‘Time, cost overruns synonymous with project execution’

Black & Veatch is an employee-owned, global leader in building Critical Human Infrastructure in Energy, Water, Telecommunications and Government Services. Since 1915, it has helped clients improve the lives of people in over 100 countries through consulting, engineering, construction, operations and program management. Its revenues in 2013 were $3.6 billion.
G Sathiamoorthy, Country Manager & Managing Director – Black & Veatch (India) told Sandeep Menezes that reviving the infrastructure industry will depend upon how quickly the government can resolve issues related to existing projects and allocation of new projects.

Excerpts from the interview:


G Sathiamoorthy

G Sathiamoorthy

What is Black & Veatch’s future business strategy in India?
Black & Veatch is a global leader in delivering proven world class ‘concept to commissioning’ project solutions complex challenges in the segments of power, oil & gas, water and telecom.
Current market projections for India show continued growth across power, oil & gas, telecom and water. Therefore, we will remain focused on expanding our business significantly in these markets. We will leverage our brand, our top global rankings and solid reputation to capture new clients. Key to our plans will be using local experts to deliver world-class solutions to meet India’s infrastructure needs. As a result we will also expand staff size and capabilities, providing exciting career opportunities to professionals in India in the segments of power oil & gas, water and telecom.

Which are the main infrastructure segments contributing to Black & Veatch India’s current revenue mix? Going forward, do you foresee any major shift in this revenue mix?
For more than 60 years, Black & Veatch has been providing development support through EPC services across power, oil & gas and water markets in India.
There is interdependency between India’s economic development and the development of its infrastructure. For economic development to continue, infrastructure investment must continue. As a result we remain positive about future of all the markets we are targeting: power, water, oil & gas, and telecoms. We refer to these markets collectively as critical human infrastructure, and they are all important to us. There are challenges, but we are confident the desire for development will necessitate these being resolved.

Although, the new government has got elected with clear majority – it is will take at least six to 12 months for infrastructure projects to take-off. Comment.
The revival of infrastructure growth is one of the top priorities of the new government which came to power by winning majority in general election on the promise that it will boost the infrastructure development in India. The new government is mindful of the challenges it has in terms of infrastructure development and hence, has been taking steps in that direction. It has shown its intent to revive the debt ridden power sector in India by integrating the ministries of coal, power and renewable energy. Given that over 70 per cent of India’s power generation is coal-based, this move marks a good start in terms of improved co-ordination and bodes well for an integrated energy policy to be devised.
The success of the efforts to revive the infrastructure industry will depend upon how quickly the government can resolve issues related to existing projects and allocation of new projects.

Which infrastructure segments are expected to witness maximum focus in the years ahead?
The role of gas as a feedstock will grow. Low domestic gas reserves mean imports will be necessary. One result will be a significant increase in the number of LNG-related infrastructure projects. The focus will on schemes which bring imports to users: receiving terminals and pipelines. In the mid-term receiving terminal capacity needs to more than double from 13.7 million tonnes per year to 26 million tonnes per year.
With the thermal power generation segment facing the issue of shortages of coal, other feed stocks like gas – including liquid natural gas (LNG) – nuclear, hydro and renewable energy sources will get attention in the coming years.
Additionally, there is a strong inter-relationship between water services and energy generation. By employing advanced technologies, understanding synergies and optimization techniques, the amount of energy required to deliver water services can be reduced, and energy can be generated using less water. In simple terms, this is referred to as the “energy-water nexus.” This nexus of energy and water is the major emerging issue of the coming decade.

The government wants private companies to contribute half of the $1 trillion investment target over five years to 2017 to expand and improve infrastructure. How realistic is this?
According to the Ernst & Young India Attractiveness Survey 2014, the country was the fourth-largest recipient of FDI in terms of projects started in 2012, and in terms of value, it accounted for 5.5 per cent of global FDI. Ever since, there has been a marked decline. The trillion dollar investment dream target in the infrastructure sector of India, as set by the Planning Commission during the 12th Plan period (2012 – 2017), 50 per cent of which was expected to come from private players, looks a distant dream as it failed to attract new investments on account of the aforesaid manifestations of policy inertia. It is essential for bidding norms for infrastructure projects in India to be made transparent so as to infuse confidence and create a level playing field for not just domestic players, but also for foreign players who can play a major role in building India’s critical human infrastructure.
It is a gradual process and attempts to smoothen the flow of private capital into the sector have taken centre stage. Series of steps have been taken to encourage banks to lend to the infrastructure sector, and attract investors to contribute. To remove hindrances like land acquisition and environmental clearances, the government intends to set up a dispute resolution authority for projects being undertaken via the PPP model.

RoW (Right of Way) has been a major hurdle for infrastructure segments such as water supply & sewage, highways, power transmission etc. Comment.
Land is a necessity for infrastructure projects. A lot of projects are either cancelled or delayed due to non-availability of land or difficulties in land acquisition. Another major hurdle post identification and selection of land is securing the required clearances.
RoW has been the bugbear stalling infrastructure projects across India over the last 3 years. It would be prudent for the government to exclude important infrastructure development projects from the ambit of RoW and move towards single-window mechanism for core projects.

Time and cost overruns, however, have become synonymous with infrastructure project execution. Tell us about the main reasons for time and cost overruns? How can the situation be improved?
Yes, time and cost overruns have become synonymous with project execution, including energy schemes, in India. RBI data reveals that in the last two years, over 1,900 mega infrastructure projects have been stuck registering an average cost overrun of 19.2 per cent.
The main reasons attributed to the delay in implementation were delay in land acquisition, rehabilitation and resettlement problems, delay in forest and environment clearances, impediments in supply of feedstock; inflation fuelled higher costs of inputs, and funding constraints. To ensure energy security, the new government needs to be sentient towards these problems and streamline the project approval processes to facilitate quick single window clearances. Indications are that this is the case. Initiatives by the Project Monitoring Group to digitize the procedure of issuing clearances for mega projects need to be encouraged as this will help in improving their timeliness in completion.

Availability of trained manpower is an issue faced by all EPC players across India. Tell us about the extent of trained manpower shortage in India’s EPC sector?
Black & Veatch recently undertook a major recruitment effort to develop the EPC capabilities required to execute some major oil & gas wins. A strong management team was established by recruiting oil & gas project managers and engineering managers. Our Talent Acquisition team focussed on professionals with proven experience in leading process, piping and instrumentation disciplines on EPC projects. Involvement of local leadership and the prevailing market conditions helped in attracting talent from reputed multinational organizations. As the government’s plans to stimulate the infrastructure sector come to fruition, however, the competition for EPC talent will get stronger. The ability to offer roles in exciting projects both in India and overseas is helping us secure the right people.

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