Indian regulation under fire

By Helen Wright10 February 2011

Senior figures from the construction equipment industry have accused regulators in India of reacting too slowly to the country's booming infrastructure market and hindering business development with cumbersome rules.

Speaking at the 10 February Indian Earthmoving & Construction Industry Association (IECIA) conference, which took place during the bC India exhibition in Mumbai, Caterpillar India Chairman Kevin Thieneman said regulation in the country was inconsistent.

"India needs to improve its business regulation. Companies that are good corporate citizens are being held hostage by regulators, in particular the environment ministry. For example, if natural resources like steel cannot be extracted in India, how can companies plan to cost effectively manufacture equipment in the country?" he said.

Mr Thieneman cited another example where equipment sold by Caterpillar had been sitting in a warehouse for over six months because the relevant clearances to enable its use had not been granted.

"We need to step up as an industry or companies may be put off," Mr Thieneman warned.

And Ranaveer Sinha, ECIA chairman and managing director of Telco Construction Equipment, agreed.

"The rate of [regulatory] movement is very slow," Mr Sinha said, adding "the environment has become a particular stumbling block in India".

Attendees at the conference heard that political and regulatory inconsistencies have resulted in a lack of coordination between the various government agencies responsible for granting clearances for construction projects.

"The situation is a barrier to entry for foreign contractors and we need to level the playing field by establishing an autonomous regulatory authority," Ravi Shreehari, head of business development at IL&FS Transport Networks told attendees.

But Mr Sinha was confident that the situation would improve in future years and irregularities would be ironed out as the regulatory environment matures in line with growth in the construction market.

"There are many other issues for regulators to deal with in coming years, not least the need to improve business practices to reduce unethical behaviour," Mr Sinha said.

He also pointed to the market for second-hand construction equipment as in need of new regulatory limits.

"We don't want India to become a graveyard for yellow metal and safety must be a key priority," Mr Sinha said.

India is widely tipped to be the next big market for expansion in the construction equipment industry, with total unit sales in the country forecast to represent 8% of global market by 2015, according to information provider Off-Highway research.

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