27 February 2020

Interaction - Satin Sachdeva. Founder & Sec Genera

CERA is working to create and sustain an environment conducive to the growth and development of equipment rental industry of India

 

 

CERA works to create and sustain an environment conducive to the growth and development of construction equipment rental industry of India. It promotes the rental concept in order to facilitate a continued growth of the rental industry. In an exclusive interview to CONSTRUCTION OPPORTUNITIES, SATIN SACHDEVA, FOUNDER & SECRETARY GENERAL, CERA speaks about how CERA was conceptualized and the multiple tasks ahead for the Association to ensure higher standardization of the equipment rental industry in India.

 

 

 

 

 

 

Recently CERA wrote a SOS letter to Union Finance Minister Nirmala Sitharaman demanding moratorium on bank EMIs up to 31.03. 2020. What has been the response of the Finance Minister to this letter? 

 

We have not received any response so far from the government. However, we have received a positive response from government on our request of lowering down the GST to 5 percent from which is currently very high at 18 percent. Government has considered our request and has asked GST Council to analyse our demand. We hope that our other demands will also be looked into by the government.

 

 

Your assessment of the current state of equipment rentals for construction sector in India?

 

If you see globally, market reports say, the global construction equipment rental market size is expected to reach USD 230.0 billion by 2025 at a 4.8% CAGR during the forecast period.

 

But in India, issues of unceasingly delayed and stuck payments, lack of standardised practices in the construction equipment rental industry and fall of giants like IL&FS, ERA Infra Engineering, etc. have created a gloomy scenario.

 

Though India will be among top countries for infrastructure development and construction, but for next two years at least the construction equipment rental companies will have to work both in an environment of uncertainty as well as promise of strong market. 

 

The major challenge before the government will be to put all the infrastructure projects again on track.

 

 

It’s been 3 years since CERA has been in existence; tell us about the journey so far.

 

CERA was conceptualized and founded in vacuum. There was no one to represent construction equipment rental industry at National level. CII, FICCI represents the industry in entirety but not the rental industry specifically. So, the dearth of a national organization to stand for equipment rental sector was a factor for the birth of CERA.  It was in this milieu of hope and uncertainty that CERA was conceptualized and founded. I had been thinking about it for a long time and one day, I floated the idea and invited the owners of rental equipment companies to give a physical shape to it and CERA was born with a thought Let’s grow together in Sep 2016.

 

CERA has come a long way since then. CERA is working to create and sustain an environment conducive to the growth and development of equipment rental industry of India. As we move forward, there are multiple tasks ahead for the Association to ensure higher standardization of the equipment rental industry in India. 

 

 

Tell us on the steps and measures taken by CERA for the growth and development equipment rental companies.

 

CERA is growing in strength. We are working towards transforming the construction equipment rental industry into an organized sector from an unorganized sector.We are also aggressively working towards standardization - of practices and rules,  guidelines, operating procedures, business rules and practices, rental tariffs, salaries of operators, warehouse sharing prices and many other indicators. In addition to it, CERA is also working towards training the manpower in the sector and become a centre for skill development and training of operators and technical staff. This transformation movement towards becoming organized sector and gradually moving towards standardization is benefitting the construction equipment rental companies and the construction companies too. 

 

 

Skilled operators are a necessity for the industry, tell us about CERA’s contribution

 

The industry is facing dearth of skilled human resource. Due to this shortage, the unskilled or sometimes semi-skilled staffs deployed at the machine ends up in damaging the machine and causing loss to rental companies.  Consequently, the hirers restrict themselves from adopting new technologies, which otherwise will increase the productivity.  But the hirers must look forward to new technologies, especially the use of Artificial Intelligence (AI), GPS and drones, which would make work and supervision easy, and would make coordination easy at any site. CERA, in collaboration with its members ACE, SANY, Schwing Stetter, XCMG, Doosan Bobcat, CASE, Liu Gong, Gainwell Caterpillar, Alpha, Dozco, Mahindra and Gmmco organize trainings for operators and mechanical staff on various machines.

