Manufacturing thrust to begin with plan for reviving capital goods

The department of heavy industry is collaborating with industry chambers to take inputs for the policy.

The government is preparing a national policy on the capital goods sector, which will list problems and lay down a strategy for revival, essential to boosting the domestic manufacturing industry.

The capital goods sector, a key barometer for industrial activity, showed a contraction of 3.6 per cent in 2013-14, but has seen better days when it registered a growth as high as 48.5 per cent in 2007-08. Last December, it showed a modest growth of 2.1 per cent.

“Our total domestic demand for machinery is around Rs 3 lakh crore. Most of our demand is met through imports. We imported about Rs 1.55 lakh crore last year. We are trying to change this situation,” an official told The Indian Express.

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India imports most of its machinery from South Korea and China, the official said adding that the sector has not been able to perform due to several factors including free trade agreements (FTAs).

“The FTAs allow import on zero duty while the domestic manufacturer has to pay several taxes, thereby making them uncompetitive in the market. Then there is the problem of inverted duty structure where raw material for such goods costs more than the final product. Lack of technology only compounds the problem,” the official added.

The department of heavy industry is collaborating with industry chambers to take inputs for the policy.

“We are exploring options like local content requirement in machinery to make India the global manufacturing hub of machinery. While investment allowance and customs duty benefits are already available for import of heavy machinery, we are looking at excise duty and income tax holidays in the long run,” the official said.

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The department has chalked out a five-point plan to revive the sector. Among the many initiatives are tie-ups with the IITs and the Bangalore-based Central Manufacturing Technology Institute for conducting research in machine tools, processed plant equipment, heat exchangers, earth moving machinery, material technology, and textile machinery. It is also opening a test centre for construction machinery.

“We are preparing blueprint for machine tools cluster park, likely in Bangalore, where small units can set up their facilities. We are also in the process of setting up a technology acquisition fund which will provide up to 25 per cent to units that want to import technology but don’t have funds. Also, a common engineering facility centre for textiles and machine tools is being planned in Surat and Pune respectively,” the official said.

Last September, the Cabinet had cleared a scheme for making the capital goods sector more competitive. The estimated outlay for the scheme is Rs 930.96 crore.