The EPC mode has become very popular as this resulted in a visible shift from owner-managed projects to projects where the risk of time and cost overruns has been transferred to the contractor Arun Karambelkar – President & CEO – E&C, HCC Ltd.
The concept of EPC has been evolving over the last few years and has emerged as a preferred form of contracting by clients. What are the merits of this model?
In India, the mode of contracting has evolved from Item Rate to EPC over the last few years.
In Item Rate contract the client has do the basic as well as detailed engineering. Then the entire scope of work is divided in different packages as per different disciplines or expertise. For example, in Hydroelectric Power Project contract the work is divided into engineering, civil work, electro-mechanical, hydro-mechanical and equipment supply. Since the client takes the overall responsibility, they have to manage the coordination with various agencies.
In the EPC mode it is the contractor who is responsible for designing the project, procurement of necessary material & equipment and construction. This mode of contracting has become very popular as this resulted in a visible shift from owner-managed projects to projects where the risk of time and cost overruns has been transferred to the contractor.
The major benefit of this contracting mode is that Employer’s time and effort on interface management between various contractors is saved. This puts single point responsibility on the contractor. Even contractors find it very beneficial as EPC contracts offer more scope for innovation and value engineering.
- How do you see the opportunities of EPC business in India?
India needs Rs 31 lakh crore (US$ 465 billion) to be spent on infrastructure development over the next five years, with 70 per cent of funds needed for power, roads and urban infrastructure segments. Budget for fiscal year 2016-17 has earmarked Rs 2.21 lakh crore for infrastructure sector, which will put the industry on the growth trajectory. Significant construction opportunity in the form of EPC mode of contracting is expected in Expressways & Highways, Urban mass transit systems, dedicated freight corridor project, high speed rail corridors.
- The EPC sector is currently facing headwinds from several directions, hampering its growth. Could you please shed some light on the challenges facing by the sector today?
Delay in land acquisition, delay in MOEF clearances continue to hamper the project implementation. Regulatory hurdles have resulted in a decline in no. of projects being awarded. Projects in bidding stage are experiencing aggressive bidding. The much publicized new Arbitration & Conciliation act 2015 though good in spirit has failed to provide any relief as it has no retrospective effect and hence will not help clear the claims logjam.
- Tell us about your ongoing/upcoming projects?
Few of the recently completed projects by HCC include: Chutak HEP, Nimoo Bazgo HEP, Uri II HEP and Mughal Road project – all in J&K, India’s first and second strategic oil storage caverns in Vizag and Padur in south India, Polavaram Project Right Main Canal Package-III, Maroshi-Ruparell College water tunnel in Mumbai, Kashang HEP and Sainj HEP in Himachal Pradesh and Dagachhu Hydro-electric project in Bhutan. HCC has constructed around 75% of Bhutan’s installed hydro power capacity. We have also secured award of one more hydro project Nikachhu Hydro-electric project in Bhutan.
HCC is currently executing over 50 projects in India and abroad and has a current order backlog of Rs 18,123 crore, excluding L1 contracts worth Rs 3,701 crore. We are executing one of India’s largest EPC hydro power contract – Kishanganga Hydro-electric project [330 MW] in J&K. Two more mega EPC jobs in hydro power sector Tehri Pumped Storage Scheme and Vishnugad Pipalkoti Hydro-electric Project both in Uttarakhand are in full swing.
HCC has vast experience in tunneling in all types of challenging geologies and have handled tunneling with TBMs of smallest diameter (2.5 m) as well as largest diameter (10m) in India. It is also the largest TBMs fleets operational (6 TMBs) in India with 3 tunneling contracts for Delhi Metro Rail Corporation under 3 different contract packages and one TBM for hydro power project.
Bogibeel Steel Bridge superstructure in Assam is another mega project we are executing. This is the third bridge being built across Brahmaputra river (first two were also built by HCC) and is India’s longest rail cum road bridge. We have recently secured work for another mega road project – Rs 1,783 crore Ramban Banihal Road project in J&K.
We are currently involved in phase III of the Godavari Lift Irrigation project in Telangana. We are also constructing the 18 km long Veligonda Irrigation Tunnel in Telangana. We are executing civil works for Rajasthan Atomic Power Project, units 7&8. We have secured work for first phase of new Integrated Nuclear Recycle Plant (INRP) project for BARC recently.
We have also recently forayed into Building sector. We are constructing green buildings for Indira Gandhi Centre for Atomic Research, Kalpakkam in Tamilnadu.
