The Indian government has announced a significant exemption for imported raw materials used in the chemicals and petrochemicals sectors, specifically for the manufacturing of export products. According to a notification by the Directorate General of Foreign Trade (DGFT), these raw materials are now exempt from mandatory Quality Control Orders (QCOs).
Beneficiaries of the Exemption
This exemption applies to Advance Authorisation Holders, Special Economic Zones (SEZs), and Export Oriented Units (EOUs) that produce goods under the Department of Chemicals and Petrochemicals (DOCP). The industries that stand to benefit include:
- Inorganic chemicals
- Organic chemicals
- Tanning or dyeing chemicals
- Plastics and its articles
- Synthetic rubber
- Man-made fibers and filaments
Industry’s Long-Standing Demand
The chemicals and petrochemicals industry has been advocating for this exemption due to the challenges posed by the QCOs. These standards had narrowed down the choice of suppliers, complicating procurement processes. Under the QCO guidelines, any product sold in India with prescribed quality standards had to comply with those standards and obtain quality certification. This certification process included thorough examinations of manufacturing facilities and adherence to various conditions. Many suppliers were reluctant to undergo this rigorous process, thereby limiting the industry’s supplier base.
Comparative Exemptions Across Sectors
The DOCP’s move aligns with similar exemptions provided by other ministries. The Ministry of Steel, the Department for Promotion of Industry and Internal Trade, the Ministry of Textiles, and the Ministry of Mines have all granted exemptions for products used as inputs in manufacturing goods for export.
Export Performance and Industry Goals
In the fiscal year 2023-24, India exported $20.3 billion worth of agrochemicals, chemicals, dyes, cosmetics, essential oils, and castor oils, marking a 14.3% decline compared to the previous year. The plastics industry, which will also benefit from this exemption, exported $11.5 billion worth of goods, a 3.5% decrease from the previous financial year. The plastics sector aims to boost its exports to $25 billion by 2027.
This exemption from QCOs is expected to provide a significant boost to these industries by expanding their supplier base and reducing procurement hurdles, thereby enhancing their competitiveness in the global market.