Amid series of speculations on India’s economic slowdown, a recent report by FICCI Capital Goods Committee brings some rays hope. The report by the Committee called ‘Opportunities for Capital Goods Industry with Indian Railways and Metros’ highlights various opportunities for capital goods sector under ambitious construction projects such as high-speed rail and dedicated freight corridors. These provide new business opportunities for Indian industry.
The report identifies specific opportunities for industry across various areas such as rolling-stock manufacturing, sub-assembly or component manufacturing, machinery and tool manufacturing, including project execution.
Arun Goel, Secretary, Department of Heavy Industry, and Shailendra Roy, Chair, FICCI Capital Goods Committee and Member of the Board, Larsen & Toubro Ltd, recently released the report
“Indian Railways is the lifeline of India’s social and economic structure. Industry participation is a must for next generation of upgrades and expansion in Railways infrastructure and network. Policymakers should promote this through both strategic initiatives such as phased manufacturing programs, and policy and process reforms such as making procurement contracts compatible with global standards,” FICCI Capital Goods Committee Chair Shailendra Roy opined.
The report further highlights that Indian Railways has substantially stepped up capital expenditure from historical levels of Rs 40,000-50,000 crore per annum. Railways’ capital expenditure for 2019-20 was Rs. 1.3 lakh crore, while budget for 2019-20 stands at Rs 1.59 lakh crore, as it undertakes high priority initiatives such as electrification, rolling-stock upgrade, track expansion. Also, metro projects in multiple cities are in various stages of execution.
FICCI report captures ‘Voice of Industry’ through inputs from industry players associated with Railways and Metro corporations. Industry players expressed great enthusiasm to pursue opportunities with Railways and Metros with many targeting more than doubling of business over the next 5 years. The industry players also appreciated the transparency in bidding and tendering processes while voicing the pain points they face vis-a-vis procurement policy and processes.
FICCI further comes up with some recommendations for policymakers to further facilitate and encourage industry participation in these opportunities, some of which are as mentioned below:
– The recommendations include formulation of national railway plan, reforms in procurement policy and processes, strategic initiatives such as phased manufacturing program, expansion of PPP model to newer areas, and closer collaboration with industry for absorption of technology.
– The report identifies imperatives for industry which include de-risking business from over-reliance on Railways orders, forge partnerships with global technology players, promote self-certification, and ramping up of manufacturing and project execution capabilities.
– Business opportunities identified in the report can also play a critical role in ‘Make in India’ and job creation.
– The report estimates incremental manufacturing opportunity of Rs 28,000 crore per annum for the Indian Capital Goods industry.
– Fully capturing these opportunities will generate around 70,000 direct manufacturing jobs and a total of around 7 lakh indirect and induced jobs.
– On project execution side, FICCI report says that successfully achieving targets on track construction, electrification, high-speed rail, and dedicated freight corridors will generate a total project execution opportunity of about Rs 5 lakh crore for industry over the next 5-7 years.
– This will generate 60 to 70 lakh man years of employment during the construction phase of these projects, notes FICCI report.