GTRI Urges Government to Cap Testing Costs Under Quality Control Orders to Support MSMEs

Global Trade Research Initiative (GTRI) has called on the government to regulate and cap product testing charges under Quality Control Orders (QCOs), warning that rising compliance costs are placing a heavy burden on MSMEs and small importers in India.

Growing Concern Over Rising Compliance Costs

India’s expanding framework of Quality Control Orders (QCOs) is aimed at improving product quality and ensuring consumer safety. However, experts believe that the rapid rollout of these regulations is creating unintended challenges for businesses, particularly micro, small, and medium enterprises (MSMEs).

According to GTRI, the high cost of testing and certification required under QCOs is emerging as a significant barrier for smaller players. These costs are not only affecting importers but also impacting domestic manufacturers who rely on imported components.

Pressure on MSMEs and Small Importers

GTRI Founder Ajay Srivastava highlighted that excessive compliance expenses could push many MSME importers out of the market. Smaller firms often operate on limited margins and cannot absorb the high upfront costs associated with certification.

As a result, there is a growing risk that the market could become increasingly dominated by large importers who have the financial capacity to manage such expenses. This could reduce competition and limit opportunities for smaller businesses.

Role of BIS and Certification Requirements

The certification process is governed by the Bureau of Indian Standards (BIS) under its Foreign Manufacturers Certification Scheme (FMCS). This scheme mandates that foreign manufacturers obtain BIS certification before exporting products covered under QCOs to India.

The process involves multiple steps, including:

• Appointment of an authorised Indian representative
• Submission of detailed technical documentation
• Inspection of manufacturing facilities by BIS officials
• Testing of product samples at BIS-approved laboratories
• Grant of certification licence before exports begin

While these measures are designed to ensure quality, they also add layers of complexity and cost.

High Upfront Costs Impact Business Viability

For many MSMEs, the cost of obtaining BIS certification can range between ₹15 lakh and ₹20 lakh. This includes expenses related to inspections, testing, documentation, and compliance procedures.

Large importers can distribute these costs across high volumes of imports, making it manageable. However, smaller businesses that deal in low-volume or specialised products find it difficult to justify such high investments.

In many cases, these costs make importing certain goods commercially unviable, forcing businesses to either exit the market or limit their product offerings.

Strain on Testing Infrastructure

Another major concern highlighted by GTRI is the strain on India’s testing infrastructure. As the number of QCOs increases, the demand for testing facilities has surged, leading to bottlenecks and delays.

Limited availability of accredited laboratories and lengthy certification timelines further complicate the process for businesses. These delays can disrupt supply chains and increase operational costs.

Recommendations by GTRI

To address these challenges, GTRI has proposed several policy measures aimed at easing the compliance burden:

1. Capping Testing Charges
   The think tank has recommended setting a ceiling on testing fees for routine industrial products to ensure affordability for smaller businesses.
2. Recognition of Foreign Lab Reports
   Accepting test reports from accredited international laboratories could reduce duplication of testing and lower costs.
3. Adopting Risk-Based Testing
   Instead of requiring extensive testing for all products, a risk-based approach could focus on high-risk categories, reducing unnecessary compliance.
4. Regulatory Impact Assessment
   Before introducing new QCOs, the government should evaluate their economic impact on businesses, especially MSMEs.

These measures aim to strike a balance between maintaining quality standards and supporting business growth.

Impact on ‘Make in India’ Initiative

GTRI has also warned that high certification costs could undermine the Make in India initiative. Many domestic manufacturers depend on imported machinery, components, and specialised inputs that are not readily available in India.

If importing these essential inputs becomes too expensive or cumbersome, it could hinder production and reduce the competitiveness of Indian industries.

Balancing Quality and Ease of Doing Business

While QCOs play a crucial role in ensuring product quality and consumer safety, experts believe that the current approach needs refinement. A balance must be achieved between strict quality standards and ease of doing business.

Overregulation or excessive compliance costs can discourage investment and innovation, particularly among smaller enterprises. On the other hand, inadequate standards could compromise product quality and consumer trust.

Way Forward for Policymakers

The government faces the challenge of designing a regulatory framework that supports both quality assurance and economic growth. Policymakers may need to focus on:

• Strengthening testing infrastructure
• Streamlining certification processes
• Reducing duplication of compliance requirements
• Supporting MSMEs through subsidies or incentives

By addressing these issues, India can create a more inclusive and efficient regulatory environment.

Conclusion

GTRI’s call to cap testing charges under Quality Control Orders highlights a critical issue facing India’s manufacturing and import ecosystem. While the objective of ensuring high-quality products is essential, the associated costs and complexities must be managed carefully.

Without timely intervention, smaller businesses could face significant challenges, leading to reduced competition and slower industrial growth. By adopting balanced and pragmatic policies, the government can ensure that quality standards are upheld without compromising the growth of MSMEs and the broader economy.