The Indian Electrical and Electronics Manufacturers Association (IEEMA) has sought service tax exemption for all power projects, including power generation, transmission and distribution projects, in line with other infrastructure projects such as roads, airports, ports, railways, transport terminals, bridges, tunnels and dams.
According to estimates, less than one per cent of the industrys annual turnover is invested in research and development (R&D). Buying practices of utilities do not encourage innovation or R&D, which is why the main focus of manufacturers of electrical equipment is on cutting costs and not on innovative technologies. Tax incentives would boost R&D, IEEMA has said in a presentation to the government. The entire power sector value chain is dependent on the financial viability of the distribution sector and reduction of aggregate technical & commercial losses, which at around 30 per cent currently should be addressed.
The countrys share in global export of electrical equipment is also less than one per cent and there is a need to incentivise this. The ministry of finance should work in closer coordination with the ministry of power to set an achievable target of capacity addition, IEEMA said in its pre-Budget memorandum for 2012-13. It has also said the government should provide a level field to domestic electrical equipment makers as compared to foreign suppliers.
The cost disadvantage suffered by the domestic power equipment manufacturing industry is estimated to be around 14 per cent by a committee under the chairmanship of the Planning Commissions member (industry).