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● Market-oriented reforms, such as the target of ‘Power for All’ and plans to add 88.5 GW of capacity by 2017 and 93 GW by 2022.
● Incentives for capacity addition in power generation will increase the demand for electrical machinery.
● Indian manufacturers are becoming more competitive with respect to their product designs, manufacturing and testing facilities.
● A large pool of human resources and advancements in technologies.
● Increasing scope for direct exports to neighbouring countries.
● Investments in research and development in the electrical machinery industry are amongst the largest in India’s corporate sector.
● Estimated output by 2022 is USD 100 Billion.
● The electrical equipment industry was worth USD 24 Billion in 2012-13.
● The market expanded at a CAGR of 10.5% over 2007-12.
● During the last 8 years, exports have increased at a CAGR of 14.8% to touch USD 4.9 Billion in 2013-14.
● Capacity creation in sectors such as infrastructure, power, mining, oil and gas, refinery, steel, automotive and consumer durables are driving demand in the engineering sector.
● Nuclear capacity expansion will provide significant business opportunities to the electrical machinery industry.
● Rapid increases in infrastructure investment and industrial production will fuel further growth.
● A comparative advantage in terms of manufacturing costs, market knowledge, technology and creativity.
● 100% FDI is allowed under the automatic route in the electrical machinery sector, subject to all applicable regulations and laws.
● The electrical machinery industry has been de-licensed.
● This has facilitated the entry of global majors into the electrical machinery industry in India.
TARIFFS & CUSTOM DUTIES :
● The customs duty on power generation equipment is 5% at present whereas transmission and distribution equipment attracts 7.5% customs duty.
INITIATIVES TO INCREASE POWER GENERATION :
● With planned capacity addition of 88.5 GW projected at the end of 2017 through the Accelerated Power Development Reform Program, the government plans to provide reliable, affordable and quality power to all.
NATIONAL ELECTRICITY POLICY (NEP) :
● The government aims to achieve per capita electricity consumption of 1,000 kWh through its mission under NEP.
VISION 2O22 FOR THE INDIAN ELECTRIC MACHINERY EQUIPMENT INDUSTRY :
● To make India the country of choice for the production of electrical equipment and reach an output of USD 100 Billion by balancing exports and imports.
● Areas of focus include technology and R&D, the lowering of customs duties on a range of equipment, the setting up of the Electrical Equipment Skill Development Council (EESDC), the establishment of electrical equipment industry clusters; the enhancement of product-testing infrastructure in the country; an increase of shares in the export market and financial support.
KEY PROVISIONS OF THE 2O14-2O15 UNION BUDGET :
Any of the following two deductions can be availed:
● Investment allowances (additional depreciation) at the rate of 15% to manufacturing companies that invest more than INR 1 Billion in plant and machinery acquired and installed between 01.04.2013 and 31.03.2015 provided the aggregate amount of investment in the new plant and machinery during the said period exceeds INR 1 Billion.
● In order to provide a further fillip to companies engaged in the manufacture of an article or thing, the said benefit of additional deduction of 15% of the cost of new plant and machinery, exceeding INR 250 Million which is acquired and installed during any previous year ending on 31.3.2017.
TAX INCENTIVES :
R&D Incentives: industry/private sponsored research programmes
● A weighted tax deduction is given under Section 35 (2AA) of the Income Tax Act. A weighted deduction of 200% is granted to assesses for any sum paid to a national laboratory, university or institute of technology, or specified persons with a specific direction, provided the said sum is used for scientific research within a program approved by the prescribed authority.
COMPANIES ENGAGED IN MANUFACTURE HAVING AN IN-HOUSE R&D CENTRE :
● A weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development. (Expenditure on land and buildings are not eligible for deduction).
STATE INCENTIVES :
● Apart from the above, each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidised land cost, relaxation in stamp duty, exemption on the sale/lease of land, power tariff incentives, a concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects, etc.
AREAS BASED INCENTIVES :
● Incentives for units in SEZ/NIMZ as specified in respective Acts or the setting up of projects in special areas such as the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.
GENERATION MACHINERY: BOILERS, TURBINES, GENERATORS
● By 2022, the generation equipment industry in India is projected to grow to USD 25-30 Billion. The industry is sized at USD 6.7 Billion in 2012-13.
● By 2022, the T&D equipment market in India is expected to grow to USD 70-75 Billion from USD 17.3 Billion in 2012-13.