The domestic construction equipment (CE) industry wants a production-linked incentive scheme for the sector. While the move will encourage domestic players to ramp up investments in manufacturing, it will also help attract global OEMs and precision component manufacturers to set up shops in India, said Dimitrov Krishnan, President, Indian Construction Equipment Manufacturers’ Association (ICEMA).
“Schemes like PLI, components champion and global sourcing for the construction equipment industry need to be introduced to help attract global manufacturers especially from EU, Japan and Korea to set up their manufacturing base in India. It will also propel exports to 15-20% of production,” Krishnan, who is also managing director for Volvo’s construction equipment business in India, said.
In the Budget for 2021-22, the government had announced an outlay of Rs 1.97 trillion for the PLI scheme for 13 sectors, including telecom, automobiles & auto components and steel, among others.
The CE industry, which produces heavy equipment such as loaders, excavators, dump trucks, wheel loaders, mobile cranes and concrete mixers etc for use in construction, mining and quarrying sectors witnessed a dip in revenue in FY22 to Rs 50,000 crore on decline in sales of earthmoving and road construction equipment segment by 14% and 10%, respectively.
A total of 85,385 units of construction equipment were sold in FY22 as compared to 92,470 units in FY21. Domestic sales stood at 77,583 units, while 7,802 units were exported in FY22, up 60% over FY21.
While the sales are projected to grow by around 15-20% in the current fiscal, rising input costs, mostly steel, logistics costs for imported parts and supply chain challenges will continue to impact the margins of sectoral players, Krishnan said. The mandatory transition of the industry to CEV-IV emission norms has placed immense cost pressure on the industry.
Krishnan said the time gap between conceptualisation and implementation of infrastructure projects should be reduced and the pace of projectisation needs to have a continual rhythm to help achieve the infrastructure development targets of the government. Also, access to low-cost finance for buyers of construction equipment needs to be improved by providing the priority sector status to the CE industry at par with the infrastructure sector.
There is also a need for a single-point nodal authority, preferably the ministry of road transport & highways, to finalise and notify relevant norms and regulations for construction equipment industry.