Highlighting opportunities for the capital goods industry under ambitious construction projects such as high-speed rail and dedicated freight corridors, FICCI’s Capital Goods Committee has prepared a report on ‘Opportunities for Capital Goods Industry with Indian Railways and Metros’, with multiple suggestions that provide new business opportunities for the Indian industry. The report identifies specific opportunities across various areas such as rolling-stock manufacturing, sub-assembly or component manufacturing, machinery and tool manufacturing, and project execution.
The report was recently released by Arun Goel, Secretary, Department of Heavy Industry, and Shailendra Roy, Chair, FICCI Capital Goods Committee and Member of the Board, Larsen & Toubro (L&T).
"Indian Railways is the lifeline of India's social and economic structure,” said Roy.“Industry participation is a must for the 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."
The FICCI report highlights that Indian Railways has substantially stepped up capital expenditure from historical levels of Rs 400-500 billion per annum. The capital expenditure for 2019-20 was Rs 1.3 trillion, while the budget for 2019-20 stands at Rs 1.59 trillion, as it undertakes high-priority initiatives such as electrification, rolling-stock upgrade and track expansion. Also, metro projects in multiple cities are in various stages of execution.
Here are some highlights from the report 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 a phased manufacturing programme, expansion of the PPP model to newer areas, and closer collaboration with industry for absorption of technology.
- The report identifies imperatives for industry that include de-risking business from overreliance on Railways orders, forging partnerships with global technology players, promoting self-certification and ramping up 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 an incremental manufacturing opportunity of Rs 280 billion 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 the project execution side, the 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 trillion for the industry over the next five to seven years.
This will generate 60-70 lakh man years of employment during the construction phase of these projects, notes the report.