NEW DELHI: The Centre is considering a 12–16% incentive on large investments to boost domestic manufacturing of construction equipment such as tunnel boring machines, cranes and crawlers, two people familiar with the discussions said.
The proposal is part of the scheme for enhancement of construction and infrastructure equipment (CIE) announced by finance minister Nirmala Sitharaman in her FY27 budget speech on 1 February. The budget allocated ₹200 crore for the scheme to be implemented by the ministry of heavy industries.
Under the current plan, companies investing more than ₹500 crore in construction equipment manufacturing could receive the proposed incentives, according to the people cited above, who requested anonymity.
This development comes at a time when India's ₹12.2 trillion capex bonanza—three times FY20 levels—supercharges demand for roads, rails and mining equipment, yet persistent imports of critical components hobble self-reliance.
The scheme is being designed with a ₹14,300 crore corpus over seven years, including two years for investments to be made and five years of incentive payouts, one of the people said.
The government is considering a structure of 16% incentives for the first three years, followed by 14% in the fourth year and 12% in the fifth year, the person added.
Manufacturers of construction equipment components investing more than ₹200 crore may also qualify for the incentives, the second person said.
Mint had earlier reported in November 2025 that the ministry of heavy industries had begun consultations with the construction machinery sector for an incentive-based scheme.
The proposed scheme will focus on import substitution and domestic manufacturing of high-quality spare parts, the second person said. It will include localization requirements of 30–50% domestic value addition, depending on the product’s current level of import dependence, the person said.
“If a manufacturer wants to build a product in India that is fully imported currently, they would have to localise at least 30% of the value addition. Similarly, if the product is mostly imported but some parts are made locally, the manufacturer must meet the 50% domestic value-addition condition. This is the current consideration,” said the second person cited above.
Queries emailed to the heavy industries ministry on 10 March, and construction equipment makers JCB India, Larsen & Toubro Construction and Mining Machinery, Escorts Kubota, and Action Construction Equipment (ACE) on early 11 March remained unanswered.
India imported about $500 million worth of heavy construction machinery, including bulldozers and excavators, in FY25 slightly lower than $538 million in FY24, according to commerce ministry data.
Import dependence
However, experts say import dependence is concentrated in critical components rather than finished construction equipment.
India is largely self-reliant in finished construction equipment because both domestic and global manufacturers produce machines locally, said Poonam Upadhyay, director at Crisil Ratings. But the country still imports advanced systems such as hydraulic assemblies and specialised components used in large equipment, she said.
Large lifting equipment such as cranes, and tunnelling or boring machines used in complex infrastructure projects are typically sourced from China, Japan, South Korea, and parts of Europe, including Germany and Italy, which lead in advanced heavy-engineering manufacturing,” said Upadhyay.
India has to import construction equipment largely because of insufficient domestic demand to make local production economically viable, availability of key raw materials, and the technology gap of tier-II/III suppliers compared to developed market vendors, according to ratings agency Icra.
The government capex primarily supports sectors such as roads, railways, shipping and defence, which are major users of heavy construction equipment.
A November 2025 report by Crisil said demand for construction equipment in India is driven mainly by roads (40%), followed by mining (25%), real estate (15%), and sectors such as railways, water supply and power.
India’s construction equipment market was valued at $9.24 billion in January 2026, and could rise to $13.61 billion in value by 2031, according to market research firm Mordor Intelligence.
According to industry body Indian Construction Equipment Manufacturers’ Association, said the sector grew 3% year-on-year in FY25, with sales of 140,191 units.
While domestic market growth remained subdued at 2.7%, the industry's overall performance was stronger, driven by a robust 10% surge in exports, reinforcing India's position as the world's third-largest construction equipment market.