Engineering and infrastructure conglomerate Larsen & Toubro (L&T) on July 24 said that India is losing a large portion of its skilled labor to infrastructure projects that are being executed in the Middle East.
"Markets like Middle East which are investing lot of money in infrastructure development, there is so many Indians working there," L&T's chief financial officer R Shankar Raman said on July 24.
Shankar Raman while speaking on the company’s post Q1FY25 earnings conference call said that the Indian government should look to provide better conditions for labor in India.
"So if we are able to provide the conditions appropriate to India, the biggest lever differentiator is tax-free income there (in Middle Eastern countries)," Shankar Raman said.
He added that there is a fundamental difference between tax-free earnings versus taxable earnings.
"I think the government in India requires tax revenue, it requires everybody to pay tax except this agriculture sector which I do not understand," Shankar Raman said, adding, "For whatever reason, we have decided to keep the largest employment sector not taxed, but the rest of the sector increasingly are being sought to be taxed."
He added that just increasing the salaries of laborers by Rs 5,000 to Rs 10,000 is not the underlying issue with the Indian market, rather it is a deeper issue and it requires a lot of of concurrence between the government, private sector, and India's growing working population.
Shankar Raman added that there is growing disinclination to doing manual work and instead people are looking for better automation, equipment, and living conditions.
The CFO of the engineering conglomerate also said that increasing the salaries of laborers is not a big issue for large infrastructure companies.
"If you put all the labor costs at the higher emoluments together in the context of the overall project cost, it could possibly change the yield by 1 percent," Shankar Raman said.
He added that he was not very sure as to how India would meet its aspirations with Indian labor.
Last month, L&T had flagged that it was experiencing a "severe" shortage of skilled labor across various projects, attributed to factors such as extreme weather conditions and disruptions caused by elections.
The company's managing director SN Subrahmanyan. had said that L&T was facing a shortage of approximately 25,000-30,000 laborers in June 2024.
The Engineering, Procurement, and Construction (EPC) sector in India is indeed grappling with a shortage of skilled labor.
One of the key factors contributing to the shortage is climate change, executives point out that extreme weather conditions have caused laborers to drop out of projects.
"We have specific a HR for Labour. We have private labor colonies... we also taken measures to transport people in buses, taking measures to give them health and energy drinks during breaks. Early morning when they come to us, we give them breakfast late night when they go we give them dinner. So such arrangements have been made," Subrahmanyan had said in June.
He further pointed out the shortage of engineers in its IT business.
"There is a need for about 20,000 engineers within L&T... We are augmenting the shortage with training centres to upskill the with necessary requirements."
There is also 10 to 12 percent attrition at Larsen & Toubro, Subrahmanyan pointed out.
As of March 31, 2024, the company had 59,344 total employees of whom 4,459 were women and the remaining men.
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