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The Export Promotion Capital Goods (EPCG) Scheme is a flagship export incentive programme of the Government of India designed to promote exports and technology upgradation by reducing the cost of acquiring modern machinery and capital equipment. It is administered under the Foreign Trade Policy (FTP) by the Directorate General of Foreign Trade (DGFT) and coordinated with customs authorities.
At its core, the EPCG Scheme allows eligible Indian exporters to import capital goods which include machinery, equipment, tools, fixtures, and software either duty-free or at concessional customs duty, provided the exporter fulfills a stipulated export obligation over a specified period.
The primary objective is two-fold:
Under the Export Promotion Capital Goods (EPCG) Scheme, capital goods refer to assets that are essential for producing goods or services meant for export. The scheme allows eligible exporters to import these capital goods at zero or concessional customs duty, provided they meet prescribed export obligations.
Capital goods under EPCG are broadly defined to cover the entire value chain of manufacturing and service delivery from preparation to final output ensuring exporters can upgrade technology and improve competitiveness in global markets.
1. Machinery and Equipment
This includes all machinery and equipment required at pre-production, production, and post-production stages.
These assets help enhance efficiency, quality, and scale of export-oriented operations.
2. Computer Systems and Software
Computer systems and software are treated as capital goods when they are integral to the functioning of imported machinery or production processes.
This includes:
Such inclusions recognize the growing role of digitalization and automation in modern manufacturing and services.
3. Spares, Dies, Moulds, Jigs, Fixtures, and Tools
To ensure uninterrupted production, the EPCG Scheme also covers:
These items are critical for maintaining quality standards and minimizing downtime in export-focused units.
4. Catalysts
Catalysts used in manufacturing processes are eligible as capital goods under EPCG for:
This is particularly relevant for chemical, pharmaceutical, and process industries where catalysts play a vital role in production efficiency and output quality.
5. Capital Goods for Approved Project Imports
Capital goods imported under approved project imports are also covered. These typically relate to large-scale or specialized projects sanctioned by the appropriate authorities, ensuring that exporters executing such projects can benefit from EPCG concessions.
The Export Promotion Capital Goods (EPCG) Scheme is a flagship initiative of the Government of India under the Foreign Trade Policy (FTP). The scheme is designed to support exporters by allowing them to import capital goods at zero or concessional customs duty, provided they fulfill specific export obligations. By reducing the cost of capital investment, the EPCG Scheme aims to enhance India’s export competitiveness and promote technological upgradation across industries.
One of the most significant features of the EPCG Scheme is the exemption from basic customs duty on the import of capital goods. In some cases, imports may also be permitted at a reduced duty rate. This benefit helps exporters lower their initial investment costs when setting up or expanding production facilities.
The scheme covers a broad range of capital goods, including:
Importers availing EPCG benefits must fulfill an export obligation, which is typically six times the duty saved on the imported capital goods. This export obligation must be completed within a specified time frame, usually six years, ensuring that the scheme directly contributes to increased exports.
The EPCG Scheme is sector-neutral, making it accessible to exporters from various industries such as:
Both merchant exporters and manufacturer exporters are eligible under the scheme.
In addition to imports, the EPCG Scheme also supports procurement of capital goods from domestic manufacturers, encouraging local production while still offering similar duty-saving benefits.
By enabling access to advanced machinery and technology at reduced cost, the EPCG Scheme promotes:
The scheme allows flexibility in fulfilling export obligations through:
This flexibility helps businesses align export commitments with market demand.
In certain cases, EPCG authorizations may allow transfer of capital goods after completion of export obligations. Additionally, provisions exist for extension of EO periods and relief in genuine hardship cases, subject to approval by authorities.
The EPCG (Export Promotion Capital Goods) Scheme is designed to support Indian exporters by allowing the import of capital goods at concessional or zero customs duty, subject to export obligations. The eligibility criteria are broad, enabling participation across multiple sectors involved in export-led growth.
