Lights Off in Digital India as Environment Ministry Bans Import of Electrical and Electronics Machinery in Second Hand Condition

–Arun Goyal–

Established policies to promote “Digital India” and “Make in India” are being overturned in the Hazardous Wastes Section of the HSM Division. However, recent actions to stop import of second hand electronic and electrical equipment and spares thereof in the name of banning Hazardous Wastes are working in the opposite direction.

This is even as the DeitY has developed an enabling environment with incentives going up to 25% of Capital investment under the MSIPS policy to make a dent in imports as a part of the “Make in India” policy. Recently, the MSIPS has been extended by five years to cover both green field and brown field investments.

There is a contradiction between Foreign Trade Policy on Electronic and Electrical machinery import under Hazardous Waste Policy. The FTP allows imports of all capital goods including second-hand machinery in the category of “Free”, where as Hazardous Waste Policy has put a ban on Second-hand Electrical and Electronic machinery. (We understand that the HSM Division has issued a circular to DGFT stating that mechanical machinery in second-hand form is freely allowed, but electronics machinery is subject to HSM clearance. Why this discrimination against Digital India!).

On the other hand, the HSM Division of the Environment Ministry is rejecting cases of Second-hand machinery import for electronics sector only on grounds that is generating electronic waste!  A recent circular on this subject is in the box.

In a typical mobile manufacturing plant, there are 15 types of SMT (Surface Monitored Technology) equipment, 2 types of Moulding presses, 11 Tool Room equipment, One Paint shop, 5 Assembly machines and 34 Testing equipment. The HSD has prohibited all these in Second-hand condition!

[Ref: MoEF Office Memorandum dated 16th July 2015]

Subject: Policy decision with respect to consideration for applications of import/export of hazardous waste under Hazardous Waste (Management, Handling and Transboudary Movement) Rules, 2008.

This pertains to import/export of hazardous wastes listed under hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008.

2. In this regard it is to inform that with reference to the recommendations of the Expert Committee during its 58th meeting held on 20th– 21st May, 2015, Ministry evolved certain criteria and adopted policy decision with respect to consideration of applications of import/export of hazardous waste in the Ministry. Accordingly, cases of following categories of hazardous waste under Hazardous Waste (Management, Handling and Transboundary Movement) Rules. 2008 will not be considered for approval of import:

i) Used computer, servers and accessories to be re-exported after more than one year.

ii) Second hand electrical and electronic equipment (EEE) with respect to complete shifting of office with no probability of re-export.

iii) Used EEE for trading purpose.

iv) Medical equipment and other such electronic and electric equipment which are more than 3 years old.

v) PET bottle and other plastic scrap.

3. This is applicable for the applications considered during 58th meeting held on 20-21st May, 2015 and onward.

4. This issues with the approval of Competent Authority.

Testing, Design and Research & Development Equipment

Testing, Design and Research & Development facilities are coming up in India. These are recognized as the “Early Bird” in investment strategy. High tech professionals are available in India at low price, thus R&D is the first area for investment. Many large MNCs at the forefront of research are planning to move their global testing, design and R&D facilities to India.

The Ministry of Environment, Forest & Climate Change is not granting approvals for such equipment. This has sent shock waves in industry. It is seriously jeopardizing the setting up of these facilities and creating substantial high quality employment, because many of the investors, specially Indian brands who are relatively low in resources, can ill-afford to invest in new equipment.

It will be absurd if such policy is adopted which is on the opposite side of free importability provided in the Foreign Trade Policy 2015-20.

Further, the HSM Division requires an undertaking to be given by the importer for re-export of this equipment in one year/ three years, which is also not logical and is detrimental to the operations of these facilities. “Digital India” is in favour of investment staying in India and not flight of investment out of India.

For your information, several factories are shutting down in the West and in the East also specially in Korea, Japan, Taiwan and China. Expensive equipments are available at a fraction of the cost. For example, an e-GSM/ GSM/ WCDMA Tester will cost anything between USD 30,000 - 50,000. We are able to get excellent second-hand GSM Testers between 1,000 to 5,000 USD. Some of these second-hand GSM Testers may never have been used or would have been used very sparingly. Not only are they available at a very economical price, they also have a substantially long residual life of 7-10 years or even more.

It has to relocate mid to high level jobs into India for R&D and Testing. This will create the much desired ecosystem for manufacturing.

Considering that the equipment is meant for use in production, classifying it under e-Waste is not quite correct. There is no scope for manufacturing these machines in India, there is no market here yet.

Refurbished spare parts for servicing critical manufacturing, enterprise and telecom equipment (primarily for warranty and replacement purpose).

Refurbished spare parts are necessary because in many cases new parts are not available as they are no longer in production. In any case, these parts are not for resale, but only for use in these equipments.

Even if we accept that second-hand parts are not permitted in the Policy, there should not be any hesitation in allowing the import under license where there will be an actual user condition attached. The spares will be used in the machinery and will not be sold as scrap to generate e-waste.

There are sufficient checks and balances have to be observed when a dispensation like this is permitted. But not allowing refurbished spare parts is extremely detrimental because some of these critical equipments will become dead if import of refurbished parts is not allowed.

High value assets are available in India in SEZs and EHTPs. Under the new dispensation, all these are e-Waste!