Paragraphs 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Four paragraphs of Chapter 5 lower the burden of an EPCG export obligation: condonation for early fulfilment (5.09), a 75% specific obligation for green technology products (5.10), a 25% specific obligation for units in the North East, Jammu and Kashmir and Ladakh (5.11), and exemption from the average obligation for listed sectors (5.12). The Handbook adds relief when a sector's exports fall (5.17), a carry-over rule (5.18) and the list of green technology products (5.26).
This article is based on the chapter-wise text of the Foreign Trade Policy, 2023 published on the DGFT website, as consulted on 2 October 2026; the copy carries no "updated up to" date. The procedure is taken from Chapter 5 of the Handbook of Procedures, 2023 as published on the DGFT website (file of July 2026), consulted on 2 October 2026. Later Notifications and Public Notices should be checked. If you are weighing which reduction fits your project, our legal consultation team can compare them against the authorisation.
Paragraph 5.09 condones the remaining obligation if the holder has fulfilled 75% or more of the specific obligation and hundred per cent of the average obligation in half or less of the original period. Paragraph 5.10 sets the specific obligation at 75% for green technology products; paragraph 5.11 sets it at 25% for units in the North East, Jammu and Kashmir and Ladakh. In both, the average obligation does not change. Paragraph 5.04(l) allows only one of these benefits.
What the Policy says
| Paragraph | Rule |
|---|---|
| 5.09 (incentive for early fulfilment) | To accelerate exports: where the holder has fulfilled 75% or more of the specific export obligation and hundred per cent of the Average Export Obligation to date, if any, in half or less than half the original export obligation period specified, the remaining obligation is condoned and the authorisation is redeemed by the RA concerned. |
| 5.10 (green technology products) | For exporters of Green Technology Products, specific EO is 75% of the EO under paragraph 5.01(b). No change in the average EO under paragraph 5.04(c). The list is in paragraph 5.26 of the Handbook. |
| 5.11 (North East, J&K, Ladakh) | For manufacturing units in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Jammu and Kashmir and Ladakh, specific EO is 25% of the EO under paragraph 5.01(b). No change in the average EO. |
| 5.12 (exemption from average obligation) | In the cases in sub-paragraph (a) the holder need not maintain the average obligation. |
Paragraph 5.12 in detail. Sub-paragraph (a) covers exports of goods relating to: handicrafts; handlooms; industries covered under the Khadi and Village Industries Commission; agriculture; aquaculture (including fisheries) and pisciculture; animal husbandry and dairying; floriculture and horticulture; poultry; viticulture; sericulture; carpets; coir; and jute. Sub-paragraph (b) says the exemption is not allowed for import of fishing trawlers, boats, ships and other similar items. Sub-paragraph (c) says goods, except tools, imported under EPCG by those sectors cannot be transferred for five years from the date of import even where the export obligation has been fulfilled.
One benefit only. Paragraph 5.04(l) allows only one benefit among the 25% reduction for indigenous sourcing (5.04(d)) and paragraphs 5.09, 5.10 and 5.11. Paragraph 5.12 is not in that list; it concerns the average obligation, not the specific obligation. The Policy does not say in so many words whether a holder in a paragraph 5.12 sector can also take one of the four; this article does not answer that.
Procedure under the Handbook
Paragraph 5.17 (relief in average export obligation).
- (a) For exporters of sectors where total exports in the sector or product group have declined by more than 5% compared with the previous year, the average export obligation for the year may be reduced in proportion to the reduction in exports of that sector or group against the preceding year. Where the decline is continuous over consecutive years, the base year is the year after which exports have shown continuous decline.
- (b) The sectors or product groups to which the relaxation applies are conveyed by the DGFT to all RAs within seven months of the end of the previous financial year, and the RAs re-fix the annual average EO for the previous year accordingly.
