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Liberal imports idling indigenous capacities

Prime Minister Modi’s Make in India exhortation makes great sense. The country has capabilities to produce many of its requirements on its own. 

Unfortunately, policymakers do not spend the needed attention to ensure such capacities created are fully utilised. We see the spectacle of a large number of industrial units – steel, power equipment, cement, automobiles... performing to a fraction of their capacities. This depresses interest in investments for creating new capacity.  We have a grim situation.

BHEL recorded huge expansion of capacity to provide 20,000 MW of power equipment per annum. The Tiruchi unit and its satellites had a record production, valued around Rs 20,000 crore, during 2012-13. Other renowned companies like Mitsubishi, Toshiba and Alstom invested on creating capacity for power equipment manufacture that would enable the country to meet demand for such equipment in full.

Yet one witnesses a curious spectacle of China, Korea, Japan and other countries dumping their products into India at lower prices. In recent times we also witness Chinese companies successfully contesting contracts awarded to BHEL in the Madras High Court leading to the cancellation of orders placed on BHEL.

A similar spectacle is witnessed in regard to steel. The industry riding on the post 2000 boom made handsome investments. A capacity for around 115 million tonnes has been created; but simultaneously the clamour for imports has also increased. One witnesses again the sad spectacles of capacity created at great expense remaining under-utilised and exports on the increase.

Consistent with WTO commitments there is need for a mechanism to ensure indigenous industry is provided a measure of encouragement and even protection to perform to capacity. This in due course will lead to investments to expand capacity and hence support the Prime Minister’s Make in India slogan meaningful.

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