EPCG Scheme 2022

Export Promotion Capital Goods (EPCG) Scheme 2022 is a duty‑exemption programme that allows Indian manufacturers to import capital equipment without paying customs duty, provided they meet a quantifiable export obligation. Launched under the Foreign Trade Policy 2022‑27, the scheme is administered by the Directorate General of Foreign Trade (DGFT) and is anchored in Section 2(1)(c) of the Foreign Trade (Development and Regulation) Act, 1992. Its distinctive feature is the coupling of zero‑duty imports with a mandatory export target of 6 % of the imported equipment’s FOB value, spread over a six‑year fulfilment period. By lowering the cost of advanced machinery, the EPCG scheme seeks to modernise India’s production base and boost the country’s share in global value chains. ## Historical Background The EPCG concept originated in the early 1990s as part of India’s liberalisation drive, with the first formal notification issued in 1995 under the then‑Foreign Trade Policy. The scheme was revitalised in 2000 and again in 2015 (Notification No. 03/FT/2015), each iteration tightening export obligations while extending the duty‑free import window to five years. The 2022 revision (Notification No. 03/FT/2022) emerged after a two‑year consultation with industry bodies such as the Confederation of Indian Industry (CII) and the Federation of Indian Export Organisations (FIEO), reflecting a consensus that higher technology adoption was essential for post‑pandemic recovery. Historically, the EPCG scheme has accounted for roughly 15 % of all duty‑free capital goods imports, according to DGFT data released in March 2023. ## Mechanism and Procedure Applicants must first obtain an Import‑Export Code (IEC) and then submit an EPCG application through the DGFT’s online portal, attaching a detailed project report, a bank‑guaranteed export obligation (EOG) and a declaration of the intended capital goods. Upon approval, the importer receives a “Letter of Permission” that authorises customs duty exemption under Section 25(1) of the Customs Act, 1962, for a period not exceeding five years from the date of import. The duty‑free benefit applies only to the capital goods themselves; ancillary components and consumables remain taxable unless separately covered by other schemes. Export performance is monitored quarterly via the Foreign Trade Data System (FTDS), and any shortfall in the 6 % EO triggers a penalty of 10 % of the duty saved, payable to the Central Board of Indirect Taxes and Customs (CBIC). ## Key Provisions The 2022 EPCG scheme stipulates an export obligation of 6 % of the FOB value of imported capital goods, to be satisfied within six years, with a minimum annual fulfilment of 1 % after the first two years. The scheme caps the total duty‑free import value at ₹ 5 billion per exporter per policy period, a ceiling introduced to prevent concentration of benefits among a few large firms. Eligible capital goods are listed in Annex‑II of the policy and include items such as CNC machines, robotics, and advanced testing equipment, each classified under HS Code 84.71‑84.79. The scheme also permits “partial” export obligations, allowing exporters to meet the EO through indirect exports of services linked to the capital goods, as clarified in the DGFT circular dated 15 January 2023. ## Current Implementation and Impact As of September 2024, DGFT reports that ≈ 2,800 exporters have been granted EPCG licences under the 2022 policy, collectively importing capital goods worth ₹ 4.3 billion duty‑free. The automotive and textile sectors account for the largest share, with firms such as Tata Motors and Raymond Textiles reporting a 12‑15 % reduction in production costs after importing robotic welding lines under the scheme. A mid‑term review released by the Ministry of Commerce in June 2025 indicated that exporters had fulfilled ≈ 68 % of their aggregate EO, translating into an estimated US$ 1.2 billion increase in export earnings. However, the review also flagged compliance gaps in smaller firms, prompting the DGFT to launch a capacity‑building programme in collaboration with the Export Promotion Councils. ## Significance for Indian Export Competitiveness By decoupling capital acquisition costs from customs duties, the EPCG scheme directly enhances the price competitiveness of Indian manufactured goods in overseas markets. The 6 % export obligation creates a virtuous cycle: higher exports generate foreign exchange, which in turn funds further technology upgrades, aligning with the “Make in India” vision articulated by the Ministry