Ludhiaba, August 27, 2012: Chamber of Industries and Commercial Undertakings (CICU) today said that in a supposed bid to boost domestic manufacture of capital goods, the Centre reportedly plans to ban import of used plant and machinery more than five years old.
In a statement here today, the CICU general secretary Avtar Singh asked the Centre not to implement the proposed restriction on import of second-hand plant and machinery by domestic manufacturers.
He further said that the idea that growth need necessarily be at high cost with gleaming new equipment is absurd. The fact is that there is huge recurring demand for second-hand machinery in Indian industry, to keep upfront costs low, for instance, or simply because of local non-availability.
The CICU joint secretary Upkar Singh said that to cope up with the changing time, sizable number of MSMEs has started technology up gradation by importing second hand plant and machinery. The propose ban will greatly affect the already reeling MSME Sector in this adverse economic scenario.
Adding, he said clamping down on such imports would actually limit production and almost certainly nip demand for producer goods as well. It is to be noted that some 80% of shuttle-less looms in the textile sector are second-hand equipment, some three-fourths of construction equipment like cranes are similarly procured, as are almost half of all machine tools. The point is that there are clear gains from trade in using second-hand capital goods for domestic manufacture specially MSMEs.
He further said that the proposed ban violates the concept of free trade agreement on such imports. Building new technology by installing first hand high cost plant and machinery is a very costly proposition for MSME Sector. Adding, he pointed out that there is need for formulation of rules for the import of second hand equipments to strengthen and standardize their inspection and administration of importation to safeguard the safety and quality. But a blanket ban on imports of dated machinery would likely guarantee a high-cost industrial economy.
Further, he said the Centre is also reportedly planning to slap import duty on 75% of the original value of second-hand machinery proposed to be imported. To evaluate the age of machinery is a controversial issue involving corrupt practices.
He told that CICU has already submitted presentation to Director General Foreign Trade that blanket ban on capital goods imports should not be imposed. This move will boost the costs of importers and again is a wonky idea that needs to be dropped forthwith. Artificially high tariff barriers and stepped-up import costs would only hamper our competitive advantage which will impact production right across the board.
He said the Centre needs to work to improve investor confidence and coagulate corporate investment. Shortcuts like import licensing and outright bans on capital goods imports will not work.