A slew of steps, such as eliminating exemptions on countervailing duties on imports, monetisation of land owned by public sector companies and allowing industries to buy electricity directly from the markets, are needed to enable Make in India Initiative a success, according to the Economic Survey released on Friday.
The duty exemptions are favouring foreign producers over domestically made goods thus defeating the initiative, according to the government statement.
Parts of land belonging to the state-owned companies can be converted into land banks and used to promote Smart City initiatives. “If the land is in dense urban areas, it could be used to develop eco-systems to nurture start-ups, and if located in smaller towns and cities, it could be used to develop sites for industrial clusters.”
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Industries with a high demand for power should be allowed to absorb the excess generation capacity through open access (OA). Consumers with electricity load above one MW are permitted by the OA policy (under the Electricity Act 2003) to procure power directly from electricity markets. Presently, the efficiency of electrical energy usage has fallen with an increase in power generation capacity not being able to be capitalised by distribution companies due their financial inability to purchase electricity.
The Make in India Initiative aims to transform India into a global manufacturing hub and increase the share of manufacturing in India’s GDP from a stagnant 15-16 per cent since 1980 to 25 per cent by 2022 and create an additional 100 million jobs.
On the issue of countervailing duty exemptions, the Economic Survey last year had also pointed out that the duties were not imposed on several items of imports. The survey had said the effective rate of excise on domestically-produced non-oil goods was about 9 per cent. Though the effective collection rate of CVDs should theoretically be the same, in real terms it was only around 6 per cent. This difference represents the fiscal cost to the government to the tune of around Rs.40,000 crore, the survey had said.
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Eliminating policies — currently providing negative protection for Indian manufacturing and favouring foreign manufacturing — could be achieved by quickly implementing the Goods and Services Tax (GST), according to the survey. However, if delays are envisaged in rolling out the GST, a similar result could be achieved by eliminating the duty exemptions.
Another factor that could have an adverse effecton the Make in India Initiative will be India’s decision to join the US-led mega regional free trade pact called the Trans-Pacific Partnership (TPP) at a future date. Membership of the TPP would prevent the Indian government from using state-owned enterprises and government procurement as vehicles for achieving social and economic objectives, including employment generation, thereby have to compromise on the Make in India Initiative policy.