Out of the $3 billion construction equipment sold in India, a mere 7% is sold to rental companies. At present, there are a few rental companies around, but the market is dominated by regional players. Despite all the odds, like different taxation structure for different states, entry tax, way bill, work permit etc., organised equipment rental business is bound to grow in India because of several factors facilitating its growth.

As of today, most of the projects are time-bound. Hence mechanisation is crucial to meet stipulated dates. Moreover, contractors have several projects in hand and they find it difficult to buy a number of machines due to capital expenditure, complications in managing and operating fleet, and so on. Hence contractors realise that for projects that need to be completed in a shorter period of time, rental is a better option than buying.

An interesting development is that a few big contractors have started setting up their own equipment rental division (from surplus equipment). Another positive factor in the growth of rental business is that earlier rental equipment were used only for complex projects. These include thermal power, wind energy, mega industrial projects and port construction, where heavy-lifting cranes were required – or smaller projects, with basic equipment like backhoe or pick-n-carry cranes. But now, this trend is changing, and piling rigs, concrete, tower cranes, excavators, road construction equipment etc., are also being offered on rental.

The following are some of the benefits of rental businesses, as shared by contractors who hire equipment from rental companies:

  • Availability as and when equipment is required for a short or long duration without capital expenditure, which in some cases can go up to $3m
  • It is not easy to get trained operators to run machines, and if the cranes break down then the company has to depend on operators only, who are supposed to be the skilled personnel.
  • Efforts for fleet maintenance and stocking of spares are also saved by going to rental companies.
  • The expenditure incurred by the industry in terms of hiring charges (for any duration) is treated as revenue expenditure. This is 100% allowed by the Income Tax department and any service tax amount paid is permitted to be adjusted.

About the author

Kuldeep S. Bhardwaj has over 25 years of experience in IT hardware, consumer electronics and industrial products. He has a successful track record of setting up new businesses, product launches and channel expansions, as well as building out OEM businesses in the domestic and international markets.

An alumnus of FMS, Delhi, Kuldeep is the CEO of Spartan . Previously as well, he has held senior management positions for top companies, including Samtel and Stanley Black & Decker.


 

Note: The views expressed in this blog are the author’s own expert opinions, and do not necessarily reflect the official policy or position of RCPC and its employees. RCPC cannot be held responsible¬†for the use which may be made of the information contained therein.

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