NITI Aayog report calls for pause on Quality Control Orders for capital goods, backs easier certification norms

Sources said the panel has also suggested sweeping reforms in the Bureau of Indian Standards (BIS), as well as scrapping of the Steel Import Monitoring System (SIMS) which it said duplicates existing measures to check imports while adding to compliance costs.

A NITI Aayog panel last month recommended to pause the upcoming Quality Control Orders (QCOs) on raw materials and capital goods, along with restricting new QCOs only to products that pose direct safety or environmental risks, sources familiar with the development have told Moneycontrol.

The capital goods equipment flagged by the report includes industrial machinery, electrical equipment and engineering components covered under the Omnibus Technical Regulation issued by the Ministry of Heavy Industries.

Sources said the panel has also suggested sweeping reforms in the Bureau of Indian Standards (BIS), as well as scrapping of the Steel Import Monitoring System (SIMS) which it said duplicates existing measures to check imports while adding to compliance costs.

The yet-to-be-released report by the High-Level Committee on Non-Financial Regulatory Reforms under NITI Aayog has recommended deferring the implementation of upcoming QCOs and cross-sector technical standards (OTRs) for raw materials and capital goods. It added that these measures should first be reviewed by the Inter-Ministerial Group (IMG), as their premature rollout could increase compliance burdens on manufacturers and MSMEs, as well as slow down investment in clusters dependent on imported intermediaries.

The IMG on QCOs is a committee with representatives from key ministries, including commerce, heavy industries and MSME that reviews implementation of these orders issued by different departments.

Many of these draft QCOs cover broad, generic industrial products, unlike similar international norms, and such wide mandates can potentially cause delays in approvals, making it harder for companies to access affordable capital goods, the report seen by Moneycontrol said.

The Centre has already begun taking steps in this direction. On November 13, 14 QCOs covering key sectors such as chemical, plastics and textiles were withdrawn. The pause will come with immediate effect from the date of Gazette publication, without any transition delay.

Revoking SIMS

The report’s recommendation to revoke Steel Import Monitoring System (SIMS) noted that ministries can obtain import data directly from the Directorate General of Foreign Trade (DGFT) as needed, hence, maintaining an additional monitoring system duplicates the role of DGFT, and risks turning the mechanism into an import-licensing tool rather than a monitoring exercise.

The Steel Import Monitoring System (SIMS) was instituted in September 2019 to provide the government and stakeholders information in advance on steel imports to aid in responding to market conditions and prevent dumping. It also aimed to ensure compliance with Indian quality standards for imported steel.

Reforming BIS

In its proposal to reform the BIS, the committee has urged the rationalisation and consolidation of the existing ten certification schemes into two principal ones - Scheme I for general products, which will be the default and primary enforcement mechanism for all new items, and Scheme II for high-risk products.

Items under the current schemes will be reassigned to either of the two, based on the recommendations of the Inter-Ministerial Group on QCO assessment. Additionally, BIS should grant perpetual licences at the renewal stage, with an annual licence fee payment mandated thereafter, the report has suggested.

Global Benchmarks

The yet-to-be released report by the think tank has flagged India’s heavy reliance on mandatory QCOs, especially on raw materials and intermediate goods and terms it as a far stricter regime than what some of the major economies like the European Union follow. The report said while the EU limits compulsory compliance to specific finished products like construction steel, India requires factory-level licensing and grade-wise approvals even for raw materials.

This difference in standards has increased compliance burdens, reduced sourcing flexibility, and added friction to supply chains at a time when domestic industry is already staring at rising competition. The report also said that there is mounting competition from China, since QCOs have led to supply constraints, pushing domestic prices of key petrochemical and polymer inputs 10–20 percent higher than Chinese levels. This cost differential has particularly impacted Indian textiles, leading to loss of export share, while Chinese players have maintained or even expand their presence in markets like the United States.

The committee has argued that easing QCOs on such inputs could restore price competitiveness and prevent further erosion as India seeks to climb global value chains. The report therefore concludes that India’s mandatory QCO regime goes well beyond international practice, imposing supply-chain constraints not seen in major manufacturing economies.

MSME Disadvantage

The report also said that a majority of QCOs introduced over the past five years - nearly 70 percent of them - have led to unintended consequences, affecting manufacturing competitiveness and the broader objectives of the Make in India initiative.

It also said that a majority of QCOs are concentrated on raw materials and intermediate products rather than finished goods, which has put MSMEs at a disadvantage.

For several products, the government mandates compliance with Indian standards, citing public interest, protection of human, animal, or plant health, environmental safety, prevention of unfair trade practices, and national security.

For such products, the Centre directs mandatory use of Standard Mark under a Licence or Certificate of Conformity (CoC) through the issuance of QCOs.

This report by NITI Aayog has proposed suspending or deferring QCOs for over 200 products, out of a total of 790.