Why do small and medium scale industries look for help from India's machine tool industry?
Directions: Answer the given question based on the following passage:
The productivity figures represent the number of machines per year produced at the plant in an average year during the late 1990s divided by the total manpower associated with that plant including both direct and indirect labour. All design staff and all sales and service staff are excluded. All managerial and supervisory staff are included. It might be expected that production volumes per man of the smaller type should be expected to be about double that of the medium type in a plant of equal productivity, but this ratio is a crude estimate and should be applied cautiously. If we accept this crude estimate for the appropriate correction factor, then the range between the maximum of 2 (smaller machines) and the minimum of 0.15 (medium machines) indicates a corrected ratio between the maximum and minimum productivity levels.
The figures for Taiwan which relate to standard machines are 2.6 (medium machines) and 5 (smaller machines) respectively. In the latter case, a high proportion of components are bought in. If, once again, we use the crude correction factor of 2 for machine size, then the ratio between the lowest Taiwanese score and the highest Indian score is a factor. This ratio should be compared to the corresponding ratio in wage rates; a comparison between the hourly rate paid to qualified machinists in the two countries suggests a wage ratio of about 6:1 for Taiwan relative to India at current exchange rates.
Now another aspect of the complete scenario: imports.
Today the import duty on a complete machine is 30% for all practical purpose, whereas the import duty on raw materials and components ranges from 35.85%. The story does not end here. After paying such high import duties on component, once a machine is made, it suffers excise duty from 5% – 10% (including on the customs duty already paid). At the time of sale, the machine tools suffer further taxation, i.e. central sales tax or State sales taxes which range from 4% – 16%. This much for the tax angle. Another factor, which pushes the cost of manufacture of machine tools, is the very high rate of interest payable to banks ranging up to 22%, as against 4%–7% prevailing in advanced countries.
The production of machine tools in India being not of the same scale as it is in other countries, the price which India's machine tool builders have to pay for components is more or less based on pattern of high pricing applicable to the prices of spares.
The machines tool industry in India has an enviable record of very quick technology absorption, assimilation and development. There are a number of success stories about how machine tool builders were of help at the most critical times. It will be a pity, in fact a tragedy, if we allow this industry to die and disappear from the scene.
It is to be noted that India is at least 6500 km away from any dependable source of supply of machine tools. The Government of India has always given a great deal of importance to the development of small scale and medium scale industries. This industry has also performed pretty well. Today, they are in need of help from India's machine tool industry to enable them to produce quality components at reduced costs. Is it anybody's case that the needs of the fragile sector (which needs tender care) will be met from 6500 km away?
Then, what is it that the industry request from the Government? It wants a level playing field. In fact, all of us must have a deep introspection and recognize the fact that the machine tool industry has a very special place in the country from the point of strategic and vital interest of the nation. Most important, it requests for the Government's consideration and understanding. It is therefore high time that the government gives the due attention to this industry which has a good potential.