Raising the Bar of Indian EPC
- Mittravinda Ranjan

EPC industry could not have asked for anything more after the announcement of investments to the tune of 45 lakh crore during the 12th Five Year Plan planned by the government to give a boost to developing infrastructure and thereby providing the much-needed thrust to the growth of India's manufacturing sector. But even after two years into the 12th Five Year Plan, the industry is still awaiting any announcements of new projects, which were expected to be cleared 18-20 months back; a major setback for the Indian and international EPC players focused on projects in the Indian market.

Globally, EPC business has become highly competitive and extremely challenging with the increasing scales and complexities of projects. Tighter time lines and necessity to adhere to compliance norms further heightens the competition for the contractors in other world markets. There is no scope for compromise on standards in international markets where project owners factor safety as a part of the cost all through the five stages of the project viz pre award, pre planning, project planning and design, project execution and monitoring to project closure and handover. It is critical for the EPC companies to enhance the project management standards as per the global norms lest they may not qualify even for the bidding.

EPC players are mandated to comply with the regulatory norms, policies and legal norms that vary from country to country mandate the contractors to have a flexible approach to adapt to the local regulatory structures and work environments.

Lack of new projects in local market has drawn the Indian EPC players to the regions which are witnessing a surge in the number of new projects in the Middle East, North Africa, USA and South East Asia. Although some of the Indian players have made significant in-roads in the international markets and many Indian small scale manufacturers of process equipment are now preferred vendors for some of the leading international project owners and contractors, India, still continues to be perceived as a low-cost production house rather than an EPC business destination in its true sense in global supply chains.

Many international companies have set up their engineering centres in India to support the international projects; however, scepticism has continued to prevail in the international community in terms of quality safety and timely project deliveries in the Indian context.

On the other hand, in India, EPC contractors continue to face the challenge because of limited number of projects in the market due to various reasons right from complex approval processes, re-tapism and policy paralysis which result in long waiting periods sometimes even stretching up to few years. An Ernst & Young survey has revealed that 42 percent of infrastructure projects are delayed due to some or the other reasons. These are perhaps some of the key reasons why we do not see international players in the infrastructure, water and power sectors.

In India, project owners from PSUs have continued to award EPC-based projects while EPCM continues to be prevalent across the private players where they can have complete control on the project. One of the key issues with the EPC-based contracts is the practice of awarding the contracts to the lowest bidder, which can be a risky affair in the long term for all the stakeholders.

Globally, learning from the experience, both the project owners and contractors are now more open to experimenting with new contracting models thus creating win-win situations by sharing risks and rewards and working together towards project deliveries. And it is time for Indian project -owners to start looking at the new models of contracting that would help in creating a more competitive environment.

With the new stable government in place, everyone is hopeful that the projects which were put on the back burner will be cleared and there will be no shortage of projects over the next 3-4 years across infrastructure, oil & gas and power sectors.

Additionally, implementation of faster project clearance systems would attract the investors and the engineering contractors to provide much needed thrust to the development infrastructure to support industrial growth and economic development in the country.