After four months, the Directorate General of Foreign Trade (DGFT) has been compelled to partially amend the wrong done because the clandestine issue of licence to a select few was openly questioned. However, the futility of the amendment is there for all to see.

An Inter Ministerial Committee in the DGFT is to clear the applications for import. In case of less than five-year old capital goods imports will be automatic. If that is the case then why is this costly hurdle created resulting in waste of time, both bureaucrats' and importers'. Why should the importer be made to wait for two-three months to get the licences, pay licence application fees, surrender three times the CIF value of imports worth Special Import Licence which may simply add up to 10 per cent of the landed cost. Secondly, do you think that worthwhile secondhand capital goods will be discarded in less than five years.

In theory, we talk about reducing transaction costs, but in practice we do the opposite. Only theoretically, the policymakers wish to reduce cost but practically they are neither interested in it nor they can do it because none is abreast of the practicalities of business.

In case of capital goods aged between five and 10 years, the decision will be based on comparative advantages. Now the question is that as an importer why do I need the Inter-Ministerial Committee to decide what is good/bad for my business? Does that seal of approval ensure the success of my business or guarantee profits? If that is not so, then why should the government meddle in business?

In case of capital goods older than 10 years, only heavy equipment in the infrastructure and core sector will be allowed. However, the import of aircraft is already specifically separately permitted without age limit for whose benefit and at whose behest is again a mystery. All this is done in the name of public interest though this sector can afford to bear the delay and the additional cost. It seems, the relaxation is necessary for the politicians of the country because elections now take place every year and they need faster means of travel to cover their territories.

Relaxations have been allowed in respect of the prior period commitments before the imposition of restrictions with an eye for bailing out the preferred ones through the back door by accepting merely fabricated pieces of papers as orders for imports.

Another beauty is that, it has been implemented through a policy circular which gives it a retrospective effect so to even justify the actions of the DGFT in the absence of the clarifications.

Further, there is a bouncer to bowl flat the importers in the guise that powers are showered on the inter ministerial committees to fix any other criterion - discretion to please some and powers to thwart a bonafide import requirement. This can promote a "I-take-care-of-you and you-take-care-of-me" approach. So much for the transparency after four months of deliberations.

Even the EPCG Scheme is not spared though it is linked to export promotion. It is concluded so because seen in the case of EPCG applications already cleared earlier applicants have to submit applications after conversion into Restricted import licence applications. Even the 100 per cent EOUs are not spared to the extent that they will also have to bear the delays and surrender SIL. They would be able to walk away with duty exemption under separate notification governing them, it customs agree to permit use of two non conflicting notifications simultaneously.

Further even moulds and like (used construction equipment for turnkey projects) are capital goods. Now the question arises, whether second hand moulds and like items can be imported or not or can they be imported without a licence on reexport basis. These are important policy issues which cannot be left to discretion.

Another, set of regulations which are necessary is that, if you are using the same second hand machines without any problem, then repeat applications should be allowed without any problem i.e., on automatic basis.

Secondly, the government should publish the list of machines on the Internet/ public notice so that repetition of placing applications in inter- ministerial committee is avoided/clearance of import should be product based and not company based for exploitation and discretion.

Thus you will realise from the simple reading that policy formulation is without the application of mind, leave aside the implementation.

It cannot make sense to revert protection to capital goods industry and dig the grave of others. In today's difficult times, there is no room for luxury of new machines when acceptable second hand capital goods are available at throwaway prices. The price differentials are are more than 4:1. Where from the capital differential is going to come from? What will be the cost of capital, given the high interest rates prevailing in India? Thus, such eccentricities can increase industrial sickness and derail revival. It would be better to modulate protection in the form of tariff control because that is the way exports and import are to be regulated in future i.e., beyond 2002 when quantitative restrictions (QRs) are to be given up. Tariff control can balance the scales in an appropriate manner and be acceptable to both sides.

There are other apparent paradoxes. I agree that one should go for the best available in terms of technology but then the other side is that do we have the trained manpower to operate such machines and do we have the capability to maintain and service these goods and in case of worst scenario, repair these goods.

Another paradox is that I can import chocolates but not a second hand machine which makes chocolates. Then where is your priority, in importing chocolate or the machines to make them? Which are more essential: Potato wafers or silicon wafers?

Another paradox is that second hand machines should conform to environmental and industrial safety norms. What about the new machines, should they not? Secondly, there is a separate body to check this, then why is DGFT taking this additional responsibility? Does this mean that if I import machine under restricted import licence then I would not require any `no objection' certificate from the pollution control department?

To my mind, it appears that all this tinkering is based on individualistic whims and fancies with an eye on maintaining the false prestige of the bureaucracy. Delhi's importance should be maintained at any cost.

It is not absolutely correct to say that new machines will always mean updated technology. Even through new machines old technology can pass through. Take the example of computers and telecommunications where the absoluteness is very fast. The world is changing very fast, a single break through can change anything overnight. On the other hand, the premise that what comes in the terms of second hand capital goods is discarded technology and India is being used as a dumping ground is also a misconceived notion. For arriving at right decision, the discretion should lie with importer alone and there is no reason to limit this with unnecessary restrictions. There may be various markets, technology levels, demand scenario, availability of capital, individual factors, state of industrial development etc. Last but not the least importer factor is that, in liberalisation free enterprise will ensure equilibrium and success and there is no reason to distort it.

Another viewpoint is that in the past many have taken the advantage of these schemes, they do not want the heat of the competition to increase because of increasing better terms. Therefore, they have also raised the chorus of jamming brakes on second hand capital goods.

I am surprised that many have hailed the decision, most probably without going through the circular and its implications. The policy circular provides very few answers and throws up more questions. There is no reason to be happy with one step forward and two steps backwards decisions because they cannot lead you forward but push you backwards only.

At the FIEO open house in Mumbai, the DGFT tried to pacify importers by saying that a beginning has been made but this is not good enough, free enterprise should prevail.

The author is an exim policy analyst