The Hindu Business Line : Panel for review of policy on capital goods

Chennai, Sept. 22 A high-level committee on manufacturing, in its report submitted to the Prime Minister on Saturday, has stressed that the activity of manufacturing ought to be viewed as an aspect of National Security.

With this view, it has identified five manufacturing sectors as “strategic for strengthening the national capabilities from the long-term point of view”. These five sectors are: aerospace, shipping, capital goods, IT hardware and electronics and solar energy.

While on aerospace, shipping, electronics and IT hardware and solar energy, the report discusses the need for special treatment of these sectors with policy interventions, it is a little more specific in its recommendations when it comes to Capital Goods.

Pointing to a need to “re-orient some of our existing policy”, the report calls for abolishing of the mega power policy, which allows for duty-free imports of power equipment for projects over a certain size.

Scrapping the policy would nullify the present unintended consequence of in effect encouraging a rapid surge in imports of Chinese power generating equipment at the cost of domestic manufacturing. “This is essential given the disadvantage to domestic manufacturing on account of the relative appreciation of the rupee vis-À-vis the Chinese currency and the non-market nature of the Chinese economy,” the report says.

The report points out that the condition of privatisation of distribution in cities with over one million in population for States to be eligible for getting cheaper power from mega power projects “has been, in effect, abandoned”.

Similarly, the condition of 15 per cent price preference for domestic manufacturers as provided in World Bank ICB procedures are “unenforceable for private sector projects”.

The report also wants duty exemption given for the National Highway Development project to be withdrawn wherever there is a domestic capacity for production of such equipment.

“The Capital Subsidy provided for the textile industry under the Technology Upgradation Scheme should be given only if the machinery is accessed from domestic sources,” the report says.

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