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NMCC - PMO Report of Sept 2008


The NMCC – PMO Report of Sept. 2008 has identified capital goods among five manufacturing sectors as “strategic”. Machine tool is one of the capital goods sectors. The report further goes on to say, “from the strategic point of view support the following industries with focused attention: (1) Machine Tools …” The report further recommends: “In each of these sub‐sectors, a time bound action plan should be prepared for building high class modern capacities with R & D facilities in line with the requirement of meeting the long term strategic demands of the country. The plan would contain policies and programmes which would encourage growth and development of these sectors in the private sector while strengthening the existing public sector. Competitiveness should be the touchstone for Governmental support.”

Extract of NMCC report 2008 on  Capital Goods Industry which include machine tools 

If the country is to manufacture products of world‐class technologies, it would require a strong and substantial capital goods industry of high quality. Considering that the economy is expected to grow at 9 to 10 per cent on average, the capital goods industry in India today is of a miniscule size when compared with the future requirements of the country. More than 50 percent of the capital goods requirements of the country are currently being imported and with the targeted economic growth the demand for capital goods will increase enormously leading to much higher imports unless action is taken urgently to build a modern capital goods industry of substantial capacity. It is not possible to give focused attention to all sub‐sectors within the capital goods Industry. Therefore, the following more important industries from the strategic point of view need to be supported with focused attention. 

  • Machine tools
  • Heavy electrical equipments
  • Heavy transport, earth moving and mining equipments
  • High technology equipments like telecommunication equipments and upper end of IT and Electronic Hardware 

In each of these sub‐sectors, a time bound action plan should be prepared for building high class modern capacities with R & D facilities in line with the requirement of meeting the long term strategic demands of the country. The plan would contain policies and programmes which would encourage growth and development of these sectors in the private sector while strengthening the existing public sector. Competitiveness should be the touchstone for Governmental support. 

In order to protect and promote the selected capital goods industry there is a need to reorient some of our existing policy. Under Project Import the customs duty, at present, are exempt on power equipments and highway construction equipments under the mega power project and National Highway Development Project respectively. In the mid1990s the mega power policy was introduced whereby duty free imports of power generating equipment was enabled for large projects with the view to lowering the cost of electricity. The conditionality of privatization of distribution in cities over one million for States to be eligible for getting cheaper power from mega power projects has been in effect abandoned. The conditionality of 15% price preference for domestic manufacturers as provided in World Bank ICB procedures are unenforceable for private sector projects. It would be appropriate to abolish the mega power policy benefits prospectively. This would nullify the present unintended consequence of the mega power policy of duty free imports in effect encouraging a rapid surge in imports of Chinese power generating equipment into the country 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‐a‐vis the Chinese currency and the non‐market nature of the Chinese economy.

To view full report click here

Indian Machine Tool Manufacturers’ Association; Head Office : 10th Mile, Tumkur Road, Madavara Post, Bengaluru, Karnataka (India) 562123; Regd. Office : Plant No.13, Extension Office, Godrej Campus, Vikroli East, Mumbai – 400079
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