New Delhi: In a move aimed at bolstering exports and enhancing ease of doing business, the government last week rolled back 14 Quality Control Orders (QCOs) pertaining to chemicals, polymers and fibre intermediaries used in the textiles sector, and 55 others on steel-related intermediaries used across industries, including automobiles.
The suspension of these 69 QCOs, which were primarily on raw materials and intermediates critical to India’s manufacturing and exports sector, is expected to ease the sourcing of raw materials for domestic players, thereby making Indian finished products more attractive.
The government’s decision comes amid trade tensions with the US and an internal NITI Aayog report in October recommending rolling back 208 QCOs, primarily related to raw materials and intermediaries.
Governed by the Bureau of Indian Standards (BIS) and implemented by line ministries of government, QCOs aim to improve the quality of domestic products while restricting the import of substandard products. Once a QCO comes into effect, no one can manufacture, import or sell the product covered by the order without having a BIS mark under a valid licence.
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Why govt tightened QCO norms post-2016
As of October 2025, there are a total of 790 products mandating QCOs and around 79 are in the pipeline to be implemented over the next year. The government has been aggressively using QCOs post-2016 primarily to reduce reliance on imports and promote self-reliance in the manufacturing sector.
Between 2016 and 2025, the number of QCOs grew exponentially, from 70 to 790, according to the NITI Aayog’s internal report, accessed by ThePrint.
“A majority of QCOs have been introduced over the past 5 years, with nearly 70 percent on raw materials, intermediates, or capital goods rather than finished consumer products,” the report states.
The rapid expansion of QCOs have led to unintended consequence, impacting the manufacturing competitiveness primarily of Micro, Small and Medium Enterprises (MSME) players by restricting supply chains and increasing costs.
Niti Aayog’s report states, “While the expansion reflects India’s commitment to enhancing product quality and strengthening confidence in Make in India manufacturing, it has also posed certain challenges, particularly for MSMEs and export-oriented sectors that are dependent on imported inputs.”
According to Arun Goyal, the Director of Delhi-based think-tank Academy of Business Studies, the withdrawal of QCOs on 14 product categories under pressure from the US tariffs is a positive move. However, he underlined that QCOs have been used by the government as a geopolitical and commercial tool.
“QCOs are being implemented very selectively and passively with a primary objective of targeting China and benefiting certain large domestic players,” Goyal told ThePrint.
Industry groups, particularly MSMEs, argue that the QCOs regime has created compliance burdens that are distorting markets instead of strengthening them.
“QCOs are a non-trade barrier and a protectionist measure that is impacting the MSME players with high compliance and certification costs,” said Shaunak Rungta of Rajasthan-based Vardhan Group, an MSME that manufactures and imports steel hardware products.
According to Rungta, QCOs have eroded fair play competition in the Indian market by restricting the supply chain which primarily benefits large industry players that are able to absorb high costs and dictate market price.
While QCOs are acting as a barrier for trade flow, they are also bringing back the old “license raj system”, Rungta said. The certification process is bogged down by bureaucracy and long delays.
BIS inspectors are required to travel abroad to inspect factories, which further delays the process to over a year. Sometimes this usually takes 7-8 months. “The delay is something that a smaller player like us just cannot afford,” Rungta added.
As per section 16 of the Bureau of Indian Standards Act of 2016, the central government can mandate the use of standard quality marks on any goods or industry on grounds of public interest or for the protection of human, animal or plant health, safety of the environment, or prevention of unfair trade practices, or national security.
Impact on export competitiveness
The QCOs have disrupted the supply chain of manufacturing industries in India dependent on imported raw materials. Inputs like polymers, metals, rubber, chemicals, and fibres which are critical building blocks for Indian manufacturing have limited availability in India due to lower economies of scale, according to tehe Niti Aayog’s internal report.
Prerna Prabhakar, a fellow at the Centre for Social and Economic Progress (CSEP), told ThePrint that QCOs have suppressed imports of intermediate goods critical for domestic production without making any significant improvement in exports.
She authored the ‘Decoding India’s Quality Control Orders’ report, which was released by the CSEP in September 2025.
Using econometric analysis, the CSEP report concludes that in the year of a QCO notification, the imports of intermediate goods decline by 16 percent, followed by a 17.5 percent decline in the subsequent year and 30 percent over the long term.
On the other hand, exports grew by just 10.6 percent in the year of notification, but declined by 12.8 percent in the second year and made no significant gains in the long-term, cites the CSEP report.
According to Parbhakar, the CSEP’s ongoing research using firm-level data for chemical firms suggests that QCO regulations hurt micro and small firms, whereas largr firms appear to benefit from its implementation owing to their production levels and employment.
The implementation of QCO has also resulted in the consolidation of some domestic suppliers that now control the market and set prices.
In categories like polyester, yarn and some steel products, the premium runs around 15 to 30 percent above global benchmarks. “This is one of the main reasons for India’s declining share in global apparel exports despite the withdrawal of anti-dumping duties on select products,” states Niti Aayog report.
The effect of high pricing resulting from QCO is also visible in India’s apparel market. India’s man-made fibre exports to the European Union (EU) fell nine percent, while exports to the US stagnated. Vietnam, meanwhile, saw its exports to the US and EU rise by 4 percent and 6 percent, respectively, between 2023 and 2024.
High licensing cost burden
The QCO compliance adds to the cost of domestic and foreign manufacturers, which is then passed on to end consumers. “There are significant costs associated with QCO compliance, including expenses for testing, inspection, and certification,” Prabhakar told ThePrint.
She further added that apart from certification cost, the applicants are also required to submit a detailed documentation and also bear the international travel costs of BIS officials’ visits to inspect foreign facilities.
According to Prabhakar, the foreign manufacturers that she has spoken to for her research cite a high-cost burden arising from BIS certification requirements.
“The foreign exporters are required to deposit a performance bank guarantee worth USD 10,000 for each product with the BIS,” Prabhakar said.
As per the Bureau of Indian Standards, the application and certification cosst come between Rs 20,000 to Rs 30,000 under foreign manufacturers certification scheme. However, testing charges are separate and vary based on the products.
Comparing regulation with major economies
When one compares the regulatory requirements for India’s steel industry with those of international economies, the difference is striking. Major economies like the US, EU and Japan do not require factory-level certification according to the Niti Aayog report.
While Indian traders and manufacturers can only import steel-related products from certified foreign factories, there are no pre-approvals in countries like Japan, US and EU.
In India, the QCO mandate for the steel industry is applied to both raw materials and finished products, whereas in other major economies, it is only limited to certain finished construction and industrial products.
Overall, the Niti Aayog report cites that India’s regulatory measures are protectionist in comparison to other major economies, which rely on prevailing market standards for quality.
(Edited by Ajeet Tiwari)
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