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Recommendations for 12 th Five Year Plan for Capital Goods & Engineering Sector 27 4.2. Common issues across capital goods sector were identified. 2 All sub-sectors within Capital Goods and Engineering sector require support in four core areas 1 2 3 4 Support for incentivizing technology development/transfer and value addition in India • Develop indigenous facilities for design, development & testing of equipment • Address barriers/denial of access to cutting edge technologies to domestic companies • Incentivize/mandate foreign players to increase value addition in India Ensuring a level playing field between domestic manufacturers and imports • Restrict/ban import of second hand machinery • Revisit existing FTAs, PTAs; analyze effects on domestic players before any future agreements • Address adverse tax structure for local manufacturers in India Incentives for increasing share in global exports across sub-sectors • Export line of credit to be extended at appropriate conditions • Support for market/brand development Presence of established public sector players who can act as industry leaders • Increasing scale of operations in the industry • PSUs to act as base for technology up gradation in the industry Capital goods & Engineering sector- Recommendations for 12th five year plan 49 5.3. Sub-sector-specific issues 3.1Engineering Goods - Lack of standards in products like engines, fasteners, etc. - Unavailability/ high price of raw material such as silica sand & pig iron for casting industry, forging quality steel etc. 3.2 Heavy Electrical - Surplus installed capacity leading to projected low capacity utilization as power equipment worth 50,000 MW already ordered to Chinese cos. - Underdeveloped testing for high voltage testing & inadequate testing capacity for low voltage equipment at CPRI - Unavailability of raw material like CRGO steel - Lack of Standardization relating to rating of equipments 3.3 Process plant equipment - Large projects funded on limited recourse basis /ndian Export Credit Agency is not mature to take up large projects. - Lack of focused/ mass manufacturing mainly due to taxation related paperwork which affects the manufacture of components in the value chain - Lack of network development CAPITAL GOODS AND ENGINEERING SECTOR OCTOBER, 2011
Recommendations for 12 th Five Year Plan for Capital Goods & Engineering Sector 28 - Lack of Know how on Process technology; Dependant on overseas process licensors 3.4 Earthmoving& mining machinery - Lack of bilateral technology alliances with select countries for longwall mining, walking dragline, high capacity dump trucks and rope shovels 3.5 Textile machinery - Cumbersome procedures for refund of terminal excise duty for purchases of textile machinery under EPCG license from domestic supplier – encouraging the EPCG license holders to import the machinery - Lack of capacity creation through expansion and new units as gestation period is long with slow rate of return 3.6 Metallurgical machinery - No coordination with the user sector on payment terms, demand outlook and technology up gradation - Low exports due to trade barriers by other countries as tendency of foreign process licensors / EPC contractors to source equipment from their own countries. - Lack of design engineering & manufacturing capabilities in steel plant equipment 3.7 Machine tools & Plastics machinery - Government tender terms place Indian manufacturers at a disadvantage against imports such as condition of previous supply, non-acceptance of single tender from domestic manufacturers - Lack of capacity creation through expansion and new units substantial amount of Working Capital is required by the industry as the cycle time is long, running sometimes into a few years - Capacity in PSUs such as HMT & HEC not optimally utilized 3.8 Plastics machinery – Increasing imports due to FTAs/PTAs – Processing industry dominated by SME opt for machines from far east on account of low price. Domestic cost disadvantages to be eliminated. – Need to develop efficient supply chain cluster 6.4. Sector Wise Assessment 1. Machine Tools Machine tool industry is considered as mother industry for capital goods sector as it supplies machinery for the entire manufacturing sector. The multiplier effect could be achieved to the extent of 1:100 times. This sub-sector faces umpteen number of problems mainly due to decade long technology gaps. Out of 800 manufacturers of machine tools and its parts mostly SMEs, about 25 units are mid-size manufacturers which have annual turnover varying between Rs.200 - 300 crore each. Type of machine tools currently manufactured in India are General/Special Purpose Machines, Standard CNC machines, Gear cutting, Grinding, Medium sized machines, EDM, Presses, Press Brakes, Pipe Bending, Rolling, Bending, Measuring, metrology and gauging, etc. CAPITAL GOODS AND ENGINEERING SECTOR OCTOBER, 2011
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