Exports have fallen and entrepreneurs that had opted for the scheme are now finding it increasingly difficult to meet their targets. The scheme allows export oriented units to import capital goods at concessional rates, on the condition that these units export goods worth four to six times the CIF value of imports. These exports are to be made in a block of five to eight years and the target for each year is fixed beforehand. But if the units fail to meet these targets, not only do they pay the actual duty applicable on imports, they also have to pay a 24 per cent interest charge per annum on the differential. Furthermore, the move by the DGFT to monitor export obligationsunder the scheme has also not helped.

It could be argued here that as exporters have been facing tough times, the norms for the EPCG scheme should be made less strict. Also those units that have met their export obligations in rupee terms, but have failed to do so in dollar terms should be spared the rod. However, as the fall in exports may be a temporary phenomenon, a dilution of the EPCG norms may not be advisable. Strict monitoring should help buoy exports, as units that have availed of the EPCG scheme will be forced to devise new ways to meet their export obligations. Another method, would be to cut prices even if it means taking a loss to the extent of the penalty involved on not meeting export targets.