India notifies QCO enabling flexible sourcing framework for some sectors

The Department for Promotion of Industry and Internal Trade (DPIIT) notified the Transition Facilitation (Quality Control) Order, 2026, introducing a flexibl...

What Happened

The Department for Promotion of Industry and Internal Trade (DPIIT) notified the Transition Facilitation (Quality Control) Order, 2026, introducing a flexible sourcing mechanism for key manufacturing sectors including toys and electronics.
Under the new order, eligible domestic manufacturers may source inputs from suppliers holding licences under Scheme II (Conformity Assessment) of the Bureau of Indian Standards (BIS) Regulations, 2018, rather than exclusively from Scheme I (ISI Mark) licensees.
Eligibility for the framework is contingent on demonstrated technical capability, a consistent compliance record of at least three years without default under QCO requirements, and a commitment to technology advancement, R&D, and domestic supply chain strengthening.
An alternative risk-based compliance pathway is also introduced, enabling a phased transition for industry while maintaining quality assurance and consumer protection standards.
The order explicitly aims to balance regulatory adherence with supply chain resilience and innovation, addressing long-standing industry concerns about procurement rigidity under mandatory QCOs.

Static Topic Bridges

Quality Control Orders (QCOs) and the BIS Framework

Quality Control Orders are issued by the Central Government — primarily through sectoral ministries in consultation with DPIIT — to make BIS certification mandatory for specified products. The legal authority for QCOs flows from the Bureau of Indian Standards Act, 2016 (which replaced the BIS Act, 1986) and, in select cases, the Essential Commodities Act, 1955. The BIS Act, 2016 vests in the Central Government the power to require that certain goods carry the Standard Mark (ISI Mark) as a condition for manufacture, import, distribution, sale, or storage.

BIS functions under the Ministry of Consumer Affairs, Food and Public Distribution.
The ISI Mark certifies conformity to a specific Indian Standard; its use without a valid BIS licence attracts imprisonment up to two years or a fine up to ₹2 lakh (first offence), with higher penalties for repeat violations.
Scheme I (ISI Mark Scheme) involves factory inspection and product testing before grant of licence; Scheme II (Conformity Assessment) is a broader certification pathway covering a range of conformity models.
As of 2026, over 700 product categories are covered under mandatory QCOs.

Connection to this news: The Transition Facilitation QCO 2026 does not dilute quality standards — it expands the permissible certification pathway from Scheme I alone to include Scheme II for qualifying manufacturers, making compliance more operationally flexible without lowering the quality bar.

Make in India and Domestic Supply Chain Resilience

Launched in 2014, Make in India is a flagship industrial policy initiative aimed at transforming India into a global manufacturing hub across 25 sectors. A key pillar of the initiative is deepening domestic value chains — reducing dependence on imported components and intermediate goods.

QCOs were progressively deployed from 2014 onwards as a non-tariff instrument to check the entry of sub-standard imports, particularly from China, while simultaneously raising quality benchmarks for domestic producers.
Sectors most affected by QCOs include electronics (including mobiles, cables, LED lighting), toys, steel, chemicals, and consumer goods.
The Production-Linked Incentive (PLI) scheme complements QCOs by incentivising scale, while QCOs create a quality floor.

Connection to this news: The 2026 order responds to industry feedback that strict Scheme I-only sourcing requirements created procurement bottlenecks, particularly for sectors with rapidly evolving technology such as electronics. The flexible sourcing framework aligns regulatory compliance with the innovation timelines required to compete globally.

Risk-Based Regulation as a Policy Tool

Risk-based regulation is an approach in which the intensity and form of compliance scrutiny are calibrated to the level of risk posed by a product, process, or actor. Regulators focus stricter controls on high-risk actors or products, while allowing proven, low-risk compliers greater operational latitude.

Globally, regulators including the EU's REACH framework and the US Consumer Product Safety Commission use risk-tiering to allocate oversight resources efficiently.
In the Indian context, risk-based approaches have been piloted in food safety (FSSAI risk-based inspections) and financial regulation (SEBI's risk-based supervision of market intermediaries).
The core principle is that compliance history is itself informative: a manufacturer with a three-year clean record signals lower regulatory risk than a new entrant.

Connection to this news: The Transition Facilitation QCO 2026 embeds a risk-based logic by conditioning access to the flexible sourcing framework on a proven three-year compliance record. This deters misuse while rewarding consistent quality performance.

Key Facts & Data

The Transition Facilitation (Quality Control) Order, 2026 was notified by DPIIT under the Ministry of Commerce and Industry.
Eligibility criteria include: three consecutive years of QCO compliance without default, demonstrated R&D or technology advancement, and commitment to domestic supply chain strengthening.
Scheme II of BIS Conformity Assessment Regulations, 2018 is the alternative certification pathway enabled under this order.
Over 700 product categories are under mandatory QCOs in India as of 2026.
Key sectors covered: toys, electronics, and related intermediate goods.
The BIS Act, 2016 replaced the BIS Act, 1986 and broadened BIS's mandate to cover goods, services, and systems.