From a global perspective, the equipment rental industry in India is in its nascent stage. Currently, the average off take for rental is 7-8 per cent of the annual equipment production in India as against up to 80 per cent in developed countries like UK, South Korea and others. Secondly, the business model in most developed countries is ?dry rental? while in India it is ?operated rental?. As a result, in addition to supplying quality equipments, all Indian hirers are burdened with the responsibility of providing trained operation and maintenance crew, on ? site maintenance support, delivery and exit logistics and many other such challenges.

Despite the challenges of modus operandi, equipment hiring is still big business in India, making significant contributions to our GDP and provides employment to millions of people. The equipment offered by this industry can be categorised in to construction, earthmoving, material handling, mining, lift and reach, concrete, aggregate processing, transportation and haulage, power generation, utilities etc. Heavy crane rental is a very significant part of the lift and reach category. It is a highly specilised segment providing heavy lift solutions in the range of 200 to over 1,000 tonne, an essential requirement of all major infrastructure projects across the country.

Market size
Authentic and accurate and market data or analysis is not available for India. However, on consulting with Ashwin Gandhi, President Crane Owners Association of India (COAOI) and some heavy crane rental companies, it could be established that the annual market size is in the range of Rs 3500 to 5000 crore catered by nearly 400 cranes of capacity 250 to 750 tonnes, a few cranes of lifting capacity up to 1250 tonne and more which are owned by a limited 12 to 15 players in this market segment. Some large organisations have also procured heavy cranes for their captive use.

Growth prospects
The Modi effect of ?Good days will come? has not happened as yet. ?Unless and until bad days go the goods cannot come. Nobody knows when the bad days will go? says Gandhi. He further comments, ?For the past 4 to 5 years the industry has registered a negative growth and even if it revives the same shall be in the range of 5 to 10 percent only.?

Sunil Makad, Director, Steel Carriers Infrastructure is optimistic and claims that market is already growing, new cranes are being imported driven by the demand from Reliance Jamnagar and some others. Gandhi also confirms that from January 2015 onwards a lot of new cranes are being imported mainly for the Reliance project. However, once this project is completed nearly 500 cranes of different capacities will be released and there are no projects in India which can absorb the same.

Market conditions indicate that windmill sector will a prime growth driver because the government has relaxed the regulations followed by power, infrastructure, railways, cement plants, refinery modernisation, steel plant revamping and others, according to Makad.

However, Hitesh Obhan, Proprietor, Ishardas & Sons says, ?In the interest of driving growth, there more corporate players yet to enter this market as they will have adequate capacity to invest in new cranes, comply to quality and safety standards and will also have the muscle power to drive timely payments by the customers which the foremost problem of the rental industry.

Market dynamics
Name of the game is supply and demand, say all players. If the required crane is available at the right place at the right time the hirer gets the business. When projects are at remote locations the capability of the vendor for organising delivery and exit logistics, providing quality operation and maintenance crew, reputation of safe and successful heavy lifts, back up support and other factors are prime considerations for awarding the contracts. Long term rentals beyond six months durations fetch lower rates in comparison to either short term or turnkey lift contracts.

Says Gandhi, ?Current market demand translates to only 75 per cent time utilisation and for 25 per cent time the cranes are either idle or under maintenance. Any idle time beyond 25 per cent causes survival problems for the hirer because of high rate of interest. Bigger the crane higher its cost. Many customers demand new cranes less than 10 years age.?

Instead of investing in the entire range of heavy cranes most cranes many hirers resort to cross renting of specific cranes through friendly associates. However, cross rental revenues are limited to 5 to 10 percent of the turnover by most, in the interest of maintaining a healthy time utilisation of their own cranes above 75 per cent.

All hirers offer operated rentals to their customers for various reasons:

• Unable to trust the customer to use the crane within the rated capacities and maintain the equipment as per required standards.

• Unsafe operational practices being adopted by the customer leading to accidents.
• Not sure whether the crane will be returned in proper condition.
• Dry lease attracts VAT in addition to service tax.
• In dry lease ?Right To Use? has to be given which attracts additional lease tax of 4 to 5 per cent depending upon the state in which the crane is being operated.

Challenges
Inordinate delay in payment realisation is the foremost concern of the rental industry. Payment cycle is up to 120 days from the date of invoice, is the current norm. Last priority is accorded to rental dues by the customers but they demand the highest standards of the services from the providers. As a result, the cash flow of the hirer is poor or negative compelling many to either downsize or even close operations. ?The payment situation is bad that hirers have filed winding up petitions in the courts for customers having defaulted on payments for over 1 to 2 years. COAOI intends to circulate the list of payment defaulters to all members recommending their boycott,? says Gandhi.

Second major challenge is the differential rates of RTO tax and entry tax. In states like Andhra Pradesh, Karnataka and Rajasthan the rates are exorbitant. Interstate movement of heavy cranes is a logistic nightmare. COAOI has approached many government bodies to streamline the taxes thereby providing a seamless working environment to the hirers but to no avail till date. Owing to such regulations and the extent of transit delays encountered by us in crossing the bottlenecks at the state borders, we feel like foreigners in our own country,? says Makad.

Organising trained and qualified operation and maintenance crew and back up support at site is another major issue. So far in India there is no legislative regulation or mandatory certification or awareness or training facility for crane operators. At best customers demand Heavy Vehicles Driving license for the operator as a safeguard, which not the correct document. As a result, persons with low educational qualifications or even uneducated helpers graduate to being heavy crane operators. Further, owing to the scarcity of trained operators there is high attrition and migration to companies offering higher wages at random.

Looking forward
In light of the initiatives taken by the present government for accelerating infrastructure development in India it is evident that this industry will also witness exponential growth within the next 2 to 5 years. In spite of mixed reactions from the industry that things are not moving on the ground CRISL still terms the government?s initiatives as building blocks for the future.