Highlighting opportunities for capital goods sector under ambitious construction projects such as high-speed rail and dedicated freight corridors, a detailed report prepared by the FICCI on ‘Opportunities for Capital Goods Industry with Indian Railways and Metros’, has come out with multiple suggestions that provide new business opportunities for Indian industry.
The report, which was released on Tuesday, identifies specific opportunities for the industry across various areas such as rolling-stock manufacturing, sub-assembly or component manufacturing, machinery and tool manufacturing, and project execution.
The FICCI report highlights that the Indian Railways has substantially stepped up capital expenditure from historical levels of Rs 40,000-50,000 crore per annum. Railways’s 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.
Shailendra Roy, Chair of FICCI Capital Goods Committee, said, “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 programmes, and policy and process reforms such as making procurement contracts compatible with global standards.”
According to a statement issued by the FICCI, the 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 five years. The industry players also appreciated the transparency in bidding and tendering processes while voicing the pain points they face vis-à-vis procurement policy and processes.
The FICCI report highlights 10 recommendations for policymakers to further facilitate industry participation in these opportunities. The recommendations include formulation of a national railway plan, reforms in procurement policy and processes, strategic initiatives such as phased manufacturing programme, expansion of PPP model to newer areas, and closer collaboration with industry for absorption of technology.
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The statement further said that 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. "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," FICCI statement said.
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 the FICCI report.