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Vol. 11 Issue 5.3 May 20, 2015
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Capital National Goods Policy - to be unveiled
The Department of Heavy Industry has constituted a joint task force with the
Confederation of Indian Industry to roll out a comprehensive National Capital
Goods Policy. Objective of the policy is to provide stimulus to the sector under the
Prime Minister’s ‘Make in India’ initiative.
The task force will address key concerns and issues faced by the industry and to
evolve a roadmap for the sector comprising of textile machinery, machine tools,
electrical and power equipment, plastic machinery, construction equipment,
process plant equipment and dies, mold and press tools.
The initial framework for the policy, to be formulated by the next few months, has
been articulated in a paper published by the Ministry (‘Base Paper’). The draft
base paper outlines key concerns, such as India’s share in global exports,
infrastructure and manpower support facilities, low appetite for capital investment
in research and development and huge cost of power and infrastructure; the paper
also lists the strategic pillars required for the Indian capital goods sector.
Highlights of the Base Paper:
Mission is to increase the share of capital goods contribution from present 12
percent to 20 percent of total manufacturing activity by FY 2025 and the Vision
is to be amongst top 10 capital goods producing nations of the world;
Creation and expansion of market for capital goods sector with a focus to help
the manufacturers and end users de-risk their operations, provide stable
investor friendly tax regime while actively addressing the current inverted duty
structure, close public–private collaboration to ensure that the opportunities
across the complete production value chain is captured;
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Promotion of exports with focus on introducing market access incentive
scheme for capital goods, streamlining processes and logistics for exports,
providing incentives under export promotion schemes, supporting exporters
through appropriate incentives and financial enablers and support for soft
promotions overseas should be provided to facilitate the entry of local
manufacturers into global markets;
Development of human resource, technology & intellectual property rights and
other support services with focus on working with Universities & Institutions to
promote skills needed for capital goods sector, identifying opportunities
overseas to plug technology gaps, providing special thrust for green
manufacturing through research and development innovation and building up
data base of production through suitable reporting system
Mandatory standards with focus on defining national policy to increase present
product range coverage, issuing mandatory standards on safety, environment
and quality based mandatory standard for products, institutionalizing
mechanism to determine necessary standards and age profile for machines as
well as policies for enforcement;
Focus on Small and Medium Sized Enterprise (‘SME’) to promote
indigenization and growth through technology modernizations, skill
development, product development and export facilitations. Introduce Interest
Subvention scheme like Technology Upgradation Fund Scheme which
provides concessional rate of interest to promote SME’s in the sector;
Creating an eco-system for globally competitive capital goods sector with a
focus on:
a) Defining long term strategy for the sector basis the local demand
b) Modifying public procurement policies (e.g. government tender norms) to
give preferences to local manufacturers within World Trade Organization
(‘WTO’) framework, skills and industrial infrastructure;
c) Modifying duty structure, in a manner that not provide undue advantage to
imports but enable domestic manufacturing viable
d) Renegotiating Foreign Trade Agreements (‘FTAs’) / Preferential and Free
Trade Areas (‘PTAs’) with partner countries (wherever feasible) to provide
equal playing field to local manufacturers
Mukesh Butani, New Delhi
+91 11 3066 3010
Rajeev Dimri, New Delhi +91 124 669 5050 [email protected]
Gokul Chaudhri, New Delhi
+91 124 669 5040
Bobby Parikh, Mumbai
+91 22 6135 7010
Sriram Seshadri, Chennai
+91 44 4298 7000
Amit Jain, Pune +91 20 668 19010 [email protected]
Deni Shah
Suryachandrika Murthy
e) Incorporating safety, environment and performance standards as
mandatory norms equivalent to international practices
Apart from the above, sub-sector specific strategies are also being formulated;
these strategies include elements like:
Machine tools - Facilitation of FTAs/ PTAs with partner countries to ensure
level playing field for domestic manufacturers, resolving funding issues for
SMEs, providing seamless access to capital, facilitating moderation of interest
rates for the sub-sector to spur growth and instituting schemes to bridge skill
and technology gap in this sector;
Textile Machinery - Introduction of minimum standards for equipment,
especially on imported second-hand and refurbished machinery, promoting
technology upgradation, streamlining procedure for refund of terminal excise
duty and incentivizing setting up of industrial units for manufacture of
machinery for technical textiles, knitting, and other un-represented textile
machineries;
Construction Equipment - Instituting WTO compatible norms primarily related
to anti-dumping from low-cost countries and prohibiting import of non-standard
used second-hand machinery, implement standards in end user industries,
facilitate streamlining of tax and duty structure to promote domestic demand;
Heavy Electrical and Power Equipment - Instituting schemes to improve
operating cost structure of local Indian companies, promoting testing facilities
in India, redesigning export promotion schemes;
Plastic & Rubber Processing Machinery - Negotiating FTAs/PTAs with partner
countries to spur domestic production, developing and promoting common
facility centres (‘CFCs’) in each of the manufacturing clusters to build efficient
supply chain;
Process plant equipment - Rationalizing tax and duty structure on imports to
promote level playing field for domestic manufacturers, rationalizing terms in
Export Credit Agency funding for large mega projects to promote domestic
manufacturers and limit mandate of sourcing equipment only from donor
countries subject to WTO norms, Promote advanced manufacturing
techniques;
Dies and moulds - Allowing special depreciation rates in tool room industry for
better return on investment and rationalizing duty and tax structure on imports,
negotiate FTAs/PTAs to promote domestic production of dies and moulds.
Printing & Packaging machinery - Checking the imports through local
manufacturing through technology transfer and attracting foreign direct
investment
Metallurgical machinery including steel plant equipment - Promoting local
manufacturing through transfer of technology
Advance manufacturing technology, automation and 3-D printing- Establishing
Common Engineering Facility Centre at industry clusters
BMR Comments
The National Capital Goods policy would be a positive step towards aligning
the larger vision of ‘Make in India’, mission of Foreign Trade Policy to
increase India’s exports to US $ 900 billion by 2020 and tie down the visions
and mission to the objective of National Manufacturing Policy which aims to
increase share of manufacturing in GDP to 25%.
The policy demonstrates governments resolve to provide structural and
administrative support to priority sectors and industry segment which hold
promise to revive India’s economy growth engines and contribute to
employment generation.
India’s participation in global value chain and capturing higher value addition
in India are key areas of priority for the government, and the capital goods
sector will play a critical role in realising these goals. All in all, this seems to
be a step in the right direction to support to the vision of India establishing
itself as a global manufacturing base for quality products.
BMR Business Solutions Pvt. Ltd.
36B, Dr. RK Shirodkar Marg, Parel, Mumbai 400012, India
Tel: +91 22 6135 7000 | Fax: +91 22 6135 7070
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