Paragraph 5.18 (maintenance of annual average export obligation). Excess exports towards the average obligation in a year can offset any shortfall in the average obligation in other years of the export obligation period or the block period, as the case may be, provided the average obligation is maintained on an overall basis within the block period or export obligation period.
Paragraph 5.26 (green technology products). For paragraph 5.10 of the Policy, which provides reduced export obligation of 75% for green technology products, the export products are: solar energy generating systems and parts or equipment; wind energy generating systems and parts or equipment; LED lights of various kind; vapour absorption chillers; waste heat boiler; waste heat recovery units; unfired heat recovery steam generators; water treatment plants; battery electric vehicles (other than hybrid electric vehicles and plug-in hybrid electric vehicles) of all types; vertical farming equipment; wastewater treatment and recycling; rainwater harvesting system and rainwater filters; and green hydrogen. That is thirteen entries. Whether a particular article falls within an entry is a classification question to check on the authorisation and the item's entry in ITC(HS); this article does not classify any product.
Examples with invented names
Early fulfilment. Sunrise Panels Pvt Ltd holds an authorisation with a 6-year export obligation period (paragraph 5.01(b)). Within 3 years, half of that period, it has fulfilled 75% of its specific obligation and hundred per cent of its average obligation to date. Under paragraph 5.09 the remaining obligation is condoned and the RA redeems the authorisation.
North East unit. Brahmaputra Pack Works, with a manufacturing unit in Assam, has an authorisation under which paragraph 5.01(b) would give a specific obligation of a stated amount. Under paragraph 5.11 the specific obligation is 25% of that amount; its average obligation stays as imposed under paragraph 5.04(c). It cannot also take the 75% route of paragraph 5.10 on the same authorisation, because of paragraph 5.04(l).
Cross-references
The base obligation of 6 times the duties saved is in our article on paragraphs 5.00 and 5.01; how the obligation is counted is in paragraphs 5.04 and 5.08. Plain-language scheme guides: EPCG Scheme: Six Times Duty Saved, and the Average Export Obligation and EPCG Scheme: Zero-Duty Capital Goods for Exporters. The Policy is made under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 and the Handbook is issued under section 6. The Policy is not a statute; it binds through the Act and the conditions of each authorisation.
Need help choosing between the reductions?
The four reductions do not stack, and the right one depends on the product, the unit's location and the pace of exports. Our legal consultation service can read your authorisation against paragraphs 5.04(l) and 5.09 to 5.12 before you commit to a route.
Key takeaways
- Paragraph 5.09: 75% or more of specific and hundred per cent of average obligation, in half or less of the period: balance condoned.
- Paragraph 5.10: 75% specific obligation for green technology products (thirteen entries in paragraph 5.26 of the Handbook).
- Paragraph 5.11: 25% specific obligation for units in the ten named States and Union Territories.
- Paragraph 5.12: thirteen sectors need not maintain the average obligation; five-year no-transfer rule.
- Paragraph 5.04(l): only one of paragraphs 5.04(d), 5.09, 5.10, 5.11.
- Handbook paragraphs 5.17 and 5.18: relief on sector decline above 5%; carry-over of excess exports.
Read next
- Paragraphs 5.04 and 5.08 of the Foreign Trade Policy, 2023: EPCG export obligation
- Paragraph 5.07 of the Foreign Trade Policy, 2023: indigenous sourcing of capital goods under EPCG
- Paragraphs 5.15, 5.16 and 5.19 of the Handbook of Procedures, 2023: extension of the EPCG export obligation period
- GST Refund Under the EPCG Scheme
Disclaimer: Based on the chapter-wise text of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023 published on the DGFT website, and on the later Notifications named in this article, as consulted on 2 October 2026. The copies carry no "updated up to" date. Notifications, Public Notices, Trade Notices, the ITC(HS) schedules, Appendices and forms change often; the current text on the DGFT website should be checked before acting. This article is general information, not legal advice; check the official text before acting.