Manufacturers want the government to focus on removing cost hurdles such as logistics
Listen to this article
Schemes such as production-linked incentives (PLI)—part of the Make in India vision -- are just the first steps in the right direction and the government needs to do much more for Indian manufacturing to contribute a larger share to the GDP, according to leading manufacturers.
Speaking at the Mint Budget Conversations, leaders of India’s manufacturing sector listed a number of measures they would like to see from the government to help the sector realize its potential and contribute to the goal of making India a $5 trillion economy.
“The government aims to reach a level of 300 million tonnes of steel production by 2030. So, there is a gap of 180 million tonnes and we have only nine years to achieve that. The challenges in reaching that target are: how to put up large greenfield projects, how to make financial arrangements for all these new projects, how to strengthen the MSMEs and how to stop imports and strengthen our own ecosystem," said V.R. Sharma, managing director, Jindal Steel and Power Ltd.
Sharma added that on the fiscal front, the time has come to opt for a two-slab GST, either 18% and 9% or perhaps 15% and 7.5%. “This will give a boost to the Indian economy," he said.
Solving the problem of setting up greenfield projects will be key to creating the additional steel capacity the government is aiming for.
“It is a Herculean task to get a parcel of land between 1,000 and 5,000 acres and it takes almost three years to get environment clearance. If we create packages where we get water, land and environment clearances and then maybe auction to various industrialists so that the project comes in a time-bound manner. If that happens for 10-15 projects then in another six-seven or eight years, we may create a capacity of another 100 million tonnes," said R.K. Goyal, managing director, Kalyani Steels Ltd. “Govt has to create enablers so that new greenfield projects can come."
Manufacturers want the government to focus on removing cost hurdles such as logistics and put more effort into skilling the workforce to make it more competitive.
“Logistics cost in India is around 14-15% of our GDP. If you look at Europe or Germany, logistics costs are 8-10% of GDP. So that is the disadvantage we have in every product if we manufacture in India and export. We need to remove that disadvantage; therefore investment in infra should be increased even more," said Satyakam Arya, managing director and chief executive of Daimler India Commercial Vehicles.
“We have to look at skilling at least 100 million people in the next 10 years. We should not look at cheap labour, we should look at competitive labour," he added.
Experts said that while the government has put a lot of focus on ease of doing business, what the industry needs is consistency of doing business. “Because manufacturing has a long gestation period, you need policy consistency, tax transparency to ensure that foreign investors have the confidence to invest and stay invested for a long time," said Piyush Arora, director and head, strategy and marketing, Honeywell India.
According to Nishant Arya, vice chairman of JBM Group, the government needs to focus not only on Make In India but also on Create In India.
“Today we talk about Make In India, etc. If we take a step back, what is more important is we create in India, we design and engineer in India. So, the software and hardware part of it is essential and incentivizing it in the upcoming budget will be important," said Arya.