According to Amit Gossain, President, Indian Construction Equipment Manufacturers Association (ICEMA), this would imply a $16 billion to $21 billion market, up from today´s $3 billion in India.
At what rate has the Indian construction equipment (CE) industry been growing in the last two decades? What opportunities do you foresee for the industry? The industry has been growing at a rate of 10-15 per cent in the last two decades. But in the last couple of years, there has been a degrowth due to decline in infrastructure activity. The degrowth is also due to the overall economic slowdown along with other reasons like delay in project execution, land acquisition issues, environmental clearances and severe decline in the financial health of infrastructure companies. However, with the government introducing the much-needed reforms, we are hopeful of witnessing some growth in the coming months. According to a latest report released by AT Kearney, the construction equipment market is expected to grow by a healthy 20 to 25 per cent over the next few years to reach 330,000 to 450,000 units sold in 2020, from current levels of about 76,000 units. This would imply a $16 billion to $21 billion market, up from today´s $3 billion.
Further, the government´s recent announcement to roll out Rs 2 lakh crore worth of infrastructure projects this year has definitely set a positive note for the industry. Projects like Delhi Mumbai Industrial Corridor, Swachh Bharat, Clean Ganga, Smart Cities, and other projects like airports in Tier-1 and Tier-2 cities, thermal and hydroelectric power plants, telecommunications, water & sanitation - all of which present a huge opportunity for construction equipment manufacturers.
What are the major challenges before the industry today? Lack of skilled manpower is one of the foremost challenges. Availability of skilled manpower for handling construction equipment is becoming an issue in India, with a potential shortage of around 20 per cent anticipated by 2015. If the industry grows as predicted, the gap could widen to 30 per cent by 2020. Import of low quality machinery is another challenge. As an industry body, we believe that the government should look at restricting multiple port entry to prevent dumping of low quality used equipment. We should have a single port entry system to facilitate more effective inspection of the machines on various parameters like safety, emission etc.
What measures has ICEMA taken to tackle the issue of skilled manpower shortage? ICEMA´s proposal for setting up a Sector Skill Council has been approved by NSDC (National Skill Development Corporation). The council, recently renamed as Infrastructure Equipment Skill Council (IESC), with the support of ICEMA and its members, will spearhead the skill development initiative of the industry. The council would work towards developing National Occupational Standards and curriculum for operator training. Existing training centres of ICEMA members would be affiliated to IESC for conducting trainings. IESC would also collaborate with other concerned training centres for conducting the training.
How is the import of second-hand equipment/machinery affecting the Indian industry? Import of used equipment in India is largely unregulated, which can make India a dumping ground for outdated equipment, with serious safety implications. These products are of very low quality and short life, without adequate after-market support, though the initial cost is very attractive. Hence dumping of equipment by low-cost countries should not be encouraged and domestic industry should get the benefit of supplying their products to the local projects.
ICEMA has made the following recommendations in this regard to the government: restrict import of used machines to less than 3 years old; meet CMVR (Central Motor Vehicles Rules) stipulations on homologation; clearance from ARAI (Automotive Research Association of India) on emission /noise pollution control; higher import duty than that of new machines and single port entry.
What other reforms are required to promote the industry? Some of the major reforms required are in the taxation and duty areas. Tax rates are high and in certain cases, this favours imports over equipment manufactured in India. Value Added Tax (VAT) which varies from State to State should be made uniform in all States. Entry Tax should not be levied for goods already subjected to VAT/CST (Central Sales Tax). The government should create a Level Playing Field for the domestic industry by providing duty exemption on certain construction equipments manufactured in India. Some of the equipment listed at Item No. 16 and 21 of the list 16 under the Notification No.12/2012 (Custom) dated 17th March 2012 should be removed. These items are presently manufactured in India. Domestic industry needs to have a level playing field in supplying their products to the projects of NHAI, PWD, Metropolitan Development Authority and other government bodies.