National Capital Goods Policy, 2016

The National Capital Goods Policy, 2016 gives an impetus to the capital goods sector and a leg up to the Make in India initiative. This is for the first time that a national policy has been framed for the sector. Some of the key issues addressed by the policy include availability of finance, raw materials, innovation and technology, productivity, quality and environment friendly manufacturing practices, promoting exports and creating domestic demand.

Recommendations of the Policy

  • To integrate major capital goods sub-sectors like machine tools, textile machinery, earthmoving and mining machinery, heavy electrical equipment, plastic machinery, printing and packaging machinery and food processing machinery as priority sectors to be envisaged under ‘Make in India’ initiative.
  • To create an enabling scheme named, ‘Heavy Industry Export & Market Development Assistance Scheme (HIEMDA)’ to enhance the export of Indian made capital goods.
  • The policy recommends increasing the budgetary allocation & scope of the present ‘Scheme on Enhancement of Competitiveness of Capital Goods’ which include setting up of Centers of Excellence, Common Engineering Facility Centers, Integrated Industrial Infrastructure Park and Technology Acquisition Fund Programme.
  • To launch a Technology Development Fund under PPP model to fund technology acquisition, transfer of technology, purchase of IPRs, designs & drawings as well as for commercialization of such technologies of capital goods.
  • To create a ‘Start-up Center for Capital Goods Sector’ shared by Department of Heavy Industry (DHI) and Capital Goods (CG) industry in 80:20 ratio to provide an array of technical, business and financial support resources and services to promising start-ups in both the manufacturing and services space.
  • To upgrade development, testing and certification infrastructure such as Central Power Research Institute (CPRI).
  • To develop a comprehensive skill development plan/scheme with Capital Goods Skill Council and to upgrade existing training centers and set up 5 regional State-of-the-Art Greenfield Centers of Excellence for skill development of CG sector.
  • To enhance competitiveness through a cluster approach, especially for CG manufacturing SMEs.

Challenges

  • Issues affecting domestic demand creation:
    • Lack of preference towards domestic value addition in public procurement policies
    • Difficult contract conditions
    • Persistent import and use of second-hand machinery with no incentive for replacement
    • Zero duty import under ‘Project Imports’
    • Delays in project implementation are the key factors limiting domestic demand.

Issues Affecting Exports

    • Inadequate availability of competitive short and long-term financing
    • Non-tariff barriers in export markets denying market access
    • Limited understanding of international market requirements especially by smaller players.
  • Non-alignment of trade policy towards developing regions in India’s export policy to realize India’s comparative advantage.

Achieving high growth would need focused collective efforts by all concerned stakeholders - government, industry, end user segments alike and supported by an enabling policy for the capital goods industry. To address these challenges, National Capital Goods Policy 2016 was released.

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