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INDIAN ROAD PROJECTS AND BITUMINOUS BINDERS MARKET IN INDIA

INDIAN ROAD PROJECTS AND BITUMINOUS BINDERS MARKET IN INDIA. CONTENTS. DEVELOPMENTS IN INDIAN ROAD SECTOR OVERVIEW OF INDIAN PETROLEUM INDUSTRY BITUMEN AND VALUE ADDED BINDERS. THE INDIAN ROAD NETWORK. INDIAN ROAD NETWORK. Total – 3.3 MILLION Kms.

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INDIAN ROAD PROJECTS AND BITUMINOUS BINDERS MARKET IN INDIA

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  1. INDIAN ROAD PROJECTS AND BITUMINOUS BINDERS MARKET IN INDIA

  2. CONTENTS • DEVELOPMENTS IN INDIAN ROAD SECTOR • OVERVIEW OF INDIAN PETROLEUM INDUSTRY • BITUMEN AND VALUE ADDED BINDERS

  3. THE INDIAN ROAD NETWORK

  4. INDIAN ROAD NETWORK Total – 3.3 MILLION Kms INDIAN ROADS CARRY 85 % OF PASSENGER TRAFFIC & 70 % OF FREIGHT TRAFFIC

  5. ROAD CONSTRUCTIONSHIFTS TO HIGHER GEAR • HIGHWAYS BUILT 1947-97 2 Kms / Day • PROPOSED NHDP LENGTH 14000 Kms • DAILY PROGRESS 1998-03 5 Kms / Day • DAILY EXPENSES OF NHDP 10 ML. USD • FINAL PROGRESS OF NHDP 11 Kms/Day • ASSURED FUNDING MECHANISM IN PLACE

  6. INITIATIVES BY GOVERNMENT • GOVERNMENT’S VISION : TO CREATE ROAD NETWORK WHICH IS BEST IN THE WORLD. • INITIATIVES : • LEVY OF Rs. 1 PER LTR. CESS ON DIESEL AND PETROL EFFECTIVE 1999 FOR CENTRAL ROAD FUND ( $1.2 BILLION PER YEAR) PLUS FUNDING BY ADB / WB PLUS PRIVATE SECTOR • SPECIFIC FUND ALLOCATION FOR NATIONAL HIGHWAYS, STATE HIGHWAYS, RAIL OVER BRIDGES, RURAL ROADS ETC. • SPECIAL FINANCIAL INCENTIVES PACKAGE FOR TAXES AND DUTIES APPLICABLE FOR ROAD PROJECTS ANNOUNCED • HIGH TRANSPARENCY AND FAST DECISIONS

  7. MAJOR PROJECTS • JAN 1999 – TARGET OF DEC 2004 FOR 4/6-LANING OF 5846 KMs HIGHWAY IN FIRST PHASE - GOLDEN QUADRILATERAL • SECOND PHASE ON 7300 KMs NE-SW CORRIDOR TO BEGIN ON JAN 2004 WITH TARGET OF DEC 07 • SIMULTANEOUS DEVELOPMENT OF PORT ROADS, RURAL ROADS, STATE ROADS INTENSIFIED • B.R.O. PROJECTS

  8. Typical Project Implementation Schedule

  9. MAJOR CHANGESINDIAN ROAD SECTOR • TILL 15 YEARS AGO - ROADS MADE BY STATE AND CONTRACTORS ONLY PROVIDED LABOUR / MACHINERY ETC. • DURING 1990s GOVERNMENT INCLUDED MATERIAL PROCUREMENT IN CONTRACTOR’S SCOPE • CHANGES FURTHER ACCELERATED BY MASSIVE INVESTMENTS PROPOSED IN ROAD SECTOR – 1998 ONWARDS

  10. COTRACTS AWARD METHODOLOGYMAJOR OVERHAUL • CHANGE FROM PWD SUPERVISED WORKS TO REWARD ORINETED EPC (ENGG, PLNG & CONSTRN) WITH PMC • INCENTIVE FOR EARLY COMPLETION - 1% - 6% : DISINCENTIVE FOR DELAY • SEPARATE O&M CONTRACTS FOR MAINTENANCE • ANNUITY BASED PROJECTS INCLUDING MAINTENANCE EXPERIMENTED

  11. METHODOLOGY….. • 7 PROJECTS – 383 KMs UNDER ANNUITY PATTERN - MORE LIKELY • NO TOLL / NO LINKAGE TO TRAFFIC / RISK FREE • 6 MONTHLY PAYMENT IF ROAD MEETS SPECIFIED PERFORMANCE STANDARDS • ANNUITY FIXED BY COMPETITIVE BIDDING • NEW ROAD PROJECTS TO INCLUDE LONG TERM MAINTENANCE • MODERN H.T.M.S. UNDER TESTING - TO COVER ENTIRE PROJECT

  12. IN A NUTSHELL… • INDIAN ROAD SECTOR IS LIKELY TO GROW AT FAST PACE DURING THIS DECADE • HIGH QUALITY ROADS TO PUT FURTHER PRESSURE FOR BETTER CONSTRUCTIONS AND MAINTENANCE ON EXISTING ROADS

