The Hindu Business Line : Remanufactured capital goods

Import shackles on remanufactured capital goods are unwarranted and the removal thereof will not only generate additional employment opportunities in semi-urban and rural areas but also drive faster economic growth.

Jayakrishnan

It is the policy of the Government to ensure time-bound creation of world-class infrastructure, which is indispensable to sustain the current GDP growth rate. In this context, realisation of the visualised targets of key infrastructure sectors is of great importance, for which availability of infrastructure capital goods at the appropriate time at an affordable rate is crucial.

The domestic infrastructure capital goods industry in India is not capable of meeting the specific requirements of various infrastructure sectors. In these circumstances, the import of remanufactured capital goods is of great significance especially in view of the competitive cost and the fact that an investment of $350 billion is required in the infrastructure sector during the Eleventh Plan (2007-12). In other words, the facilitation of imports of remanufactured capital goods is essential to stimulate the infrastructure sector.

Make licence mandatory

However, the current Indian Foreign Trade Policy makes licence mandatory for import of remanufactured capital goods. This, in effect, makes import time-consuming and uncertain as against import of second-hand capital goods, which are freely importable. The requirement of licence causes delay and uncertainty on several counts. Licence is not a matter of right.

The Licensing Authority is empowered to refuse to grant or renew licence. Further, licence shall be issued for a prescribed period of validity and shall contain such terms and conditions, as may be specified by the Licensing Authority, including quantity, description and value of goods and actual user condition as comprehended under the prevailing Foreign Trade Policy.

Moreover, delay may also be caused in issuing the licence in case the Licensing Authority takes any assistance and advice of the Facilitation Committee or of technical authorities on issuance thereof.

A comparison between remanufactured goods and second-hand goods reveals that the restriction on import of remanufactured capital goods is due to an incorrect conception. Remanufacturing is an extensive process whereby the used product shall be completely disassembled and its actual condition assessed.

Remanufactured vs second-hand goods

It essentially includes cleaning, restoring, repairing, and replacing of parts and components. It shall be reassembled after refinements in such a way as to operate once again in the same manner as originally meant. On the other hand, a second-hand capital good need not be reconditioned or even repaired. Even in case of repairing, the whole remanufacturing process is disregarded and only the defective parts are investigated and replaced.

A remanufactured capital good is, performance-wise, as good as a brand new product and bearing guarantee for its performance as that of a brand new one.

Remanufacturing combines profitability and sustainable development benefits. It recovers a substantial proportion of the resources incorporated in a used product in its first manufacture, at low additional cost.

This reduces the price of the remanufactured product, which is available in the market at a competitive price. In short, import shackles on remanufactured capital goods are unwarranted and the removal thereof will generate additional employment opportunities in semi-urban and rural areas.

Import restrictions

There may be a notion that unshackling imports of remanufactured capital goods may result in their dumping in the Indian market, thereby injuring the domestic industry.

The notion is improbable and baseless. Though the current Foreign Trade Policy permits free import of second-hand capital goods, it has not resulted in their dumping in the Indian market despite the inability of the domestic industry to meet growing demand.

So, the restriction on import of remanufactured capital goods is illogical, unreasonable and unjustifiable and in effect hampers the growth of infrastructure sectors of the country. Import restrictions on remanufactured goods urgently require a re-look given the current state of infrastructure.

According to official data, the rate of growth has gone down to 7.2 per cent in February 2007 as against 9.1 per cent in February 2006. So, stimulation of greater economic activity in infrastructure sector is indispensable, possible under the circumstances through advanced mechanisation and technological up-gradation. Imported capital goods and equipment will be pivotal of this process.

In this context, the import of remanufactured capital goods is of great significance in view of the need of huge investment. So, a comprehensive decision on remanufactured capital goods restrictions is imperative. The import of remanufactured capital goods is not an end in itself, but a means to economic growth within a shorter span of time.

(The author is Senior Associate, Corporate Law Group, New Delhi.)

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