Policy stability

Exporters need greater certainty in tax-remission policy

The government’s recent decision to extend the Remission of Duties and Taxes on Exported Products (Rodtep) scheme by only three months, to December 31, provides continuity but little certainty. The Directorate General of Foreign Trade has kept the existing rates and value caps unchanged during the extension period. Exporters typically finalise shipment orders well in advance, making it difficult to factor in the tax remission while determining prices when the continuation remains uncertain. Rodtep’s expenditure was ₹18,313 crore in 2024-25, while the 2025-26 revised estimate (RE) stood at ₹18,233 crore. For 2026-27, however, the Budget estimate was cut to ₹10,000 crore, 45 per cent below the previous year’s RE.

 

Rodtep is not an export incentive or subsidy in the conventional sense. It returns the embedded central, state and local taxes and levies that exporters have paid, such as those which cannot otherwise be refunded, including taxes on fuel, electricity duties and mandi charges. Its purpose is to ensure that taxes are not exported with the goods. The scheme was introduced in 2021 to replace the Merchandise Exports from India Scheme and align India’s export-support framework with World Trade Organization guidelines. The case for greater predictability is strengthened by the scheme’s scale. It covers more than 10,700 export-product categories, covering diverse sectors of the economy, and as of March 31, 2025, disbursements under the scheme had crossed ₹57,976.78 crore since its launch, underscoring its significant role in supporting India’s merchandise exports. India’s exports are also gaining momentum. According to the commerce ministry’s latest trade data, cumulative merchandise exports rose 17.85 per cent to $215.91 billion during April-August 2026-27, from $183.21 billion in the corresponding period a year earlier.

 

Notably, the scheme has already seen policy volatility. In February, the government restricted Rodtep rates and value caps to 50 per cent of the prevailing levels. The rates were restored at the end of March after disruption in West Asia affected shipping routes, schedules and logistics costs. While the decision was a response to an exceptional external shock, it highlighted the difficulties exporters faced when policy changes after prices had already been negotiated with overseas buyers. Recognising this, the Parliamentary Standing Committee on Commerce has recommended that any future revision of Rodtep rates be preceded by structured consultation with industry stakeholders and accompanied by a clearly defined minimum transition period. This would help ensure that exporters are not forced to absorb losses on orders contracted on the basis of earlier rates. The commerce ministry has itself sought a five-year extension and an increase in the allocation of funds under the scheme. The government should consider the request and provide exporters a stable policy environment. The external environment is challenging and India needs to push exports both to attain stability in its external account and to grow at higher rates. The least the government should aim to do is to keep the domestic policy environment stable and not add to the complexities that exporters are anyway facing.