Construction sector contributes about 8-10% of country’s GDP. Construction sector provides employment to nearly 50 million people and is the second major sector after agriculture in terms of employment. But the industry is highly fragmented with a sizeable portion of it being unorganised. Construction industry mainly includes real estate and infrastructure development including urban development. It accounts for 55% share in the Steel consumption, 15% in the Paint industry and 30% in the Glass industry. Such being the significance of the sector, its health is a subject of concern for the government and to the people at large.
Sector hit by lockdown
Construction sector is one of the worst hit sectors in the recent countrywide lockdown announced by the government to contain the spreading of COVID-19. As construction is mainly an onsite job, the concept of ‘work from home’ doesn’t work here. As a result of lockdown, lakhs of construction workers, mainly migrant workers, have become jobless and also roofless. The Labour Ministry had issued an Advisory to all States/UTs to transfer funds in the account of construction workers through DBT mode from the Cess fund collected by the Labour Welfare Boards under the Building and Other Construction Workers Act, 1996. About Rs 52,000 crore is available as cess fund and about 3.5 crore construction workers are registered with these Construction welfare Boards. However, gesture may be just a symbolic one and may not change the ground realities much.
Partial lifting of lockdown
Extension of lockdown by 18 days on April 14th, has further compounded the problems of the sector and that of the workers. Realising this, the government has taken a lenient view on the sector and has allowed construction activities in rural areas. Even in other cases, except in containment areas, construction is allowed if employer is able to mobilise workers. Exemptions from lockdown measures are wide-ranging in nature and under the given circumstances of health emergency, this is the best we could expect from the government, says ASSOCHAM Secretary General, Mr Deepak Sood.
“Industries operating in rural areas or outside the municipality limits, special economic zones and industrial townships with certain conditions, which can be fulfilled with some costs, are a kind of partial lifting of lockdown. This is, in a way, graded opening of the economy, a proposition being advocated by ASSOCHAM. We only hope and would urge upon our members and society at large to strictly follow the SOPs so that this experiment is successful and does not pose any additional health costs,” said Mr Sood.
Mobilising workers is an uphill task
However, the task of restarting the construction at the site is easier said than done as it involves mobilising resources including labour, mainly migrant workers. Many of the migrant workers have already gone back to their native villages and once they go back to their native villages they usually come back after a gap of 2-3 months. Hence the mobilisation of workers will become a major issue and wages may play a major role here.
Availability of materials to be ensured
Further construction activity depends upon the availability of materials like cement, tiles, paint, wood panels, pipes, etc. Production of these materials have been stopped since last month post announcement of lockdown. Some materials are available in godown, with dealers and some are held up in transit due to sudden announcement of lockdown. These materials have to reach their destination before which some logistic issues need to be sorted out. Also, unless the building material manufacturers are allowed to restart their production activities, the construction activities will sooner or later will come to a halt for lack of availability of materials. No wonder then, cement companies have asked permission to restart the production activities in their factories. Even the steel manufacturers may have to think on the similar lines. Some companies like Pidilite have already started production activities selectively after obtaining required permission.
Cost of construction may go up
Post COVID-19 government may become stricter in enforcing labour related facilities including their accommodation which may add to the cost of construction and the developer might not have provided for the same in the budget. Even CII has come out with Do’s and Don’t’s for its members at the construction sites. Measures to ensure the virus is not spread may also slow down the construction process. Further, medical testing of workers, maintaining hygiene at the site, etc would increase the cost to the employer.
Liquidity issues need to be addressed
Liquidity is another important issue which also needs immediate attention. Already some manufacturers like Tata Steel and Asian Paints have written to their business partners asking for 30-45 days of credit period extension. This will have cascading effect down the line and may take several months to get normalised. Therefore, banks need to come forward with working capital enhancement provisions to help their clients to tide over the situation.
Graded opening of the industries is a welcome and much needed step but several precautionary measures are also required to be taken along with loosening of lockdown provisions. Such measures need to be taken to protect the interest of all stakeholders – manufacturers, workers, suppliers and bankers. These measures have to come simultaneously to block slippages from all/any angles.