India Inc seeks auto trigger for safeguard duty on import of capital goods

NEW DELHI: India Inc has sought an auto trigger to invoke safeguard duty in case of sudden surge in imports of capital goods. India imported $30 billion of capital goods from China, the US, Germany, Japan and South Korea in FY20 and its import dependence in various capital goods ranges between 25-75%. In its proposal to the commerce and industry ministry, industry has also sought a 25% depreciation for capital goods and a weighted deduction for R&D spends to encourage investment and domestic manufacturing in the sector, in the upcoming Budget.

“Auto trigger to invoke safe-guard duty, in case of sudden surge of imports and reciprocal trade arrangements should be introduced,” the Confederation of Indian Industry said in a representation to the government.

Besides time bound public procurement tenders with mandated certified mechanics and operators, the industry group also suggested plug and play infrastructure with shared services for capital goods, and industrial clusters based on leasing models to reduce the upfront capital cost.


This comes in the wake of the government setting up a 22-member inter-ministerial committee last month to strengthen India's capital goods sector through interventions for a $1 trillion manufacturing sector by 2025. India’s capital goods output, an indicator of investment, shrank a massive 40.5% in the first six months of FY21 compared to the year-ago period. The sector is the worst hit among all use-based categories in industrial production.

“Every engine in capital goods is not firing in the same direction and broad-based private sector expansion will be visible with a lag,” said Aditi Nayar, principal economist, ICRA.

Especially for machine tools, CII wants the government to reintroduce ‘Investment Allowance’ while for the process plant equipment sector, it has asked the government to qualify at least one Indian supplier in the approved supplier list for proprietary equipment, like China. For textile machinery, it wants the government to restrict the import of used, refurbished and low-technology goods.

Though India approved its first-ever policy for the country’s capital goods sector, envisaging creation of over 21 million new jobs by 2025 in 2016, CII has sought its implementation to be fast tracked.

The National Capital Goods Policy aimed at increasing the share of capital goods in total manufacturing activity from around 12% in 2016 to 20% by 2025.

The lobby group has also suggested the development of high-tech Common Facility centres in manufacturing technology including emerging areas like digital manufacturing and additive manufacturing.