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Impact of Gulf War on Indian Construction Industry

POSITIVE FALL OUT

Business Opportunity

The post Gulf-War period will have substantial opportunity for the Indian Business Houses who already have good experience of construction works in Iraq. The major stake holders are going to be: (i) Engineering & Construction companies, (ii) Manufacturers & Suppliers, and (iii) Advisors / Consultants / Insurance / F.Is. Iraq has been under economic sanctions and international control since the 1st Gulf War and therefore has seen very little economic growth. The next section provides an estimate of the quantum of work for rebuilding Iraq after the Gulf War.

Extent of possible investment in the next 10 years for rebuilding Iraq.

Sl.No.

MAJOR OPPORTUNITY AREAS

STAKE HOLDERS

LIKELY INVESTMENT IN NEXT 10 YEARS (in US$ m)

1.

Construction & Engineering Services

Engineering & Construction companies

 
 
  • Construction of water treatment & Selvage disposal system.

 

300

 
  • Construction of Roads / Highways and appurtenant structures.

 

4,800

 
  • Construction of Houses & Institutional Buildings. ( schools / hospitals / offices / go downs / warehouses)

 

23,000

 
  • Construction of Irrigation Systems ( canals / check dams / regulating structures )

 

10,000

 
  • Construction of Airports / Hotels

 

620

 
  • Construction of stadium / recreation centers

 

400

 
  • Construction of power generating units

 

500

 
  • Construction of Industrial Structures

 

16,000

2.

Supply of goods / trading

Manufacturers & Suppliers

 
 
  • Construction Materials (Major)

   
 
  • Cement

 

4,750

 
  • Steel

 

6,000

 
  • Finished hardware products

 

4,000

 
  • Plastics / paints / glass items

 

3,000

 
  • Construction Equipment

 

6,000

 
  • Automotive Parts

 

2,000

 
  • Tyres

 

4,000

3.

Support Services:

Advisors / Consultants / Insurance / F.Is

 

Training of construction workmen.

 

90

 

Establishing regulatory framework

 

-

 

Lending & Financing Norms

 

1,750

 

Insurance and Risk Mitigation Services.

 

1,000

 

Engineering Consultancy Services

 

3,000

 

Valuation and Costing services

 

500


Basis of Estimate:

  • Water requirement per capita: 110 lts per day

  • Sewage / sullage per capita: 60 lts per day

  • Power requirement: 1000 MW per crore of population

  • Housing: 200 sft per family of 7 members


Source:

  • Cement Manufacturers Association

  • CIDC Survey

  • Building India Brick by Brick

  • Asia Construct Country Report

  • World Bank Country Report

  • World Bank Fact Book


Negative Fall Out


1. Impact of Gulf War on Cost of Construction:


The Gulf War will result in escalating cost of construction throughout the country primarily due to increase in cost of fuel, lubricants etc. As estimated by CIDC the average increase in cost of construction will be a 0.53% in the short term period (1 to 3 months time) and thereafter the price may stabilize in the mid-term period (6 to 9 months). In the long term period (12 to 18 months) the increase in cost is likely to be 0.29%. Table 1 gives an overview of the impact.


Table 1:
Average increase in cost of construction is given as follows:

 

Delhi

Kolkata

Chennai

Hyderabad

Bangalore

Over-all Average

Short term ( 1 to 3 months)

0.525

0.627

0.596

0.627

0.596

0.52

Mid term ( 6 to 9 months)

0.525

0.627

0.596

0.627

0.596

0.52

Long Term ( 12 to 18 months)

0.295

0.295

0.295

0.295

0.295

0.295


Table 2 & Table 3 indicate the percentage increase in cost for various sectors and various regions over the short term and long term period respectively. The computations are made as per the indices calculated by CIDC

 

Table 2:
Percentage increase in cost in the short term period sector wise(1 to 3 months)

 

North

East

South

West

Building

0.59

0.66

0.65

0.59

Bridges

0.66

0.76

0.75

0.64

Dams

0.66

0.7

0.69

0.66

Medium Industry

0.44

0.58

0.52

0.42

Maintenance

0.34

0.44

0.42

0.34

Roads

0.59

0.69

0.65

0.59

Mineral Plant

0.6

0.7

0.69

0.6

Urban Infra.

0.25

0.35

0.32

0.25

Power

0.72

0.89

0.82

0.77

Railways

0.38

0.48

0.43

0.38

Transmission

0.55

0.65

0.62

0.56


Table 3:
Percentage increase in cost in the long term period sector wise (12 to 18 months)

 

 

North

East

South

West

Building

0.295

0.295

0.295

0.295

Bridges

0.295

0.295

0.295

0.295

Dams

0.295

0.295

0.295

0.295

Medium Industry

0.295

0.295

0.295

0.295

Maintenance

0.295

0.295

0.295

0.295

Roads

0.295

0.295

0.295

0.295

Mineral Plant

0.295

0.295

0.295

0.295

Urban Infra.

0.295

0.295

0.295

0.295

Power

0.295

0.295

0.295

0.295

Railways

0.295

0.295

0.295

0.295

Transmission

0.295

0.295

0.295

0.295


Source:

Primary data collected by CIDC. Analyzed as per CCI, formulations. Prepared in association with:

  • Labour Bureau

  • Ministry of Labour

  • Dept. of Economic Affairs

  • Ministry of Industry

  • Ministry of Urban Affairs & Employment

  • Dept. of Economic Affairs

  • Ministry of Finance

  • National Sample Survey Organisation

  • Ministry of Surface Transport

  • Asian Development Bank

  • Central Statistical Organisation

  • Ministry of Planning & Programme Implementation

  • Central Water Commission

  • Central Public Works Deptt

  • Army Headquarters

  • National Building Organisation

  • Construction Industry


 
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