Engineering sector wants help from Budget 2023 to become competitive against China
In FY22, India exported engineering goods accounted for 111.63 billion USD, which contributed to an increase of 45.51 percent. The engineering exports consisted of a share of almost 27 percent of the nation’s outward shipments. Furthermore, the engineering exports have exceeded the government’s target of 107 billion USD. The data has been collected by the Engineering Export Promotion Council of India.
The data shows the role of the critical sector in increasing India’s exports. The industry stakeholders have suggested that the trade could do better if the industries are protected from inflationary pressure and volatility around the world.
These challenges have caused problems for the industries. The engineering sector wants the budget for 2023 to pay attention to the uncertain and difficult global business conditions and take some specific measures according to the situation.
Arun Kumar Garodia, the EPP Chairman, has stated that one aspect of the budget should focus on increasing the volume of the engineering sector. It should be increased in the smaller MSMEs that are undergoing rigid competition with China.
He has added that the government should look into the Remission of Duties and Taxes on the exported products scheme like a reimbursement scheme instead of an incentive scheme. The government should reimburse for the taxes that are deducted during the manufacturing of a product.
Many schemes like the Emergency Credit Line Guarantee Scheme have been beneficial for the engineering sector, but these schemes can be proved to be a liability to the mSMEs In such cases, more tax exemptions or lower tax cuts can shift the money to the hands of the companies to take charge of their liabilities and for upgradation of technology and asset the stakeholders in the respective industries.
He has further opined that the MSMEs should be provided with direct tax exemption on investments that are performed on the Production Linked Scheme. MSMEs should have a scope for weighted tax deductions of up to 150 percent of the costs because of the promotion of exports. He has added for the calculation of interest. The government can look into the difference in the dollar interest rather than the rupee interest. Presently, dollar interest is at 6 percent while the rupee interest is at 11-12 percent for the MSMEs. He has added that subvention interest is crucial to driving away the higher interest.
Another reform that the government can take to promote the engineering sector is to emphasize reducing corporate taxes from 30 percent to 15 percent for the MSMEs.
The government should emphasize spending on infrastructure development which is integral for Atmanirbhar Bharat, especially in the transmission and distribution of power. The budget allocation should be increased by the government towards the RoDTEP policy. It will help to increase the competitiveness of exports for the manufacturers.
It has been stated by Sharan Bansal, Director of Skipper Limited. Another field where the MSMEs have asked for relaxation from the Indian government is the import of glass fiber roving from China, Bahrain, and Egypt. India is one of the largest importers of glass fiber that is used for many applications, like fiber-reinforced plastics. The material is highly strong and resistant to the action of chemicals.
The CEO and Co-founder of Runaya Group have talked about the import of the material stating that the government should not enforce anti-dumping duty in the manufacture and there should be PLI schemes for the companies involved in the manufacture of rare earth and magnets.
Shortcomings in the engineering sector:
Many geopolitical issues have caused imports to decrease. The budget should provide some relaxation in this respect. The markets have limited exposure to Russia and Ukraine, and there are many other risk factors to highlight like limitations in the airspace, uncertainty about the demands of consumers, and the impact of China’s Covid-19 affected economy. They must be provided with PLI that will aid in the present turmoil.
The Federation of Indian Mineral Industries has discussed some tax discrepancies that need to be taken care of to make India’s manufacture of aluminum less competitive. The firm has stated that aluminum production costs are the highest in the world. The prices have risen due to the surging prices of raw material, increase in taxes, logistic costs, and electricity.
In addition, they have asked the finance minister to increase the customs duty for copper scrap to 7.5 percent compared to 2.5 percent. Furthermore, there must be strict customs inspection in the ports.
Edited by Prakriti Arora