The Hindu Business Line : `Holistic approach to energy sector key to growth in manufacturing'

The NMCC has proposed to come out with intensive and separate studies of sectors such as textiles, chemicals, pharmaceuticals, electrical and electronics, food processing and leather and handicrafts, which have immediate potential to garner a major share of the global market.

New Delhi , Sept. 27

THE National Manufacturing Competitive Council (NMCC) is of the view that a holistic approach is necessary for the energy sector in order to maintain sustainability of the manufacturing sector.

This would be necessary to increase the share of manufacturing sector in the country's gross domestic product (GDP), according to it.

In the draft National Strategy for Manufacturing, the NMCC has said: "The energy sector should be looked at from a holistic perspective in view of the fact that energy shortages are seriously threatening the sustainability of industrial growth resurgence and the competitiveness of the manufacturing sector. The critical importance of the reliable, reasonable-cost power supply for healthy manufacturing sector growth needs to be recognised strongly."

Currently, manufacturing accounts for 16-17 per cent of the GDP.

The draft strategy paper suggests that in order to increase the share to around 23 per cent, the manufacturing sector should grow by around 12 per cent annually against the current growth rate of seven per cent.

The NMCC has identified several constraints, including sectoral and prioritised infrastructure, that call for immediate attention. Apart from energy, the council has stressed on labour issues, reversing inverted duty structure, and dismantling of the inspector raj.

Regarding labour reforms, the Chairman of the Council, Dr V. Krishnamurthy, said that no one was saying the amendments to the Industrial Disputes Act, which is being opposed by Left parties, need to be carried out first. There are several other issues like Contract Labour Act that could be attended to immediately.

He said that already downsizing and restructuring of workforce are happening in the domestic industry without amendments to the Industrial Disputes Act. He stressed on the welfare aspects of workers to bring about change of heart among trade unions to labour reforms.

The council has also suggested that the entire indirect tax structure needs to be revamped as the inverted duty structure was hitting the domestic manufacturing sector badly.

In the draft strategy the NMCC has also proposed to come out with intensive and separate studies of sectors such as textiles, chemicals, pharmaceuticals, electrical and electronics, food processing and leather and handicrafts, which have immediate potential to garner a major share of the global market.

Dr Krishnamurthy pointed out to the fact that there are multiple agencies dealing with the same issue, which is causing hindrance for the manufacturing sector.

He cited the example of the food processing industry, which is being handled by eight different Ministries despite having a separate Ministry.

The draft strategy paper identified 10 elements for long-term manufacturing strategy, including enhanced focus on competitiveness, creating a conducive climate for domestic and foreign investments, lowering cost of manufacturing, investing in innovations, and strengthening education and training facilities for the workforce.

Regarding indirect tax reforms, the NMCC said that the peak import duty should not be more than 10 per cent, and suggested introduction of national VAT, withdrawal of all other taxes such as Central excise, Central sales tax, octroi, State sales tax, entry tax, and stamp duty.

The strategy paper also focuses on the managerial and commercial autonomy of public sector enterprises (PSEs).

Regarding PSEs, it stresses on several aspects such as delegation of power, review mechanisms, cost and productivity, sourcing decisions, and technology.

The strategy paper has also proposed sub-sector interactions in areas such as telecom equipment, handicraft, ports, power, cement, fertiliser, biotech, steel, metals and minerals, gems and jewellery, labour issues, and technology transfer issues.

The draft states that the NMCC would review periodically the implementation of the various recommendations and the elaborations in the sub-sector engagements.

The measures to be reviewed would include action taken by the Centre and the State Governments in their respective domains.

It further states that the monitoring mechanism could also include surveys of business climate based on the opinion of the decision makers and leaders on various macro environmental factors of competitiveness.

"This would serve as an important feedback mechanism in the implementation of manufacturing reforms," it said.

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