Equipment rental is advantageous because the responsibility of operation, maintenance, transportation and other administrative formalities like RTO registration and insurance lies with the supplier. The crane operation requires skilled operators, technicians and engineers for execution as well as crane maintenance. This burden can be passed on to the crane renting company if one prefers to hire a crane from the market instead of outright purchase.
The most important thing is that your capital is not blocked if you rent a crane from the market which is the case in case of outright purchase. There has to be alternate usage of crane once the project is over otherwise it is not a viable proposition to buy a crane. Many times crane rentals are very minuscule (less than 1 per cent) in relation to total project cost; hence it is always advisable to rent a crane rather than to own it.
By renting equipment there is optimal utilisation of equipment against idle time when there is no work in case of outright purchase.
There are various types of cranes (for example, crawler, hydraulic, truck lattice boom etc.) with different kinds of configurations and attachments. The requirement of cranes differs from project to project. Hence in case of outright purchase of crane one needs to understand properly as to which type and configuration crane he needs to buy, which will be suitable for his kind of jobs.
This can be avoided if you rent a crane from a rental company where they (crane rental company) undertake the responsibility of providing suitable crane as per client's requirements.
The equipment rental market is booming since last four-five years, albeit with a small pause of seven-eight months from September 2008 due to the global recession.
Infrastructure development has increased demand for power and planned expansion in next five years, so there is going to be a tremendous demand for equipment rentals from all corners. Also, refineries, cement and metros are on fast track and demand for equipment, including cranes, is growing on a higher side. In next five years there will be demand for an equal number of additional equipment than there is in the Indian market today. Thus, the future of the equipment rental market looks promising.
The current size of equipment rental in India is approximately $2.3 billion. As per a McKinsey study the earthmoving and construction equipment industry has the potential to grow fivefold from its current size of $2.3 billion to approximately $12-13 billion by 2015, growing at a 24 per cent compound annual growth rate (according to 'ECE Vision 2015') considering upcoming power projects, refineries, cement units, metros and windmill erection.
The market share of the organised sector is around 70 per cent and that of the unorganised sector is around 30 per cent. The top five crane hiring companies in India have 80 per cent share in the crane rental business and Sanghvi Movers Ltd alone has a share of 45-50 per cent.
Our revenue contribution up to September 2009 from various sectors was: Power - 41 per cent, wind energy - 19 per cent, refinery - 12 per cent, cement - 16 per cent, steel and metal - 6 per cent, metro, ports etc., - 2 per cent, and others - 4 per cent.
The above equation is likely to change from user angle i.e. power sector will require increased numbers of cranes. The total number of cranes for this sector would be 50 per cent of the total rental fleet as far as cranes is concerned in the next two-three years.
(R.S Desai is Executive Director of Sanghvi Movers Ltd, one of the largest crane hiring companies in India.)