Budget to focus on energy efficiency

Mr. Ravichandran Purushothaman, President, Danfoss India

As a strong player in the manufacturing sector we expect the government to address key issues of energy security, skill gap and food inflation. The Make in India initiative envisioned by our hon’ble Prime Minster has definitely fueled the industry growth engine. However, while ease of doing business is important it is equally important that necessary infrastructure is in place for industries to manufacture. Since power is an important element in this regard, we expect a special focus on initiatives that could promote energy efficiency in the budget. Improving the energy efficiency of existing infrastructure through incentivisaion and having the right policies for new infrastructure not only improve this ratio but also contribute to lowering GHG emissions.

While we expect the budget to indicate a greater contribution from the manufacturing sector towards the GDP, specific directives need to be rolled out to measure energy efficiency achieved to ensure we are running sustainable businesses. In this regard, we would reckon that a reduction in excise duty by 5 percent can further incentivize the local production of energy efficiency products.

Today there is no tool or policy that mandates the use of energy efficiency products in industries. In fact, energy efficiency should reflect in our GDP. Additionally, given that SME and MSME inevitably form the backbone of the country’s economy, and the fulcrum on which make in India success depends, tax reforms will be crucial. On this front, we hope rolling out of the GST bill will enable these sectors by easing indirect taxation laws. Food inflation is another issue that will require close monitoring. Last year’s budget saw an encouraging allocation of INR 5000 cores towards the warehouse Infrastructure Fund to help conserve food wastage which in turn will control inflation. This time, in addition to developing cold chain, we hope the entire process from farm to work is taken into consideration. Here, we would like to propose simplification of the CENVAT waiver that can be availed of by cold chain equipment users.

The current dictate demands intensive documentation to testify that the equipment is being used for Agriculture/Horticulture produce storage purposes. Also, in case of sectors unregistered under Excise Dept. such as agriculture, the stipulated conditions are not even applicable, defeating the very purpose. Furthermore, sectors such as Dairy and Ice cream do not find the impetus in availing this waiver given the cumbersome process.
The same is the case for cold rooms required in distribution / for distributors. The distributors are not excise registered, though he handles excisable product. To make the process more efficient, government will need to give clear direction to enablers such as NABARD on the exact allocation for agriculture and horticulture grid and ease the movement of the produce between States and allocate specific budget to improve the infrastructure required for the movement.

Encouraging the food processing sector can help divert the excess produce kept in warehouses and ensure economic mobility in the sector. Last year, the government made Investment allowance @ 15% available to manufacturing units making an investment of Rs. 100 crore or more in a financial year which was subsequently reduced to Rs. 25 crore per annum.

However, Over 90% of food processing industries come under the Small sector band & may not have the flexibility of investing Rs. 25 Crores in one financial year. Since the percentage of investment allowance is fixed at 15 % the manufacturing unit concerned will get only 15% of the amount invested in plant & machinery during the specified financial year which will not suffice. Therefore, we recommend that this minimum investment requirement be done away with to provide stimulus to SME’s in general & processed food industries in particular. Furthermore, Centre and state should fix the PDS system and ensure that food is not wasted in go-downs. Additionally, R&D of cold chain systems dovetailed to India could be provided with tax incentives.

The next big deterrent to development we see is lack of skilling. There is a lot that the Manufacturing sector can learn from the Services sector. More provisions must be made to encourage skilling, up skilling and reskilling. Only if we are provided with adequate skills can the sector grow to meet both local and global demands.