Larsen & Toubro’s decision to scale up modular construction is more than a growth plan for one engineering company. It reflects a structural shift in how large industrial and infrastructure projects may be delivered as skilled labour shortages, high labour costs, extreme weather and remote locations make conventional site-based construction harder to execute.
L&T estimates that modularisation could represent a $100-150 billion market opportunity over the next five years. The estimate, described by deputy managing director and president Subramanian Sarma as a “very quick back-of-the-envelope assessment”, comes as the company seeks to move beyond treating conventional construction and modularisation as opposing models. Its stated direction is a hybrid approach in which components are fabricated away from the project site where that makes operational and commercial sense.
That distinction is important. Modular construction is not simply the replacement of site work with factory work. It changes where labour is deployed, how quality and schedules are managed, how components are transported and how project risk is distributed between fabrication yards and construction sites. For an EPC company, the value lies in shifting a portion of difficult site activity into a controlled fabrication environment while retaining conventional construction where modules are not practical.
L&T’s completed Project CERES for Australia provides the clearest evidence of the scale it is targeting. The company fabricated and delivered 110 modules weighing approximately 64,000 metric tonnes for Australia’s largest urea manufacturing plant, which has a production capacity of 2.3 million tonnes per annum. The plant is being developed by Perdaman Chemicals & Fertilisers in Karratha, Western Australia, under the Saipem-Clough joint venture.
L&T’s scope included 47 pre-assembled units and 63 pre-assembled racks. The components were fabricated at its modular fabrication facility at Kattupalli near Chennai. The order was classified by L&T as “Significant”, with a value of around Rs 1,000-2,500 crore. The project demonstrates the industrial logic behind modularisation: large portions of complex work can be completed in India and then transported to a distant project site.
The model is particularly relevant to projects located in places where a large temporary workforce is difficult or expensive to assemble. L&T identified Mozambique, Canada, Australia and the US Gulf Coast as markets where remote locations, limited skilled workforces or high labour costs could make conventional construction more challenging. In such settings, fabrication in established yards may help companies access a more stable labour and production base before sending completed or partly assembled units to the final site.
However, the model also creates a different set of requirements. Modules have to be designed for transport, lifted and assembled in a sequence that works at the project location, and manufactured within the limits of available yard capacity. The decision to modularise therefore has to be made early enough to influence engineering, procurement, logistics and construction planning. L&T’s emphasis on hybrid solutions suggests that the company sees selective deployment, rather than universal modularisation, as the more workable route.
The labour challenge is a central reason for that strategy. L&T chairman and managing director S N Subrahmanyan said the company employs about 400,000 workers at any given point but faces a shortage of about 60,000 labourers. Sarma described labour availability and capability as industry-wide challenges. Modularisation cannot remove the need for workers, but it can change the type and location of labour required by moving some activity from dispersed construction sites to specialised fabrication facilities.
That shift has implications for India’s construction workforce. Site-based projects depend on the availability of workers at multiple locations, often for limited periods and under difficult conditions. A larger fabrication component could concentrate work in established yards such as L&T’s facilities in Kattupalli, Hazira and Oman. It may also increase demand for workers with fabrication, assembly, engineering and quality-control capabilities rather than only conventional site skills.
L&T said its three fabrication yards have a combined capacity of about 200,000 tonnes. If half of that capacity is allocated to its offshore business, approximately 100,000 tonnes would remain available for onshore modularisation, according to Sarma. On that basis, the company estimates that it could undertake roughly three projects of the scale of the Australian project concurrently.
This capacity calculation also shows the limits of the opportunity. The $100-150 billion estimate refers to the potential market, not to L&T’s secured order book or available capacity. Even within L&T’s own network, capacity must be divided between offshore and onshore work. Scaling up will therefore depend not only on customer demand but also on fabrication-yard utilisation, transport arrangements, engineering capability and the ability to coordinate several large projects at once.
The company is also exploring smaller modules that can be transported by road, particularly for domestic projects. This is a different proposition from sending 64,000 tonnes of modules to an overseas industrial site. Road-transportable modules could allow modularisation to be used selectively on Indian projects where labour requirements are a concern but the components remain within practical transport limits.
The domestic opportunity is still at an early stage in L&T’s account. Sarma said the company predominantly uses modularisation for its own use in India and wants to extend the application beyond hydrocarbons to sectors such as steel and thermal power. That expansion would test whether modular methods can be adapted to different project designs, equipment requirements and logistics conditions rather than remaining concentrated in large process-industry projects.
The policy question is equally significant. L&T is in discussions with the government on support for modularisation and is in dialogue with the government and the Reserve Bank of India on credit-line facilities, concessional taxation for export projects and export incentives. These requests indicate that the company views modularisation not only as a construction technique but also as an export-oriented manufacturing activity.
That distinction matters for public policy. A module fabricated in India for an overseas project sits at the intersection of engineering services, manufacturing, logistics, finance and exports. The commercial viability of such projects can be affected by access to credit, taxation, export incentives and the cost of moving large components across borders. L&T’s discussions with public institutions show that companies are seeking an administrative framework that reflects this combined industrial character.
The successful Australian project is also intended to build customer confidence in L&T’s ability to execute large modular projects from India. That confidence is a practical requirement for the sector. Customers must accept that complex units can be engineered, fabricated, inspected, transported and assembled across national borders without undermining project schedules or performance. L&T’s earlier modular projects for Linde in Singapore, Shell in the Netherlands and Dangote in Nigeria form part of the experience it is using to establish that credibility.
The company’s modularisation strategy is unfolding alongside other areas of expansion. Sarma said L&T is pursuing both EPC projects and its own data-centre development, with an ambition to establish 250 megawatts to 400 megawatts of data-centre capacity in the near future. He also said the company expects three or four coal gasification projects to emerge over the next two to three years and would pursue them. These plans show that modularisation is being positioned as one capability within a broader effort to participate in industrial, digital and energy-related construction markets.
The larger urban and built-environment question is whether India’s construction economy can move from a predominantly site-based delivery model towards a more distributed system combining design, fabrication, logistics and assembly. The answer will depend on project type. Large industrial facilities, data centres and selected power or steel projects may provide stronger opportunities for modular approaches than projects where transport, design variation or site conditions make pre-assembly difficult.
What the available evidence confirms is that modular construction is becoming a strategic response to labour scarcity and difficult project locations, not merely a productivity experiment. It also confirms that the opportunity is constrained by capacity, transportability, financing and policy design. L&T’s next steps will show whether its Australian execution record can translate into a larger export pipeline and whether smaller, road-transportable modules can make the model more relevant to domestic projects.
