Rules relaxed for import of second-hand capital goods

Vol 3, PW 18 (29 Sep 99) People & Policy

Suppliers of capital goods equipment to the Indian oil, gas, power and infrastructure sectors can take heart from a little-publicised government move to make it easier to import Second Hand equipment from abroad - subject to certain conditions.

A policy circular issued by the Deputy Director General of Foreign Trade (Ministry of Commerce) and dated 29th July 1999 has just become public. The circular - which represents government policy - dilutes an amendment to Indias Export Import (EXIM) Policy 1997-2002, made on 31st March 1999 which put the import of Second Hand capital goods on the Restricted list (Para 5.29 and 5.30, Handbook of Procedure, Vol 1).

Indias EXIM policy places items in one of four categories: Banned, Restricted, Special Import License and Free. An item on the Restricted list means it requires an import licence, which is often difficult to obtain.

Protests by Indian trade bodies and users of capital goods succeeded in forcing an amendment on the Indian government to make it easier to import Second Hand capital goods on the Restricted list. In its circular of 29th July, the Director General of Foreign Trade clarifies that applications for the import of Second Hand capital goods will continue to be examined by an Inter-Ministerial Restricted Item Licensing Committee.

But crucially, under new relaxed guidelines. These are:- *Capital goods older than 5 years - the committee will normally grant automatic in principal clearance.

*Capital goods older than 5 years but less than 10 years - committee will take into account the comparative advantages of such imports over new goods and allow import on a case-by-case basis. *Capital goods older than 10 years - import of such goods will not be allowed except for heavy equipment used in infrastructure sector industries The policy has implications for the petroleum industry.

Several companies have proposed to set up refineries in India with second hand plants. Nagarjuna Oil Corporation, a subsidiary of Nagarjuna Fertilisers and Chemicals, wants to dismantle a Mobil refinery in Woerth in Germany and install it at Cuddalore in Tamil Nadu.

A number of other promoters have also proposed export-oriented refineries with second-hand plants but so far none of these have got off the ground. This amendment may now change that.