For exporters in India, maximizing profitability while maintaining compliance with trade regulations is essential for long-term success. The Advance Authorisation Scheme and DGFT Norms Fixation are two critical components under the Foreign Trade Policy that enable exporters to optimize resources, reduce costs, and enhance global competitiveness.
While the Advance Authorisation Scheme allows duty-free import of raw materials for export production, DGFT Norms Fixation ensures that material consumption standards are fair, transparent, and aligned with industry benchmarks. Together, these mechanisms streamline export operations, promote ease of doing business, and encourage global trade participation.
Understanding the Advance Authorisation Scheme
The Advance Authorisation Scheme, introduced by the Directorate General of Foreign Trade (DGFT), permits exporters to import raw materials, components, and inputs without paying customs duty, provided that the imported goods are used to manufacture export products. This duty exemption enhances liquidity and cost-efficiency, allowing exporters to remain competitive in international markets.
Key Features of the Advance Authorisation Scheme:
Duty-Free Imports: Raw materials required for export production can be imported without paying basic customs duty, anti-dumping duty, or safeguard duty.
Export Obligation: Exporters must fulfill a specific export obligation (EO) within a stipulated period, usually 18 months from the date of issue.
Eligibility: Both manufacturer-exporters and merchant-exporters tied to supporting manufacturers can apply for authorisation.
Transferability: The Advance Authorisation is non-transferable but can be used by supporting manufacturers associated with the license holder.
Example:
A pharmaceutical exporter importing active ingredients under the Advance Authorisation Scheme can produce the final medicine and export it without paying import duties. This significantly lowers production costs and enhances export competitiveness.
What is DGFT Norms Fixation?
DGFT Norms Fixation refers to the process of determining the quantity of input materials required to produce one unit of export product. These input-output norms are essential for monitoring and validating the use of duty-free imported materials under the Advance Authorisation Scheme.
DGFT maintains a database of Standard Input Output Norms (SION) for various export products. However, if no standard norms exist for a particular product, exporters can apply for Ad Hoc Norms Fixation to determine consumption ratios.
Key Aspects of DGFT Norms Fixation:
SION (Standard Input Output Norms): Predefined consumption standards for commonly exported goods.
Ad Hoc Norms: Temporary norms fixed for unique export products without existing SION data.
Norms Committee: DGFT’s Norms Committee reviews applications and fixes norms based on technical data, production records, and industry standards.
Example:
An exporter manufacturing specialized machinery may not find standard norms under SION. In this case, the exporter must apply for DGFT Norms Fixation by providing technical details and input consumption data. Once approved, the fixed norms will define the permissible import quantity for duty-free procurement.
How the Advance Authorisation Scheme and DGFT Norms Fixation Work Together
The Advance Authorisation Scheme and DGFT Norms Fixation are closely interlinked. The latter provides the foundation for determining the permissible quantity of imported inputs, ensuring fair usage and preventing misuse of duty exemptions.
Here’s how the process works:
Exporters apply for Advance Authorisation based on SION or Ad Hoc norms.
DGFT verifies input-output ratios through established norms.
Exporters fulfill the export obligation using imported inputs.
DGFT monitors compliance during license redemption and EODC issuance.
Example:
A textile exporter applying under the Advance Authorisation Scheme for fabric production will rely on DGFT Norms Fixation to determine how much yarn can be imported duty-free for every meter of fabric exported.
Benefits of the Advance Authorisation Scheme and DGFT Norms Fixation
Cost Efficiency: Eliminates import duty, reducing production costs.
Global Competitiveness: Helps exporters offer competitive pricing in international markets.
Regulatory Clarity: DGFT Norms Fixation ensures transparency in input utilization.
Encourages Manufacturing: Supports the government’s Make in India initiative by promoting domestic production for export.
Streamlined Compliance: Simplifies monitoring and documentation through standardized norms.
Best Practices for Exporters
To fully benefit from the Advance Authorisation Scheme and DGFT Norms Fixation, exporters should:
Maintain detailed production and consumption records.
Regularly update themselves on DGFT circulars and notifications.
Seek expert guidance for SION or Ad Hoc Norms applications.
Ensure timely redemption of licenses and submission of EODC (Export Obligation Discharge Certificate).
Implement internal compliance audits for accurate documentation.
Conclusion
The Advance Authorisation Scheme and DGFT Norms Fixation are indispensable tools for Indian exporters aiming to grow globally while maintaining compliance and efficiency. These frameworks reduce costs, promote responsible trade practices, and strengthen India’s position in global exports.
By understanding and effectively implementing these schemes, businesses can streamline their export operations, achieve higher profitability, and ensure regulatory confidence.
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