Govt move to revive capital goods industry

NEW DELHI: The government on Monday announced a multi-pronged strategy including setting up of an inter- ministerial committee to revive the capital goods industry which is facing a severe decline in production and low order book position.
Addressing an interactive session with captains of the capital goods industry, Minister for Heavy Industries and Public Enterprises Balasaheb Vikhe Patil said, "An inter-ministerial committee (IMC) headed by HI secretary BN Jha would be set up soon to look into all the problems plaguing the industry and resolve inter-ministeral issues in a time-bound manner."
Responding to a demand by the industry for restoration of 15 per cent price preference to domestic industry in World Bank projects, he said the matter was under active consideration of the government and a notification to ensure the price preference under such projects was likely to be issued soon.
Unveiling a three-point strategy at the session organised by CII, Patil said the IMC would include joint bilateral groups with various ministries to resolve issues with ministries such as power, petroleum and natural gas and surface transport.
In order to streamline all procedures, Patil said banking issues, particularly the non-performing assets (NPAs) would be examined. Similarly, the issue of reduction in import duty in certain cases to zero per cent or five per cent which was causing injury to the domestic industry would also be looked into.
In addition to this, Patil said a task force would be set up to finalise a long-term strategy to boost exports.
"The terms of reference of the task force can be finalised to examine measures to increase exports," he said, adding a task force for agricultural exports could also be set up in view of a sharp decline in tractor sales.
Expressing concern over the low level of investment in research and development (R&D) in the sector, Patil said one of the options could be to impose cess on the lines of the automobile sector for funding R&D.
He also said he would be willing to give some of the government R&D units to the industry to enhance technology levels and make the industry price and cost competitive.
Referring to labour reforms, he said there was a need to reform labour laws while ensuring security to the workers.
He, however, added the industry must take measures to increase labour productivity and labour reforms should not be used as an excuse to improve productivity.
Speaking to reporters on the occasion, Heavy Industry secretary BN Jha said the ministry would soon organise a similar interactive session with the paper industry.
Jha pointed out that the auto industry, particularly the auto parts segment, had started to look up following government initiatives to address bottlenecks faced by the sector.
The April-June quarter results of the auto sector, machine tools and the capital goods industry indicated that the industry was witnessing a turnaround, he said adding the growth rate was likely to be sustained.
Minister of State for Heavy Industries Vallabhai Kathiria suggested setting up of a task force to resolve policy-related issues, including duty structure, funding of R&D programmes for development and growth of industry.
Jha said the industry must take advantage of the shifting of manufacturing bases from developed to developing countries.
Earlier, making a presentation, Sumit Mazumdar, chairman, CII Committee on Capital Goods, said the biggest concern facing the capital goods sector was severe decline in production, low order book position and large idle capacity which had led several units to close down.
Production in the capital goods sector during 2000-01 had declined to a negative four per cent from 1.8 per cent in the previous year, he said while pointing out that sectors like textile machinery had posted a negative growth of 27 per cent.
Mazumdar said the present Purchase Preference Policy of the government was having a negative impact on the sector.
Similarly, duty free import of second hand machinery was also adversely impacting the sector, he said adding the industry would submit detailed reports on both these issues to the government.
Outlining the demands of the industry, he said there was a need for a complete revival package for the capital goods industry, setting up of bilateral joint working groups with the user ministries as also setting up of joint task forces on policy issues, export strategy, productivity improvement and funding and financing.
Mazumdar said the government should designate Special Economic Zones for capital goods clusters and provide bilateral credit lines to boost exports.