  13. OIL INDUSTRY OVERVIEW 1st year of deregulation

  14. PETROLEUM PRODUCTS DEMAND Historical Going forward • Consumption grew at a CAGR of 3.4% p.a. over the last 5 years • Production registered a CAGR of 12.5% p.a. during the same period • Demand expected to grow at a CAGR of 3.7% p.a. during next 5 years • Demand registered over 5% growth during FY2003 Source: Company estimates FY03 MOP&NG Sub-group report for X Plan submitted to Planning Commission Source: PPAC, FY03 company estimates

  15. MAJOR POLICY CHANGES • APM to Market Determined Pricing Mechanism – Import Parity Pricing • Pvt/MNC granted Marketing rights for retail. Full Competition imminent • Price of indigenous crude linked to import parity • Oil companies allowed direct crude import • Subsidies on LPG & Kerosene borne thru’ fiscal budget

  16. PETROLEUM SECTOR – NEW INITIATIVES • Robust Accounting & Business Process • Enterprise Resource Planning / SAP • Enhanced customer service • Improving Logistics Management • Latest Supply Chain Management System • Consumer Interphase • Customer Relationship Management Package • E-Commerce • B2B B2C Portals launched

  17. Binders Market in India– Key Features • Price • Imported Landed Cost • Discounts • Credit • Complex Tax structure • Logistics • Delivery / Supply Chain Management • Easy Access to Product – Nearest source • Infrastructure • Inventory Management – at refinery and at customer’s tanks • Quick Response – Large Field force • Product Quality (Consumer Demand) • MTC required with each supply

  18. NORMAL BITUMEN DEMAND • INDIA’S ANNUAL BITUMEN DEMAND : 2800 TMT • PROD’N CAPACITY : 4100 TMT

  19. BITUMEN DEMAND • Bitumen demand is likely to grow at 12% per year for next five years

  20. DEMAND PATTERNS • BULK Vs PACKED BITUMEN • MAINTENANCE REQUIREMENT TO GROW FAST IN MEDIUM TERM • NEW APPLICATIONS VIZ SLURRY SEAL / SURFACE DRESSING • MANY NEW HIGHWAY PROJECTS • DEMAND ALL OVER THE COUNTRY ASSURED FOR LONG TERM • CHANGE IN CUSTOMER PROFILE, DEMAND AND EXPECTATIONS

  21. IMPORTS ?? • BULK BITUMEN IMPORTED AT MUNDRA PORT – 20 TMT DURING 2002 • LOW TANKAGES AT PORTS – UNECONOMICAL PARCEL SIZE • ADVERSE INLAND LOGISTICS • CONTINUED AND ASSURED SUPPLY TO CUSTOMER? • HIGH PREVAILING DISCOUNTS • PACKED BITUMEN • DIFFICULT MARKET – LOW ORDER SIZE • POLY BAGS – FREQUENT BURSTING, POOR CUSTOMER ACCEPTANCE

  22. EXPORTS ?? • BULK BITUMEN EXPORTED FROM INDIA DURING 2002 EX EAST COAST • EMULSIONS EXPORT ORDERS EXECUTED DURING 2002-03

  23. BITUMEN SEASONALITY

  24. INDIAN BITUMEN MARKET • DOMINATED BY THREE MAJOR NATIONAL OIL COMPANIES • VERY HIGH LEVEL OF COMPETITION • VOLUME / SEASON BASED HIGH DISCOUNTS • SHIFT TOWARDS VALUE ADDED BINDERS

  25. THE ZONAL MARKETS

  26. VALUE ADDED BITUMEN

  27. RELATIVE PRICING OF VALUE ADDED BINDERS • BITUMEN 10000 • EMULSION 11000 • CRMB 12500 • NRMB 13500 • PMB 17000

  28. WHY MODIFIED BITUMEN? INCREASING DEMANDS ON ROAD • INSISTENCE BY CLIENTS VIZ NHAI • INCREASING NUMBER OF VEHICLES • INCREASING AXLE LOAD • DESIRE TO MAINTAIN HIGHER SERVICEABILITY LEVEL • CHANGING PATTERN OF CONTRACTS • INCLUDES LONG TERM MAINTENANCE

  29. Modifiers under use Synthetic Elastomers SBS, SBR etc. Polymers Rubbers Plastics Crumb Rubber Natural Rubber (Latex) Plain Chemically Treated Thermoplastic EVA

  30. CURRENT MARKET FEATURES • DOMINATION BY CRMB • VALUE FOR MONEY BINDER • TEST TRACKS / RESEARCH WORK SHOW EXCELLENT RESULTS • HIGH COST OF PMB A DAMPENER • INSISTENCE BY CLIENTS ON REFINERY MODIFIED BINDERS • HIGH GROWTH RATE ASSURED • EMULSION MARKET STAGNATED • TACK COAT ORIENTED • HIGH VOLUME APPLICATIONS YET TO BEGIN

  31. MARKET SIZE AN ASSESSMENT

  32. BIS SPECS • BITUMEN BIS:73:1992 • EMULSION BIS:8887:1995 • CUTBACK BIS:217:1988 • MODIFIED BITUMEN IRC:SP:53:2002 BIS SPECS FOR MODIFIED BITUMEN UNDER FINALIZATION

  33. IN A NUTSHELL… • INDIAN BITUMEN SECTOR IS CHANGING VERY FAST IN LINE WITH THE CHANGE IN GEARS BY ROAD SECTOR • IN THE FAST GROWING BINDERS MARKET, ENTRY OF HIGH QUALITY BINDERS WILL MAKE THE MARKET GROW FURTHER

  34. THANK YOU

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