Latest EPCG Scheme Reforms and Their Impact on Indian Exporters

The Export Promotion Capital Goods (EPCG) Scheme has long served as a critical pillar in Indias export strategy. Introduced by the Directorate General of Foreign Trade (DGFT), the EPCG Scheme enables Indian exporters to import capital goods duty-free, provided they fulfil specific export obligations. The Government of India introduced significant reforms to the EPCG Scheme, aiming to enhance ease of doing business, promote sustainability, and make Indian exporters more globally competitive by 2025.

In today's deep research article, we will know what reforms the government has launched or introduced in the EPCG scheme in 2025. But before that, we need to know what this EPCG scheme is.

What is the EPCG Scheme?

The EPCG Scheme enables exporters to import capital goods (like machinery, tools, and equipment) at zero customs duty, with the condition that they fulfill an export obligation equivalent to six times the duty saved over a specific period, usually six years. Its main goal is to make Indian exporters more competitive in the global market and grab opportunities. The EPCG scheme provides numerous benefits, including reduced costs, enabling them to invest in other fields.

Latest EPCG Scheme Reforms (2025)

• Simplification of Compliance and Documentation

Earlier, before 2025, acquiring an EPCG license was complicated due to the extensive documentation and complex process, which deterred many from completing it. A major pain point for exporters was the complexity of compliance under the EPCG Scheme. The new reforms simplify documentation and allow exporters to file documents digitally through a unified portal. The requirement for multiple certifications from technical authorities has been reduced. Exporters can now self-certify the usage of capital goods under certain conditions.

• Extension of Export Obligation Period

Earlier exporters used to face so much disruption or problems in the supply chain due to export obligations that they were not able to fulfill. Keeping this in view, now this time has been extended in the latest reforms of EPCG Schemes from 6 years to 8 years. Offering more time to fulfil commitments.

• Focus on Green Technology and Sustainable Manufacturing

Whatever pollution was spread earlier during export, a new reform has been added to reduce it, in which more focus is given to the green environment and sustainable manufacturing. The government is promoting the import of environmentally friendly and energy-efficient capital goods. A higher duty exemption threshold is now offered for machinery related to renewable energy, waste management, and energy conservation technologies.

• Sector-Specific Relaxations

The new reforms provide sector-specific relaxations for labour-intensive industries like textiles, leather, handicrafts, and agro-processing. Small and medium exporters in these sectors benefit from a reduced export obligation multiple (from 6x to 4x of the duty saved).

• Integration with PLI and Make in India Initiatives

The revised EPCG Scheme is now better aligned with other flagship programs like PLI (Production Linked Incentive) and Make in India. This encourages industries to not only export more but also enhance domestic value addition.

• Simplified Redemption and Closure Process

Exporters often faced delays in the redemption of EPCG authorizations. The DGFT has now introduced an automated redemption module with real-time tracking. Faster closure timelines ensure that exporters are not penalised unnecessarily.

Impact of Reforms on Indian Exporters

• Improved Ease of Doing Business

By digitising the application and compliance processes, exporters, especially MSMEs, find it easier to access and benefit from the EPCG Scheme. Companies can now focus more on business growth than on regulatory compliance by reducing paperwork and speeding up approvals.

• Encouragement for Green Exports

The emphasis on green technologies aligns with global market trends. Exporters who invest in eco-friendly manufacturing setups can enjoy duty savings and also cater to environmentally conscious global buyers.

• Boost to Sectoral Growth

Labour-intensive and MSME-dominated sectors now enjoy more favourable terms under the EPCG Scheme. This can lead to increased employment and capacity building in rural and semi-urban regions.

• Greater Flexibility

With extended export obligation timelines and relaxed norms for low-volume exporters, companies affected by COVID-19 or global slowdowns now have room to recover and still meet their obligations.

• Strategic Integration with National Programs

The reforms allow exporters to synergise benefits across various government initiatives, including SEZ, RoDTEP, MEIS, and PLI, improving the overall return on investment.

Conclusion

The EPCG Scheme continues to be a cornerstone policy in Indias export promotion arsenal. The 2025 reforms are forward-looking, designed to streamline processes, encourage sustainable practices, and support small exporters. With better alignment to global trade practices and national development goals, the revised scheme is set to play a significant role in achieving Indias ambitious $2 trillion export target by 2030.

For exporters, now is the time to evaluate how the revised EPCG Scheme can be leveraged to expand production capabilities, enter new markets, and stay ahead of the competition.