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Is business above national security?

November 01, 2004 21:28 IST

Part I: An explosive pile of scrap

Part II: How explosives entered India

The recovery of rockets and missiles abandoned in various parts of India has exposed the loopholes in the country's import policy that gives business an edge over national security.

The rockets and missiles were part of metal scrap imported by Indian companies. The scrap originated in places like war-ravaged Iraq and Afghanistan and some Central Asian countries. It was sold to Indian companies by exporters based in Dubai, UAE via ports in Iran, Somalia and Ethiopia.

Though an investigation by intelligence agencies ruled out any terrorist hand in the entire episode, it exposed the porous nature of Indian borders and showed how easy it is to smuggle banned products, including rockets and missiles, into India.

It has drawn attention on the poor technology and inadequate human resources employed by the Indian customs department.

The government passed the buck on to the police and customs officials, accusing them of failure to detect the explosives mixed in millions of metric tonnes of metal scrap, but the same department had in January and August this year detected explosives mixed in scrap. Such instances had also come to light in 2001 and 2002 in Delhi and in 1994 in Mumbai.

Experts say policy-makers have failed to understand the root cause of the problem.

The basic question that needs to be addressed is: Should business have an edge over national security?

As part of the process of globalisation, countries are expected to liberalise trade policies so as to facilitate business. Being a signatory to the World Trade Organisation, India has relaxed several laws for faster movement of goods across nations.

But a frustrated customs official complains, "Did anybody consult us while making the laws? Did anybody bother to see what facilities and infrastructure we have?"

Take the example of loose iron scrap. The government's rule says there should be 25% checking loose iron scrap. This means that only one out of four containers needs to be checked by customs officials.

If containers carrying banned items are detected, importers often abandon the cargo. One such consignment is that of Delhi-based AU International.

The Department of Revenue Intelligence had in July 2003 seized ball bearings, shoes, gold-plated dinner sets worth Rs 2.3 crore (Rs 23 million) concealed in two containers supposedly carrying scrap. The containers are still lying at ICD Tughlaqabad. Instances like this abound.

Items like newsprint are passed without checking, others like fabric and waste paper are subject to 10% checking and goods like woollen rags 25% checking.

"There are different checking standards for different items. There is every possibility of banned products passing through undetected," said Additional Commissioner of Customs Sharad Srivastava. "We cannot carry out 100% checking of all items. We don't have the resources."

The containers are checked manually at all the 100 ICDs. The best scanner to detect explosives costs about Rs 100 crore (Rs 1 billion) but officials say it is not foolproof.

Many trans-national companies have been given the 'Green Channel Facility,' which exempts their cargo from examination. Officials are required to check only the documents. This facility is given to companies that enjoy a high level of credibility.

"The purpose is to facilitate business and speedy delivery of goods," said a finance ministry official.

But a customs official said a surprise check revealed that a leading electronic goods company was using the Green Channel Facility to import video cameras illegally along with other items. The company later apologised and resolved the matter.

Another example is that of used oil imported from West Asian countries. The government allows the import despite the oil being hazardous in nature.

An environmental group has filed a petition in the Supreme Court against such imports. About 400 containers in Delhi and 950 in Mumbai are held up at ICDs awaiting the Supreme Court's order in this regard.

Hazardous and banned products can be imported, on the instructions of the government, if it is in the interest of the nation.

N K Bajpayee, who left the Customs department to work as a criminal lawyer, says, "We start debating (these issues) only when faced with a problem and then come up with short term solutions, which are of no use.

"There are lots of compromises one has to make in the name of globalisation. We have to decide what is important -- business or national security.

"These incidents (import of explosives mixed in scrap) are bound to happen given the poor infrastructure. The only solution is to have a comprehensive policy on imports."

After the hullabaloo, the government made pre-shipment inspection of cargo by approved certifying agencies mandatory for all consignments of loose scrap.

Secondly, import of loose scrap will be allowed only through 14 designated ports (the director general of foreign trade is yet to notify the names of the ports). Importers will also have to inform the home ministry about the country of origin of the scrap.

According to the new norms, 23 certifying agencies have been recognised for the purpose of pre-shipment inspection and issuing clearance certificates. These agencies enjoy the trust of the government.

[One of the certifying agencies is Switzerland-based. It is a private firm specialising in inspecting and certifying cargo. It has branches in several countries.

Exporters will have to get a clearance certificate from any one of these international agencies while shipping companies have been asked to load cargo on a vessel only after obtaining a pre-shipment inspection certificate.

At the same time, manufacturers, importers and ports have been told to voluntarily declare and inform the police by the end of October about explosives, knowingly or unknowingly, mixed in the scrap, Union Commerce Minister Kamal Nath told reporters at a press conference in Delhi.

A customs official say the new norms would reduce the risk of explosives and hazardous material being imported to India. "A foolproof system is still under discussion," he said.

Sources in the ministry, however, said the issue is not that simple. In the last budget, the customs duty on import of iron scrap was reduced to zero from five percent earlier. It means there is no revenue gain though there is a massive demand for metal scrap. The reduction in duty was aimed at giving a boost to iron and steel companies and the real estate business in India.

Cheap imported scrap produces cheaper iron and steel products for the huge price-sensitive Indian market. If the norms for importing scrap were to be made stricter, it would eventually lead to a hike the price of finished iron and steel products.

So, what should our priority be: increased trade or greater security?


Ehtasham Khan in New Delhi