RoDTEP Scheme Extension

The Government of India is poised to extend the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme beyond its current expiry date of September 30, 2025. This decision comes as a relief for exporters facing challenges in a volatile global market. The scheme, initiated in January 2021, aims to refund embedded duties and taxes on exported goods, thereby enhancing competitiveness.

RoDTEP Scheme

The RoDTEP scheme provides refunds for various duties and taxes. These include VAT on fuel used in transportation, mandi tax, and electricity duties incurred during the manufacturing of exported items. This initiative is crucial for sectors that rely heavily on exports, as it alleviates some financial burdens.

Budgetary Allocations and Fiscal Responsibility

For the fiscal year 2026, the budget allocation for RoDTEP is set at ₹18,000 crore, an increase from ₹16,575 crore in the previous year. This adjustment reflects the government’s commitment to supporting exporters while ensuring that the total expenditure does not exceed the allocated budget. The government aims to monitor claims closely to maintain fiscal discipline.

Inclusion and Exclusion of Sectors

Most manufacturing sectors are eligible for the RoDTEP scheme. However, certain sectors such as steel, pharmaceuticals, and chemicals are notably excluded. This exclusion raises concerns among exporters who feel it creates an uneven playing field. The government has included Special Economic Zones (SEZs) and Export Oriented Units (EOUs) in the scheme since March 2024, but their status remains uncertain.

Export Performance and Global Context

India’s goods exports remained relatively flat, reaching $437.4 billion in FY25, a slight increase from $437.1 billion the previous year. This stagnation is attributed to geopolitical tensions and a global economic slowdown. Exporters are particularly wary of potential tariff threats from the United States, which further complicates the landscape.

Demands from Exporters

Exporters are advocating for a longer extension of the RoDTEP scheme, suggesting a five-year continuity rather than a short-term extension. This would enable better price planning and decision-making. Many believe it is crucial to treat SEZ exporters equally to avoid discrimination and ensure a level playing field.

Future Outlook

While the extension of the RoDTEP scheme offers some assurance, uncertainties persist regarding its full implementation and the inclusion of all sectors. Exporters are keenly watching government actions as they navigate the complexities of the global market.

Questions for UPSC:

1. Discuss the impact of global economic conditions on India’s export performance in recent years.
2. Critically examine the role of government schemes like RoDTEP in supporting exporters amid international challenges.
3. What are the implications of excluding certain sectors from the RoDTEP scheme? How does this affect overall export competitiveness?
4. Explain the significance of Special Economic Zones in India’s trade policy. Discuss their advantages and disadvantages.

Answer Hints:

1. Discuss the impact of global economic conditions on India’s export performance in recent years.

1. India’s goods exports saw minimal growth, with FY25 figures at $437.4 billion, reflecting a slight increase from the previous year.
2. Geopolitical tensions and global economic slowdowns have adversely affected demand for Indian exports.
3. Uncertainties, such as tariff threats from major economies, have created a challenging environment for exporters.
4. Exporters have faced difficulties in adapting to fluctuating global market conditions, impacting their pricing and planning.
5. Overall, the combination of external pressures has led to a cautious outlook for future export growth.

2. Critically examine the role of government schemes like RoDTEP in supporting exporters amid international challenges.

1. The RoDTEP scheme refunds embedded duties and taxes, helping exporters reduce costs and enhance competitiveness.
2. It was introduced to alleviate financial burdens on exporters, particularly in a volatile global market.
3. The scheme’s extension provides confidence to exporters, allowing for better long-term planning and investment decisions.
4. However, the exclusion of certain sectors raises concerns about fairness and equal support across the export landscape.
5. Overall, government schemes like RoDTEP play important role in stabilizing the export sector during international challenges.

3. What are the implications of excluding certain sectors from the RoDTEP scheme? How does this affect overall export competitiveness?

1. Exclusion of sectors like steel, pharmaceuticals, and chemicals creates an uneven playing field among exporters.
2. It limits the competitiveness of excluded sectors, which may struggle to compete internationally without support.
3. Exporters in excluded sectors may face higher operational costs, impacting their pricing strategies.
4. This exclusion can lead to reduced overall export performance from India, as some sectors are crucial for trade balance.
5. To maintain competitiveness, the government may need to reconsider sector inclusion in future policy adjustments.

4. Explain the significance of Special Economic Zones in India’s trade policy. Discuss their advantages and disadvantages.

1. SEZs are designed to boost exports by providing tax incentives and infrastructure support to businesses.
2. They attract foreign investment, promoting technology transfer and job creation in the region.
3. SEZs can enhance export competitiveness by allowing firms to operate under more favorable conditions.
4. However, they may lead to regional disparities, with benefits concentrated in specific areas rather than nationwide.
5. Critics argue that SEZs can result in environmental concerns and may not always deliver expected economic benefits.