Department of Heavy Industry Ministry of Heavy Industries & Public ...

Recommendations for 12 th Five Year Plan for Capital Goods & Engineering Sector 35
machinery and up gradation in technology. Further investments are
necessary to raise the production volumes and technology to global
scale. Volumes will give price competitiveness.
High cost of capital: The cost of capital remaining high, processors in
Small scale sectors tend to decide on machinery selection primarily
based on price. They end up choosing low to medium technology
machines and sometimes opting for used machinery. Soon it proves to
be a bad investment as these processors incur high operating cost as
well as lose on productivity and also consume higher energy.
Cost disadvantage due to duty structure in FTAs: Duty reductions to
5% for Extrusion and ZERO for Injection Moulding Machine (IMM) in
FTAs with South Korea and ASEAN have put domestic machinery at
disadvantage on price. IMM imports below 1000T from China were
stopped by imposing anti dumping duty since May 2009. Now
manufacturers from China are routing the machines through ASEAN.
The biggest manufacturer of China has set up plant in Vietnam to find
legitimate route to export machinery to India. This is detrimental to
Indian manufacturing industry.
Used machinery imports: Advancement in processing machinery for
enhancing the energy efficiency and productivity has happened in
recent past. Under the compulsions to reduce the carbon footprint,
processors in the developed world are replacing the older machines
with new technology machines. Thus used machinery from developed
world is finding a way to developing world with an attractive price tag.
Used machinery population if allowed to increase will render the
domestic processing industry inefficient in the long run.
High Input Costs: In order to enable processors to compete with the
global manufacturers, the most technology components are imported
from Europe, USA and Japan. These imports attract 7.5% customs duty
leading to increase in prices of finished goods, which in turns makes the
domestic products incompetitive in comparison to global manufacturers.
Need of automation equipment: Certain automation equipments are
required in the machinery for improving productivity, reducing wastage
and improving quality levels. These automation equipments currently
covered under Tariff Heading 9031, are not manufactured in the country
and attract an import duty of 7.5%.
Unavailability of critical components indigenously necessitates
need to establish clusters for manufacturing critical components of
common use across the industry. With increased volumes the resultant
economy of scale will reduce the input costs.
Lack of skilled labor: With the development of IT and other
employment avenues, it is becoming difficult to recruit persons to the
industry; migration of skilled persons is also a constraint faced by the
industry. This is a constraint in getting persons with the special skills
required for the production shop besides design, research and
development functions.
CAPITAL GOODS AND ENGINEERING SECTOR OCTOBER, 2011