Budget 2018: Budget 2018 date is approaching. When the budget will be presented in 2018, all eyes will be glued to Finance Minister Arun Jaitley who will present this year’s budget on February 1. Meanwhile, Budget 2018 India expectations among various industries are already reaching heights. Notably, Foundry industry is the mother of all industries, and India is among the largest manufacturer of metal castings globally, produces more than 10 million tonnes of castings in various metals such as grey iron, ductile iron, steel and aluminium alloys for various applications valued at approx $18 billion, as per the report. However, because of the various problems faced by the industry, the growth in foundry sector over the last five years has remained stagnant.
The Institute of Indian Foundrymen (IIF) is the apex industry body promoting the competitiveness of India’s foundry industry. According to IIF, there is potential and need to do more and become a global force. In the view of upcoming budget 2018, the body has submitted its pre-budget proposals to the government and expects some interventions from the government for supporting manufacturing. AK Anand, the director of IIF has highlighted the issues and also recommended possible steps that the government can take. Take a look :
• Import Duties on key raw materials
Issue – The average rate of duty in several competing countries is nil. While in India these rates vary from 2.5% -5% which results in cost disadvantage to Indian Foundries as compared to foundries in these competing countries affecting the global cost competitiveness of Indian Foundries.
Proposal – As a proposal for Budget 2018, the import of key raw materials should be made duty free so that the impact of the devaluation of INR is offset to some extent. In fact, some of the raw materials such as metal scrap were allowed to be imported duty-free. However, subsequently, import duties were imposed on them.
Recommendations – Import Duty on Raw Materials such as pig iron, metcoke, steel /CI/Aluminium scrap /Ferro Si and sand may be abolished
Other Policy-Related Issues
• Definition of MSMEs
Issue- The definition of MSME was amended 9 years back regarding the cap in investments in plant and machinery. The cost of equipment has gone up steeply over these seven years; as such the limits in investment in plant and machinery for classification of units in Micro, Small and Medium category has become obsolete, therefore need to be relooked.
Proposal- FM Jaitley in the upcoming budget is suggested to revise the caps for cost of plant & machinery for the purpose of definition of MSME in manufacturing are given below for consideration
a. Micro – Rs 25 L to Rs 50 L
b. Small – Rs 5 Cr to Rs 10 Cr
c. Medium – Rs 10 Cr to Rs 30 Cr
• Technology upgradation fund for foundries
Issue- The Technology processes in foundry sector over the last few decades have changed radically. The changes are taking place at a pace which is unprecedented .The technologies adopted today will become outdated in next 5-7 years. Moreover, the average production in Indian Foundry is very less as compared to foundries in other countries (almost 1/7 th of avg of German Foundries)
Proposal- As a proposal for Budget 2018, the foundries will have to not only upgrade periodically in various areas such as mentioned below but also have to scale up production to achieve global competitiveness.
1. Semi Mechanization for improved productivity /man/year
2. Application of IT in Design, Manufacturing & in process Quality assurance
3. Recycling/Reclamation of Used Foundry sand
4. Energy Efficiency
5. Environment Compliance, Waste handling
Recommendation- It is proposed that a revolving Technology Up gradation Fund of Rs 500 Cr may be set up for investments in greener and productive technology in line with Textile TUF.
Issue – After The implementation of GST, the exporters have to pay IGST and claim refund. The MEIS scrips can be used only for payment of BCD, not other taxes like IGST, CGST and SGST for inputs. As a result, the requirement of working capital has gone up & this has become major issue for exporters.
Also Watch| Budget 2018: FM Arun Jaitley May Tweak Income Tax Basic Exemption Limit
Recommendation- In the upcoming budget 2018, it is, therefore, requested that the MEIS Duty credit scrips may be allowed to pay for Basic custom duty, Safeguard duty, Anti Dumping Duty and IGST, GST. This will reduce to some extent the burden of arranging finance by exporters for payment of such duties and will help the Indian Exports to some extent It is also proposed that MEIS scheme for following metal cast components may be revised to increase the export benefit from 3 to 8 % on all castings which have good growth potential.