Favorable Policies Are Supporting Sector Growth

De-licensing

• The material handling equipment industry is de-licensed and FDI of up to 100 per cent under the automatic route as well as technology collaboration is allowed freely.

Policy initiatives related to infrastructure

• Government of India’s focus on infrastructure development is the biggest driver for the construction equipment industry.
• Projected infrastructure industry spending in the 12^th plan is USD 1,011 Billion.
• 100 Smart cities and make India programme projected to boost investment.

Special Economic Zone

• The government has granted sops, including a large number of SEZs to the capital goods industry of which construction equipment is a part, especially with an impetus to increase exports.

Tariffs and Custom and Duties

• The government has remove tariff protection on capital goods.
• Custom duties on a range of goods that are used in the manufacturing process have lowered down.
• Custom duty exemption from MAT under 80IA for infrastructure projects under union budget 15-16. This exemption will help in reducing the cash outflow in the initial years of Project.
• No change in the excise duty on construction equipment in FY15-16.

Encouragement of infrastructure Debt Funds

• The government of India Set up the India infrastructure Finance company (IIFCL) to provide log-term funding for infrastructure projects.
• Interest payments on borrowings for infrastructure are subject to lower withholding tax rate of 5 percent, down from the tax rate of 20 per cent.
• IDF’s income exempt from tax.
• Government cleared model tripartite pact for infra debt funds in ports.

Issue of Tax free Infrastructure bonds

• Infrastructure finance companies like IIFCL, NHAI, Housing urban Development Corp, PFC, IRFC, are allowed to issue tax free bonds.
• Due to this company raised about USD5.5 billion in FY12 and estimated to raised about USD 4.6 billion during FY13.
• HUDCO and REC to raise around USD 1.2 billion in 2014.