NMCC asks revision of raw material sourcing

NEW DELHI: The National Manufacturing Competitiveness Council (NMCC) has called for a revision of government’s policy on sourcing of materials by public sector undertakings among other recommended policy changes.

The council has pointed out that sourcing of raw materials and sale of goods is done on the ba-sis of government guidelines that were designed for a protected domestic envi-ronment. This disables the PSUs from competing with other companies as far as imports and exports are concerned, according to the NMCC report.

High costs incurred by PSUs due to low productivity and high labour costs has also disabled them as compared to private players that operate on more flexi-ble grounds. Labour’s cost to the company is high and productivity is low also because of over manning of these enterprises. Right sizing is important for better efficiency, according to the NMCC report.

With only limited autonomy extended to these companies, managerial and commercial decisions often need to be made in consultation with multiple de-partments within the PSU and with the government. There is also a need to optimise and rationalise multiple review mechanisms that the PSUs are subject to.

The council has suggested that technology transfer must be made mandatory for PSUs to set up indigenous production bases for products manufactured with new technologies. This is also necessary to leverage capacities, the report said.

PSUs must also partner with globally competitive ancillaries to source their inputs implying better quality final products. While purchase preference policy may help PSUs, it needs to be phased out within a limited period to allow them to compete with other market players, according to NMCC.

This policy is applicable to PSUs till 2008 but import tariff protection has been reduced very significantly with peak rates being brought down to 15% in the Budget of 2005-06. This requires PSUs to reorient their working strategy, according to the NMCC report.