Make partial procurement of made-in-India products mandatory: Sunil Misra

Interview with Director General, Indian Electrical & Electronic Manufacturers Association

Sluggish growth in the country’s power sector, delays in project execution and the poor financials of many state power distribution companies continue to hit the domestic electrical equipment manufacturers. Sunil Misra, the new director general of Indian Electrical & Electronic Manufacturers Association (IEEMA), speaks to Sanjay Jog about the challenges and opportunities for the sector. Edited excerpts:

What are the key challenges for the electrical equipment (EE) industry? What strategies do they have to tackle them?

The slowdown in the power sector has impacted domestic demand and the competition faced in the domestic market from imported electrical equipment are key challenges.

To stimulate demand for the domestic electrical equipment industry, the government should expeditiously address the challenges confronting the country’s power sector, including the problems in fuel linkages, land acquisition, environmental and other clearances, precarious financial health of utilities. The power sector needs urgent attention of the government. In this regard, the Project Management Group in the Cabinet Secretariat is taking proactive and positive steps.

Imports of electrical equipment in the country have assumed very threatening proportions and have now captured 38 per cent of the market for electrical equipment in India, whereas there is significant underuse of installed domestic capacity.

Apart from other interventions, it is recommended the Government of India raise the basic customs duty (BCD) on all electrical equipment to a uniform 10 per cent (currently, BCD on transmission & distribution equipment is 7.5 per cent and on generation equipment, including project imports, is five per cent).

How has the depreciating rupee impacted import of critical raw material and inputs?

The depreciating rupee has made critical imported raw material and inputs for electric equipment more costly but given the continued threat from imports of electrical equipment in the Indian market, domestic manufacturers are being forced to absorb this additional cost to remain competitive.

IEEMA and EE companies have been raising the issue of the threat from import of electrical equipment. What has the government done so far? What else should be done?

In the last one year, the Centre has taken some steps, namely, imposed import duties at the rate of 5 per cent BCD, 12 per cent countervailing duty and four per cent special additional duty, along with cess as applicable, on import of equipment for ultra-mega power plants/mega power plants. On the finding of the director general (safeguard) that the increased import of insulators from China has caused and threaten to disrupt the market to the domestic industry and producers of electrical insulators, the Centre has imposed a safeguard duty of 35 per cent in the first year and 25 per cent in the second year on import of electrical insulators from China.

But these measures are not enough. The government needs to provide greater encouragement to indigenous manufacturing by limiting participation in tenders for domestically funded projects to domestic manufacturers only; putting in place a requirement of setting up a manufacturing facility in India, within a specified time frame of the award of the tender, where foreign bidding is allowed; to provide for level playing field, that is, phased manufacturing process should be made mandatory in the country for supply of major equipment; stipulating a minimum percentage of the total procurement by any utility to be of made-in-India products; stipulating some amount of price preference for Indian products in procurement by utilities.

These measures will support Indian manufacturers, who are not seeking protection but a level playing field, and provide necessary safeguards to the domestic industry that is facing non-market competition on account of cutthroat below-cost entry level prices offered by Chinese manufacturers.

The Centre has launched Indian Electrical Equipment Industry Mission Plan 2012-2022 in a bid to make India the country of choice for production of electrical equipment and reach an output of $100 billion by balancing exports and imports. How this can be achieved?

In the Mission Plan, five areas have been identified for strategic and policy interventions, both by the government and the industry, and these include industry competitiveness, technology up gradation, skills development, exports and conversion of latent demand.

To carry forward the recommendations arising out of the Mission Plan, Inter-Ministerial Groups, comprising of representatives of the Department of Heavy Industry and other concerned Ministries / Departments, IEEMA, industry and other stakeholders have been constituted for monitoring the implementation of the recommendations and for periodic follow-up of its status.