Pre-Budget Proposals 2016-17 - Foundry Sector Expectations

Spokesperson - Mr. Krishna Samraj, President, IIF

The Institute of Indian Foundrymen (IIF) is the apex industry body promoting the competitiveness of Indian Foundry industry. There are approx 5000 foundries in India largely in MSME category.

The foundry or metal casting industry is key component feeder for the various sectors such as Auto, Auto Components, Railways, Agro, Tractors, Textile, Cement making, Electrical Machinery, Earthmoving Machinery, Power Equipment, Defence Equipment, Aero & space industry etc. & its sustainable growth has become more important today than ever before given the emphasis of the Govt of India on "Make in India".

Today, India is the 3rd largest global manufacturer of metal castings globally producing approx 10 Million tons of castings in various metals such as grey iron, ductile iron, steel & aluminum alloys etc. for various applications valued at approx USD 18 Bn & exporting approx 12-15%. However, there is potential & need to do more & become global force.

IIF has submitted its pre-budget proposals to the government and expects the following interventions from the government for supporting manufacturing:

1. Taxes &Duties

India being a developing nation does not generate enough scrap & it needs to be necessarily imported. It is proposed that the import duties on major raw materials used in foundries such as scrap, should be reduced, whereas the export of raw materials without value addition must be discouraged by imposing export duties on raw materials to promote value addition. This becomes critical as most competing countries allow import of scrap duty free, resulting in cost disadvantage to Indian Manufacturers. SAD on scrap should be abolished.

2. Excise Duty

Excise exemption limit for MSMEs was fixed in April 2007 i.e. about 9 years back. Since then, the cost of inputs like power, labour, raw materials & other operational costs have gone up by more than 100%. Hence the present exemption has become inadequate & there are pressures on working capital.

It is proposed to increase the Excise exemption limit from present Rs. 1.5 Cr to Rs. 2.5 Cr. This will help the MSMEs to increase their manufacturing outputs by allowing them more working capital in hand.

3. Technology Up Gradation Fund - Promote investments in Green & Productive Technology

The foundry sector needs to upgrade tremendously to be able to meet the future projected demands of various sectors & be globally competitive. However, due to low margins & increasing costs of various inputs such as manpower, electricity & increasing environment compliance costs, the industry is not able to invest in new productive & greener technologies, which has become the need of the hour. There is urgent need to promote the investments in productive & green technology & for scaling up production for improved productivity & for sustainable growth in the sector.

Hence it is proposed that Foundry sector specific technology up gradation fund of Rs 1000 cr may be set up for providing soft loans to foundry units to help promote investments in green & productive technologies.

4. Export Promotion

Revisiting MEIS Scheme
Since withdrawal of DEPB Scheme, the benefits to exporters have tremendously gone down & the exporters have suffered loss of approx 5% by way of lost incentives. It is proposed that MEIS scheme may be revisited as the benefits to exporters have tremendously come down ever since the withdrawal of DEPB scheme. The benefits for the castings should be changed from 2% to 5% & it should be applicable to all categories of countries including category 'C' countries which are not included for benefits as per existing MEIS scheme.

5. Credit Linked Capital Subsidy for MSMEs

At Present a subsidy of 15% is available to MSMEs for investments in new Technology for Tech Upgradation for defined technology with Upper Cap of Rs. 100 Lakhs per unit. These limits were decided about9 years back & are now not adequate due to rise in the input costs by approx 100%. It is proposed to increase rate of subsidy to 20% and Upper Cap to Rs. 200 lakhs per unit.

6. Skill Development

It is proposed that Govt. may constitute a committee of representatives from Ministry of HRD, DGET, The Institute of Indian Foundry men (Apex industry body for Foundry sector), NIFFT Ranchi, Industry & CII etc. to review the infrastructure & curriculum needs of NIFFT Ranchi & ITI & align it with present & future needs of foundry sector. It is also proposed to set up 2 modern National Institutes of the level of NIFFT, Ranchi -One in Southern part of India & other in Western part of India. There is also need to mandate introduction of foundry technology stream in Govt colleges / Polytechnics/ITI near major foundry clusters.

7. Simplification of Procedures

It is recommended that the process for environment clearances/ consent to operate should be made simpler & on single window model. The consent to operate should be treated as final clearance. Validity for consent to operate must be for at least 5 years for Red Category & 10 years for Orange category industry.

Source : Equity Bulls

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