The government should impose duty on imports of capital goods as the domestic industry is facing cost disadvantage of 11-22 per cent, a FICCI study said.

Exemptions from import duties for various projects have led to over five times increase in India’s imports from USD 6.5 billion in 2003-04 to USD 30 billion in 2008-09, it said.

“...these (capital goods) imports are now hurting the domestic industry and have captured significant market share of various capital goods in the country,” FICCI said.

As a result of various exemptions like zero customs duty on capital goods imports and other disability factors, the cost disadvantage to the domestic industry as compared to foreign suppliers comes in range of 11-22 per cent, it said.

“The government should impose additional duty equal to Central Sales Tax\Value Added Tax on all project goods imports in view of the CST\VAT paid by local manufacturers for industrial projects...,” it said.

The study says that China has surpassed Germany as the largest exporter of capital goods to India.

To help the Indian industry against duty free imports, the study has suggested excise duty exemption for the domestic supplier of equipments to mega power plants.

FICCI also sought 15 per cent price preference in private sector mega power projects for domestic manufacturers of capital goods. Presently, this preference is given only in case of public sector projects.

The chamber also demanded that requirement of defence and other strategic sectors need to be sourced from domestic machine tool manufacturers only. Currently, only low-end machines are being procured locally.

“The government should bring out a policy framework for promoting capital goods park and clusters.... (as these) are required to address the infrastructure issues for the sector,” FICCI said.

More In: Business | Industry