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Posted on Feb 21, 09:48PM | IANS
New Delhi, Feb 21 : The government will come out with a new policy on the capital goods manufacturing sector, heavy industry secretary M.F. Farooqui said Thursday.
The capital goods industry is about Rs.5,00,000 crore in size and employs 14 lakh people. However, it has not received requisite focus and attention, affecting sectoral growth.
Farooqui said the department of heavy industry in the ministry of heavy Iindustries and public enterprises would examine policy issues and make recommendations to achieve the target of 17 percent growth as envisaged in the 12th Five Year Plan.
He was addressing an interactive session on capital goods and engineering at the Confederation of Indian Industry (CII).
The secretary also said there was an urgent need for the industry to encourage innovation and build competitiveness for business expansion.
Indian capital goods manufacturers have not been able to effectively tap global opportunities. The manufacturers face a lack of level playing field due to high interest rates, unrationalized tax structure (Sales Tax, Entry Tax, Octroi, VAT etc.), reduction in custom duties, unregulated second hand machinery imports and the various preferential and free trade areas (PTAs/FTAs) resulting in inverted duty structure, according to the industry association.
Thermax managing director M.S. Unnikrishnan identified the focus areas for action by both the industry and the government to make the sector globally competitive. These included regulating second hand machinery imports, rationalization of taxes, creating a mechanism to review FTAs and providing long-term EXIM funding.
Unnikrishnan, who heads the CII National Committee on Capital Goods & Engineering, urged the government to consider giving the same kind of support as had been done for the automotive sector by increasing duty on imports.
This had resulted in not only a robust automobile industry in India which contributed 25 percent of manufacturing and 6.7 percent of the gross domestic product (GDP) and but also a strong auto components industry that competed with the best in the world.
The capital goods sector has been witnessing a slowdown since October 2008. The performance of companies was lower in 2009-2010 due to the global recession, with the growth of 1 percent registered for the year as compared to 11.3 percent in 2008-09. However, the industry had started witnessing an upswing in 2010-11 at 14.8 percent which had again come down to minus 4.0 percent in 2011-12.