Easing QCO norms to boost exports

On March 8, 2024, the Directorate General of Foreign Trade (DGFT) issued exemptions on the import of select goods, including viscose staple fibre and various steel items, from quality control orders (QCOs). This exemption falls under the advance authorisation scheme, which permits duty-free import of input goods incorporated into export products. Industry associations like the South India Mills’ Association (SIMA) welcomed the recent exemptions, anticipating a boost in textile exports.

This decision follows a meeting held by the Ministry of Commerce and Industry with industry representatives on January 10, 2024, where concerns regarding QCOs’ impact on exports were addressed. While a blanket exemption was deemed inappropriate, the Ministry emphasized a sector-wise analysis of exports before granting exemptions.

Under the advance authorisation scheme, exporters must export input goods incorporated in manufactured products within 18 months. Failure to utilise these goods within the stipulated timeframe may result in penalties, including the destruction of unutilised goods and payment of duties, taxes, and fees.

Multiple QCOs were published by DPIIT with an aim to regulate imports, particularly from China and ASEAN countries, ensuring compliance with quality standards. The Textiles Ministry also implanted QCO on viscose staple fibre (VSF) in March 2023, which led to a significant decline in imports (but VSF users faced lot of problem). The recent exemption by DGFT comes as a relief for exporters grappling with challenges in the domestic market, such as availability and pricing issues related to VSF.

Industry stakeholders are now advocating for similar exemptions for other products, such as polyester fibre, to facilitate growth in the synthetic fibre sector. Overall, DGFT’s exemptions aim to streamline export processes, enhance competitiveness, and bolster India’s position in the global textiles market.

India is the world’s third largest exporter of textiles and apparel with a 4.6 per cent share of global trade, and ranks among the top five exporters in several textile categories. Meanwhile, according to the latest data from the Commerce Ministry, India’s textile exports totalled $30.96 billion during the April 2023-February 2024 period, down from $32.33 billion a year ago.

The industry is target exports of $65 billion by FY26. For this, India is seeking to strengthen its position in global manufacturing and supply chains by enhancing quality control measures while simultaneously negotiating free trade agreements (FTAs) with various countries. These agreements help in reducing import duties on manufactured goods, and guarding against the influx of substandard items into the country.

Recently, India signed a Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) comprising four non-EU countries — Iceland, Liechtenstein, Norway, and Switzerland. Though EFTA countries contribute less to the overall textile export kitty, this trade bloc (in particular Switzerland) is important for the Indian textile industry. Confederation of Indian Textile Industry (CITI) had been requesting the Indian government to sign FTA with Switzerland as both India and Switzerland complement the needs of each other in the T&A space. While India imports Swiss technology and machines, Switzerland offers itself as a buyer for raw materials and intermediate products, to be converted into high-quality and sustainable end products.

Negotiations with UK and EU for FTA have entered final stages. If they also come through, then India can expect monumental increase in T&A exports.