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India is set to approve a USD 1.2 billion incentive scheme to promote domestic manufacturing of high-value construction and infrastructure equipment, according to government sources. The scheme is expected to attract USD 1.8 billion in fresh investment and provide incentives over seven years. It will cover equipment such as tunnel boring machines, firefighting systems and elevators, while introducing local value-addition targets for machines that are currently fully imported. The plan is aimed at reducing India's dependence on imports, particularly from China, as the country expands spending on roads, metros, airports and other infrastructure.
India is set to approve a USD 1.2 billion incentive scheme to encourage domestic production of advanced construction and infrastructure equipment, according to two government sources. The plan is expected to be finalised soon and is aimed at reducing the country's dependence on imports for critical machinery.
The scheme is expected to attract USD 1.8 billion in fresh investment by providing incentives to domestic manufacturers over seven years. Equipment covered under the plan could include tunnel boring machines, firefighting equipment and elevators used in high-rise buildings.
The government plans to introduce local value-addition targets for machines that are currently fully imported. The scheme has been designed after assessing the level of support needed to make domestic production viable, the sources said.
State-run BEML could benefit from the plan as it is preparing to manufacture tunnel boring machines domestically. Other equipment manufacturers, including Larsen and Toubro and Johnson Lifts, could also benefit.
India's construction and infrastructure equipment market is valued at around INR 1 trillion (USD 10.5 billion) and is expected to grow as the country increases investment in roads, metro rail networks, airports and other infrastructure projects.
India continues to depend heavily on imported tunnel boring machines, which are widely used in metro and highway construction. China has been among the key suppliers of tunnelling and boring equipment.
Following the 2020 border clashes between Indian and Chinese troops, India imposed restrictions on Chinese investments and public procurement. China later introduced delays in customs clearances for tunnel boring machine shipments to India.
Imports of tunnelling machinery from China declined sharply, falling to USD 3 million in 2023-24 from USD 18 million a year earlier. They declined further to USD 500,000 in 2024-25 before rising to USD 800,000 in 2025-26.
The issue of easing restrictions on tunnel boring machine supplies was also discussed during bilateral talks between India and China. India has since eased some restrictions on investments by Chinese companies and gradually allowed Chinese firms to participate in government contracts.
The proposed incentive scheme is intended to address the gap in India's domestic manufacturing capacity and reduce its reliance on imported equipment. A final decision on the plan is expected soon.
Source Reuters
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