 

 

Why is there extremely low penetration of rentals in the Indian ECE market? Is there a shift from purchasing of equipment to equipment rentals by users? 

 

Since the market share of rental companies in India is just 7 percent, definitely there is huge potential. Despite India being among top countries for infrastructure development and construction in future, increasing the market share of equipment rental companies will be a challenge. Due to the issues of GST input, the construction companies are themselves buying the construction equipments. Consequently, the hirers have been hit quite badly. We are already trying to resolve the issue by talking to construction companies. Hopefully, we will find the mutually beneficial solution soon.

 

Secondly, the unceasingly delayed and stuck payments, and lack of standardised practices in the construction equipment rental industry are becoming detrimental to the industry. There is a need of new models of hiring which give more option to construction companies and are beneficial to both – hirers and construction companies. 

 

Currently, only two types of rental models exist - dry and wet rentals.  Dry rental is not much prevalent in India unlike in western countries. Dry rental gives the control of equipment in the hands of lessee and it has been observed that the equipment is not used and maintained in a standard way and consequently it cuts short the life span of equipment. However, the wet rental is highly prevalent in India as it keeps the equipment in control of the rental company in terms of operators and its maintenance.

 

 

 

Impact of GST on equipment rentals in India.

 

The GST of 18 percent is too high. The rental company gives equipments on rental to Infrastructure Company and GST of 18 percent is also charged on the rental which makes the rentals costly for an infra company. Market has become highly insecure after the downfall of many infrastructure companies and due to the payment issues with many infrastructure companies. Consequently, danger is looming on the existence of the equipment rental companies and on the jobs of lakhs of operators and mechanical staff. 

 

 

What govt policy will foster growth of equipment rentals in India?

 

The challenges that rental companies are currently facing are – non-uniform tax structure for interstate commutation. For example, there are different taxes for the movement of construction equipment in different states like in Rajasthan, Gujarat, Andhra Pradesh, etc. There is a need for uniform taxation or giving tax holidays for at least five years. Second, is there is a need for “National Equipment Policy” in India for the entire infrastructure, construction, environment, cranes, mining, etc. with specific guidelines, rules, rental and other laws, road taxes, trainings, separate operators’ licences, safety rules, financing, insurances, guaranteeing payments, for employment opportunities, etc for smooth working and ensuring their optimum use in nation building. They cannot be dealt like any commercial vehicles. CERA is building interface with government and lawmakers, and educating them on equipment sector. 

 

 

How competitive is India’s equipment rental sector vis-à-vis global norms.

 

The market share of equipment rental industry in India is still less as compared to the penetration in other countries. Compared to nearly 10 per cent market share in India, it is 65 per cent in Japan, 55 per cent in the US and 35 per cent in China. The market share is indicative of the progress and the pace of infrastructure development sector. So, there is ample that needs to be done and it is not possible unless the construction equipment rental industry and the construction companies work in tandem. Therefore, it is important to strengthen the relationship between the construction equipment rental companies, project and infrastructure corporates, manufacturers and financiers so that we all can leverage the emerging opportunities for mutual benefits. CERA is working closely with ERA (European Rental Association), ARA (American Rental Association), CEA (Construction Equipment Association), CECE (Committee for European Construction Equipment), for mutual cooperation worldwide and understanding their best practices. CERA also represented India’s equipment rental industry at CICEE 2019 at Changsha and led a big delegation of 50 hirers.

 

 

What are your expectations from EXCON 2019 trade fair?

 

EXCON 2019 is a very effective platform for the CE rental industry as industry professionals and company representatives get to see the latest innovations of global brands, and latest technology and products which help hirers to bring change in their operations for more growth and benefits. It is a platform for hirers to meet new companies and gather knowledge and information on market trends. Such trade shows foster business discussions, negotiations and transactions by OEMs and by finance companies, and enables sourcing of equipment and new technologies as it showcases the latest products and solutions from all over the world.




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