EPCG capital goods importers may get relief

NEW DELHI: Importers of capital goods under the export promotion capital goods (EPCG) scheme are likely to get some flexibility in fulfilling export obligations. The government is looking at the possibility of relaxing the condition of maintaining an average level of exports under the scheme and extending the period for meeting the obligation beyond eight years. The announcement is expected to be made in the annual revision of the foreign trade policy next month.

Official sources told ET that exporters have often complained it was difficult to maintain their average level of exports on a yearly basis, as in a particular year exports may be higher or lower than the average level. “We feel that as long as the export obligation is met within the stipulated period, it shouldn’t make a difference even if exports are lower than average in a particular year. Some flexibility in this area is likely to be announced in the FTP,” an official said.

The EPCG scheme allows for import of capital goods for pre-production, production and post-production at 5% Customs duty subject to export obligation equivalent to 8 times of duty saved on the capital goods imported. Capital goods imported under the scheme are subject to actual user condition and cannot be transferred or sold till the fulfilment of export obligation specified in the licence.

Officials said a number of sectors, including steel, have demanded an extension of the obligation period from eight to 10 years. “We are still considering the demand and are yet to take a call,” the official said.The industry’s demand for scrapping the export obligation has, however, been rejected.