Businesses that manufacture goods in India and export them directly to international markets.
Exporters who do not manufacture themselves but source goods from supporting manufacturers.
Entities in notified service sectors such as logistics, hospitality, healthcare, IT-enabled services, and other foreign exchange earning services.
Manufacturers supplying goods to merchant exporters under the EPCG framework.
Units providing shared facilities or services to multiple exporters.
The Export Promotion Capital Goods (EPCG) Scheme is a key initiative of the Government of India under the Foreign Trade Policy (FTP), designed to support and promote exports by reducing the capital investment burden on exporters. The scheme allows eligible businesses to import capital goods at zero or concessional customs duty, provided they commit to fulfilling a specified export obligation.
The primary objective of the EPCG Scheme is to enhance India’s manufacturing competitiveness, improve product quality, and encourage the adoption of advanced technology for export-oriented production.
Zero or Reduced Customs Duty
Importers can bring in capital goods at 0% customs duty, resulting in significant cost savings. This makes it easier for exporters to invest in modern machinery and equipment.
Improved Cash Flow and Lower Capital Costs
By reducing upfront duty payments, businesses can allocate funds toward operations, expansion, and working capital rather than heavy capital expenditure.
Access to Advanced Technology
The scheme enables exporters to import state-of-the-art machinery, improving production efficiency, consistency, and product quality to meet global standards.
Boost to Export Competitiveness
Lower production costs and better technology allow Indian exporters to offer competitive pricing in international markets, strengthening their global presence.
Wide Coverage of Capital Goods
EPCG covers a broad range of capital goods, including:
Support for Multiple Sectors
The scheme benefits various industries such as manufacturing, engineering, textiles, pharmaceuticals, food processing, logistics, and service exports, making it inclusive across sectors.
Long Export Obligation Period
Export obligations are generally spread over 6 years, allowing businesses sufficient time to plan, scale operations, and meet export targets without excessive pressure.
Encourages Capacity Expansion
With lower import costs, companies can expand production capacity, modernize facilities, and increase overall export volumes.
Typical documents for EPCG application include:
One effective policy tool that helps Indian exporters lower capital investment costs, modernize operations, and compete internationally is the Export Promotion Capital Goods (EPCG) Scheme. EPCG promotes technology adoption, industrial growth, and export expansion by permitting duty-free or concessional imports of capital goods in exchange for meeting export obligations. While it demands diligent planning and compliance, its benefits from lowered costs to enhanced competitiveness make it highly relevant for manufacturers, merchant exporters and service providers aiming for global markets.
1. What is the EPCG Scheme in India?
The Export Promotion Capital Goods (EPCG) Scheme is an export incentive program under India’s Foreign Trade Policy that allows exporters to import capital goods at zero or concessional customs duty, subject to fulfilling a specified export obligation within a fixed time period.
2. Who is eligible for the EPCG Scheme?
The EPCG Scheme is available to:
Applicants must have a valid Importer Exporter Code (IEC) and comply with DGFT regulations.
3. What types of capital goods can be imported under EPCG?
Under the EPCG Scheme, exporters can import:
4. What is export obligation under the EPCG Scheme?
Export obligation refers to the commitment made by the exporter to export goods or services worth six times the duty saved on imported capital goods. This obligation must generally be fulfilled within six years from the date of EPCG authorization.
5. Is the EPCG Scheme available at zero duty?
Yes, the EPCG Scheme allows import of capital goods at zero customs duty. In some cases, concessional duty (such as 3%) may apply depending on the Foreign Trade Policy provisions and type of authorization.
6. What is marginal productivity theory of distribution?
Marginal Productivity Theory of Distribution explains how income is shared among different factors of production like land, labour, capital, and entrepreneurship.
In simple words, each factor is paid according to the extra output (additional value) it adds to production.
For example:
A machine earns interest based on how much it increases production.
A worker is paid wages based on how much extra goods or services their work produces.
