No hiccups in Q1

MUMBAI: Indian exports from the engineering sector have crossed $5bn in the first quarter of the current financial year. Engineering goods exports increased by 20% over last year, making the sector the largest contributor to India’s total merchandise exports, Engineering and Export Promotion Council (EEPC) officials said. Rakesh Shah, chairman of EEPC said that that during the first quarter of this fiscal (April-June) $5.5bn worth of engineering items were exported from India.

At this rate, total engineering exports would touch $23bn in ‘06-07 and would be the highest among all items in overall merchandise exports from India.

Currently, leading MNC corporates like Ford, General Motors, Boeing and Airbus are looking up to Indian technology companies for certain engineering services. EEPC has also taken up the task of developing Engineering Process Outsourcing (EPO) services from India as it would have a far-reaching impact on the Indian engineering industry as a whole.

It is expected that the EPO market in India has the potential to exceed $40bn by ‘20, which will catapult India’s market share in the same category to 30% from the current 12%. To tap this EPO market all the important stakeholders, including the government, academic institutions, service providers and trade bodies will need to boost investments in infrastructure and improve marketing efforts, EEPC officials added.

The EEPC chairman had highlighted the problems faced by engineering exporters, particularly the SME segment. These include service tax on inland haulage and terminal handling charges, section 80 HHC and fringe benefit tax. He had assured the government of higher growth in exports of Indian engineering items if no taxes and duties are imposed and there is better inter-departmental co-ordination for smooth implementation of the provisions of the foreign trade policy.

The industry is also facing other problems like shortage of raw material. Rajesh S Jain, CMD, Emco, said, “Due to the supply crunch of cold rolled grain oriented (CRGO) steel, power equipment manufacturing companies are struggling to meet the demand. In India, no company is producing CRGO steel, thus all the transformer manufacturers have to import the material. The price of CRGO steel is growing every month in the international market.”

The second major issue is the shortage of electronic components. “The component manufacturers are interested in catering to the fast growing sectors like telecom and computer industry for bigger margins.

Thus they are ignoring power equipment manufacturing sector,” said Mr Jain. Another growing concern for SMEs is the lack of quality human resource. According to Aaditya R Dhoot, joint MD, IMP Powers, “The IT sector is enjoying quality human capital, resulting in a dearth in other engineering sectors. Too many taxes are also restricting the growth of companies.