The capital goods industry has been witnessing a downturn for the past few years. The achievement of the desired growth rate of 17 per cent by 2016-17 will also depend on what the Budget has in store for the industry. There is an urgent need for the investment cycle to pick up through large infrastructure projects. At present, there is no order booking for domestic capital goods manufacturers, which is not a very positive sign. Unless consumption picks up and utilisations starts, there will be no orders.
The Budget may need to address key concerns such as declining share of domestic manufacturers following the rise in imports, resulting from free trade agreements/preferential trade agreements signed with various countries. These agreements have not only dented the share of domestic manufacturers, resulting in under-utilisation of capacity, but have also led to inverted duty structures, which have created an uneven playing field between domestically made goods and imported products, thereby imposing higher costs on domestic manufacturers.
We have several expectations from Budget 2015-16. Excise duty should be reduced from 12 per cent to 10 per cent. A 4 per cent special additional duty should be imposed on all types of projects and others that involve import of capital goods.
The capital goods sector is the only engineering sector where basic Customs duty is nil in case of specified mega power projects, ultra-mega power projects, nuclear power projects, specified goods for coal-bed methane operations, goods required for petroleum operations under specified contracts under NELP, fertiliser projects and coal mining projects. The provision of nil Customs duty on import of capital goods for projects should be removed. There should be rationalisation of taxes and correction of anomalies including inverted duty structure on specific products such as electrical insulators, insulated cables, machine tools.
The Government also needs to provide fiscal as well as non-fiscal incentives for technology upgrades, R&D and exports.
The writer is CMD and CEO, JCB India Ltd