New Delhi: In Hauz Khas, a three-lane road has been reduced to two as the Delhi Metro Rail Corp. extends its elevated rail system to South Delhi. Across town, the construction of the Rao Tula Ram Marg flyover has triggered traffic snarls, making the commute to the Indira Gandhi International Airport a nightmare. These projects are indicative of the frenetic construction activity across the country as it seeks to put in place infrastructure to cope with the seemingly insatiable demand for it.
Accurate estimates about the size of the construction sector are hard to come by, but analysts say the sector will be about $150 billion (Rs6 trillion) over the next few years.
In the first half of FY07, the construction and real estate sector attracted some $289 million in foreign direct investment. A 2003 Global Insight study on the Indian construction sector estimated a growth rate of 10% over the next five years.
The sheer scale of operations has brought with it issues and concerns that the construction industry has never had to face earlier, when the economy grew at the so-called “Hindu rate of growth”, triggering what many see as structural change in an industry that was traditionally manpower intensive.
At one level, the industry is looking at projects on a scale and pace that is unprecedented. Meanwhile, it has to face up to shortage of labour as the overall pace of economic growth generates alternative employment opportunities.
The construction industry is estimated to employ 31 million people. Industry representatives maintain that the country will need at least twice as many in the rush to build roads, ports and other infrastructure.
As a sector, it has recorded double-digit growth in each of the last four years. The rate of growth of the construction sector averaged 12.8% in the last four years, while the economy grew at 8.6%. All this has begun to interfere with the traditional labour supply models in the industry.
Conventionally, the bulk of the labour force was made up of “distress migrants” from rural areas looking for stop-gap employment in between agriculture seasons.
However, a renewed emphasis on a more inclusive model of growth has generated a big push for rural employment schemes. There is some evidence that the government’s marquee programme under the National Rural Employment Guarantee Act (NREGA), is already affecting the availability of labour even as more infrastructure projects get under way.
NREGA, introduced two years ago, promises 100 days of employment every year for every rural household with an adult member willing to work.
The jobs are provided through projects such as water conservation, water harvesting, flood control, irrigation and renovation of traditional water bodies, and construction of rural roads.
While evidence that rural employment schemes are affecting distress migration and the construction labour force is largely anecdotal, the Prime Minister’s office in a recent review of NREGA says the government had provided employment to 21 million persons since the programme was instituted.
NREGA was passed partly to prevent distress migration where people move to urban areas in search of jobs.
The shortage of construction workers has taken on particular significance with building activity scheduled to increase as the National Highways Authority of India farms out larger stretches of road to be paved and the earliest approved special economic zones begin construction in the next three to five months.
“In the past, migration from certain parts of the country had been distress migration, not demand-pull migration,” says J.K. Mohapatra, a joint secretary at the ministry of rural development and also of the National Rural Roads Development Agency.
“Traditionally, as soon as harvesting is over, farmers find they have no money. That is when they sign upfront contracts with labour contractors who will then transport them to cities and work sites across the country. When they are getting jobs near their houses, why will they migrate so far?” he asks. The availability of jobs closer home is coupled with the fact that there are plenty of opportunities to make minimum wages. “If you are working in a restaurant, you can clear Rs3,000-4,000. Why will they do this then?” asks K. Rangaswami, who heads the construction division of Larsen & Toubro Ltd (L&T).
Large companies such as L&T hire unskilled and semi-skilled labourers, such as bricklayers, carpenters and tile layers from piece-rate contractors—people who go to villages and offer short-term jobs, often at minimum wages.
R.A. Mittal, secretary, Hind Mazdoor Sabha (HMS), one of the country’s largest trade unions, said that while the employment-generation schemes are creating jobs, they were largely designed to supplement workers’ lean days.
He said he has not received any reports that the usual migration from rural to urban areas in search of work had slowed down.
“The reports we are getting is that jobs are being created but not so many that they would create a shortage for the construction industry,” says Mittal. “The NREGA promises 100 days of employment in a year to those who are covered (330 districts), and not for full-year employment, which would cause a lull in migration.” But “it (labour shortage) is becoming a large issue at all levels,” says Amrit Pandurangi, who heads the transportation and infrastructure practice for consulting firm PricewaterhouseCoopers.
“We consult with a number of companies in this space, and they keep telling us about these problems. With agricultural workers, it is more true at certain seasons, such as during agricultural season or when there are activities in villages. As it is, construction season is for a few months because of the monsoons. These kind of shortages can delay projects by a few months.”
According to Pandurangi, the problem was compounded by the fact that the same set of subcontractors are often involved in building roads, ports and power projects.
Tejinder Singh heads Himalaya Associates, which sources and supplies semi-skilled and unskilled labourers for infrastructure companies. “In Delhi and Haryana, people do not want to work as unskilled labourers,” Singh says. “Many of them have learnt driving, so they prefer doing that.” Singh goes to eastern Uttar Pradesh or Bihar to convince people to sign on. “I need at least 200 people every month.”
(First of a two-part series. The second story will focus on how the changing nature and scale of construction is leading to mechanization and other innovative practices employed by companies to deal with labour shortages.)