growth expected in the segment this year will come, said industry executives, despite a 6-8% increase in the prices of construction machines under the goods and services tax regime. These equipment previously attracted an excise duty of 12.5%, plus state taxes that ranged from 6% to 13.5%. Together, the tax incidence was 26% at the most. It is now 28%.
With the government looking at investing in smart cities as well as developing infrastructure projects such as highways, inland waterways, railways and regional airports, experts expect growth in the sector to gain further momentum in the next three to five years.
According to data available with the Indian Construction Equipment Manufacturers’ Association, sales of construction equipment declined for three straight years before rising 2.5% to 36,800 units in 2015 and 41.5% the year after, to 52,100 units.
“Asset creation in the infrastructure sector is being led by roads and on the back of that we expect to grow by 10-15% this year,” Vipin Sondhi, the chief executive at JCB India. “It will help us cross the peak seen in 2011. Real growth will come in beyond that once projects in urban renewal, irrigation, railways and real estate pick up.” JCB India, he said, is confident of growing in line with the industry.
At Tata Hitachi, where sales of construction equipment increased 46% to 6,800 units in the last financial year ended March 31, executives are optimistic of the midterm prospects.
“There has been a strong pickup in road construction activity with governments investing in expressways and state highways. A lot of emphasis is also being put on irrigation projects towards desilting rivers, digging new ponds. Even if we were to look at a conservative estimate, industry sales should grow in the range of 10-15% and breach the previous peak seen in 2011,” managing director Sandeep Singh said.
Tata Hitachi has three manufacturing facilities — at Jamshedpur, Dharwad and Kharagpur — which currently run at around 65% capacity. Given the potential in the market, the company is looking at expanding its product range by introducing refurbished wheel loaders and new 14-tonne excavators. Singh expects capacity utilisation at the facilities to go up to 80% over the next two-three years.