Assessing the Impact of Imports under EPCG Scheme on India’s Exports and its Capital Goods Sector

Bureau of Research on Industry & Economic Fundamentals (BRIEF) is currently involved in an assignment titled ‘Assessing the Impact of Imports under EPCG Scheme on India’s Exports and its Capital Goods Sector’ with The Centre for WTO Studies (Indian Institute of Foreign Trade). The study aims at assessing the impact of import of capital goods under Export Promotion Capital Goods (EPCG) Scheme on India’s capital goods industry. Export Promotion Capital Goods (EPCG) scheme allows import of capital goods including spares for pre-production, production and post-production at zero duty subject to an export obligation of 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from authorization issue. The scheme also incentivises domestic sourcing of capital goods by reducing the specific export obligation to 4.5 times the duty saved on such goods procured.

The objective of the study is to find the impact of the scheme on the authorization holders and the capital goods producers specifically related to textile industry, chemical & allied industries, electronic industry and engineering industry. As an integral part of the study, BRIEF is conducting detailed interviews of key personnel in 100 representative firms i.e. EPCG authorization holders using capital goods and domestic capital goods producers in Mumbai and Delhi-NCR region, to be followed by thorough analysis of the findings.

The assignment includes detailed assessment of the effect of the scheme on metrics such as turnover growth achieved by authorization holders and domestic capital goods producers, export growth experienced by authorization holders, etc. It also includes a comparative analysis of the quality of the imported capital goods vis-à-vis similar alternatives produced domestically. Finally, it explores the opinions of the authorization holders and the capital goods producers on the overall improvement of the scheme