External Sector
What is Tariff Rate Quota (TRQ)?
DEFINITION
Tariff Rate Quota (TRQ) is a trade policy tool that allows a specified quantity of a product to be imported at a lower tariff rate, while quantities above that threshold are subject to higher tariffs. Example: India allows import of 100,000 tonnes of maize at 15% tariff (TRQ). Any import beyond 100,000 tonnes is charged 60% tariff.
Directorate General of Foreign Trade (DGFT) issues TRQ licenses and Customs authorities enforce tariffs at the borders.
Purpose of TRQs
- Protect domestic producers by limiting low-duty imports
- Ensure availability of essential commodities
- Meet international trade obligations (e.g., WTO commitments)
- Provide market access to partner countries in FTAs
India's Use of TRQs: India uses TRQs for imports like
- Dairy products
- Edible oils
- Pulses
- Sugar
- Agricultural commodities from FTA partners (e.g., Australia, UAE)
Key Features of TRQ
| Feature | Description |
|---|---|
| Dual Tariff Levels | Lower rate for in-quota, higher for over-quota |
| Quota Administration | Licenses issued to eligible importers |
| Quota Volume | Fixed annually by the government or under trade deals |
| Trade Facilitation | Encourages regulated imports without flooding markets |
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