The memorandum has suggested lowering of excise duty on machine tools from 13 per cent to 5 per cent. IMTMA, in its pre-budget memorandum to the Union finance minister, has also asked for an exemption from this duty for machine tools supplied to the small-scale sector since the SSI sector cannot avail of Modvat credit, being exempt from the payment of excise duty.

The measures suggested to boost the machine tool industry include the need to rationalise the customs duty structure on raw materials and components of machine tools. Customs duty on raw materials should be pegged at least 5 per cent lower than that applicable for complete machinery,making domestic manufacturers cost-competitive. Calling for the imposition of a counter-vailing duty which would not be Modvatable but be equivalent to the central sales tax, the memorandum has noted this would offset the advantage offered to imported manufacturers who do not have to pay sales tax and other levies.

Since cheap imports are its biggest threat, the IMTMA has suggested the creation of a mechanism to monitor pricing of second-hand machine tools or ban such imports. The memorandum has asked the finance minister to open a monitoring cell to track export obligations under the Export Promotion Capital Goods (EPCG). The IMTMA has suggested that non-fulfilment of export obligations should be treated as an economic offence under Fera. In an effort to boost growth in the machine tool industry, the memorandum has mooted the creation of a tradable tax credit scheme to provide an incentive to low profit-making companies along with a seven-year tax holiday to all new units as well as to the existing oneswhich undertake major expansion programmes.

Stressing the need for training, the memorandum has recommended that the government allocate Rs 150 crore annually for three years, enabling ITIs to modernise their facilities.