Govt cuts duty benefits for exporters under RoDTEP scheme by 50 pc; exporters body seeks relook

The government on Monday halved the rate of duty benefits under the export support scheme, RoDTEP, prompting the exporting community to seek a reconsideration of the decision. The Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme, launched in 2021, provides for a refund of taxes, duties and levies that are incurred by exporters in the process of manufacturing and distribution of goods, and are not being reimbursed under any other mechanism at the Centre, state or local level. With immediate effect, the Directorate General of Foreign Trade (DGFT) said, the applicable RoDTEP rates shall be limited to 50 per cent of the existing rates. Refunds under the scheme range from 0.3 per cent to 3.9 per cent. ''RoDTEP benefits shall be restricted to 50 per cent of the notified rates and value caps with immediate effect,'' the DGFT said in a notification. For instance, the rebate on unginned raw cotton of staple length not exceeding 20 mm has been reduced from 3.1 per cent, capped at Rs 1.60 per kg, to 1.55 per cent with a cap of Rs 0.80 per kg. Commenting on the move, Federation of Indian Export Organisations (FIEO) President S C Ralhan said the reduction of rates and the cut in value caps by 50 per cent came at a particularly challenging time when Indian exports are already facing significant global headwinds, including slowing demand, increasing uncertainty and rising protectionism. ''We request the government to reconsider the decision,'' he said. The country's exports rose marginally by 0.61 per cent to USD 36.56 billion in January, while trade deficit widened to a three-month high of USD 34.68 billion. Think tank Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said rates have been cut by 50 per cent across all tariff lines, where the rebate applies, and value caps have also been reduced by half. He said RoDTEP is not an export subsidy but a refund of embedded taxes and levies paid during production, such as state taxes on fuel, electricity duties and mandi charges that are not otherwise rebated. WTO (World Trade Organization) rules permit such remission because it merely neutralises domestic taxes on exports. ''Cutting these rates, therefore, raises exporters' costs at a time when India's shipments are already facing weak global demand, supply disruptions and rising compliance burdens, eroding competitiveness in price-sensitive markets,'' Srivastava said. He added that RoDTEP rates are revised frequently, making it difficult to build rebates into long-term pricing and contracts. Announcing the scheme with a multi-year horizon - ideally five years - would provide predictability, allow firms to factor the remission into costing and bids, and strengthen confidence in India's export policy framework. ''Halving RoDTEP rates will raise the cost of exporting from India by reducing refunds of domestic taxes that exporters cannot otherwise recover,'' he said. In price-sensitive sectors, even a 1-2 per cent increase in costs can decide whether orders are won or lost, Srivastava said, adding that the cut comes when global demand is weak, logistics and compliance costs remain high, and competitors such as Vietnam and Bangladesh still enjoy lower costs and preferential market access. ''Lower remission will make Indian exports harder to price competitively, squeeze already thin margins, and may discourage smaller firms from expanding abroad, potentially slowing export growth at a time when diversification and scale are crucial,'' he said.