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Today the import duty on a complete machine is 35% for all practical purposes, whereas the import duty on the raw materials and components ranges from 40% to 85%. The story does not end here. After paying such high import duties on components, once a machine is made, it suffers excise duty from 5% to 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% to 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 tools builders have to pay for components is more or less based on the pattern of high pricing applicable to the prices of spares. The above represents only a few of the extraneous reasons for the high cost of Indian machines.
The machine 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 6000 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 this fragile sector (which needs tender care) will be met from 6000 km away?
Then, what is it that the industry requests 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 interests of the nation. Most important, it requests for the Goat’s consideration and understanding.
1. According to the passage, assembling imported components into machines proves ultimately
(a) cheaper than importing complete machine
(b) costlier than importing machine
(c) more cost-effective than importing machine
(d) on par with the cost of imported machine
(e) a very stupendous and unmanaged-able task
2. According to the passage, all the following factors are responsible for the high cost of Indian machines except
(a) higher import duty on spares
(b) excise duty
(c) bank’s rate of interest on loans for manufacture
(d) high-profit margin expected by manufacturers
(e) sales tax
3. If the bank’s rate of interest in India is made on par with that in advanced countries, the cost of manufacture of machine tools
(a) may go up by about 4 to 7%
(b) may increase by about 22%
(c) may decrease by about 4 to 7%
(d) may decrease by about 15 to 18%
(e) will remain the same due to import duty
4. The availability of Indian machine tool industries’ help to the small-scale industry is most likely to result into
(a) increase in the demand for imported machine tools
(b) deterioration in the quality of components manufactured by them
(c) further, the increase in the customs duty on imported machines
(d) enhancement in the quality and quantity of their production at a cheaper cost
(e) severe competition among the small and medium scale industries
5. Which of the following is true in the context of the passage?
(a) India’s machine tool industry has a praise-worthy record of performance.
(b) In critical times, the machine tool builders allowed the industry to perish.
(c) In the case of machines, the excise duty is levied only on the cost price.
(d) India’s quantum of production of machine tools is more than that of other advanced countries.
(e) None of these
6. The disparity in the quantum of machine production in India and that in other countries leads to
(a) the development of small-scale and medium scale industries
(b) lethargy in the process of absorption and assimilation of new technology
(c) a need to pay higher for components and spares
(d) overproduction of machines as compared to the actual need.
(e) the necessity to export the machine from India to other countries
7. Which of the following statements is definitely true in the context of the passage?
A. The vital role of India’s machine tool industry has not been duly recognized by the Government.
B. Small-scale industries’ performance can be further improved with the help from the Indian machine tool industry.
C. The author of the passage has not discussed all the factors which are responsible for the high cost of Indian machines.
(a) A. (b) A & C (c) B & C
(d) All of these
(e) None of these
8. Which of the following best explains the sentence It wants a level playing field’ as used in the passage? The machine tool industry in India
(a) wants to adopt novel marketing strategies for sale promotion
(b) seeks to have small-scale industry as its patron
(c) needs the freedom to import the desired components at a low cost
(d) needs land for opening more factories
(e) None of these
9. Why do small and odium scale industries look for help from India’s machine tool industry?
(a) To produce low-cost components without dilution in quality
(b) To produce cheaper co opponents notwithstanding the poor quality
(c) To remain in Governments’ focus of attention
(d) To improve status
(e) None of these
10. Which of the following inferences can be drawn from the content of the passage?
(a) The Govt. of India has duly recognized the role of the machine tool industry.
(b) Levying heavy customs duty is absolutely necessary.
(c) The Govt. of India was not considerate to the difficulties faced by the machine tool industry.
(d) India should not waste its precious resources on the production of machine tools.
(e) Banks in other countries are running in loss owing to a low-interest rate.
11. Which of the following is the principal focus of the content of the passage?
(a) Reduction in the rate of interest on loans to the machine tool industry
(b) Indian machine tool industry and its vital role in country’s development
(c) Encouragement to small and middle scale industries
(d) The unrealistic strategy of development of technology
(e) Exorbitant sales tax