‘Very Shocking’: RoDTEP cut by half triggers exporters' appeal for immediate review

Feb 24, 2026

Synopsis
Exporters are reeling from the government's decision to slash RoDTEP rates by half, a move that significantly increases export costs by reducing refunds for embedded domestic taxes.

The government asserts that RODTEP is WTO-compliant, allowing tax-free exports. However, the US and EU have taken a firm stance against this assertion.AgenciesThis sudden cut, impacting competitiveness amid global uncertainties, has drawn sharp criticism from industry leaders who are urging a swift review and restoration of the benefits to support Indian businesses.

Exporters reacted with shock and surprise to the government’s decision to halve RoDTEP rates, warning that the move will raise the cost of exporting from India by sharply reducing refunds of embedded domestic taxes that cannot be recovered through other mechanisms.

Exporters and stakeholders add that this is an extremely sensitive period marked by global geopolitical uncertainties and recent developments, such as decisions by the US Supreme Court, that have added to the confusion in international trade. In such circumstances, support measures should be strengthened rather than diluted, making the restoration absolutely necessary.

For context, the government has halved RoDTEP benefits with immediate effect. A DGFT notification (No. 60, February 23, 2026) cut rebate rates and value caps across all product categories under a rationalisation exercise, limiting benefits to 50 percent of earlier levels.

Launched on January 1, 2021, RoDTEP refunds unrebated central, state, and local taxes embedded in exports through e-scrips to improve competitiveness. It is not an export subsidy, but a reimbursement of embedded levies, such as state taxes on fuel, electricity duties, and mandi charges, that are otherwise not refunded.

“A few months ago, the industry had wholeheartedly welcomed the government’s decisions regarding exports. The appreciation was still fresh when, unexpectedly, the RoDTEP rates are now reduced by nearly 50 percent. This comes as a major shock to exporters. It is very shocking at the moment and all the exporters are very surprised. I have written to the Commerce Minister and the Finance Minister to review the matter and restore the rates, understanding how critical the situation is,” says SC Ralhan, President, Federation of Indian Export Organisations (FIEO).

Notably, the cut follows a sharp reduction in budgetary support. In the Union Budget, the allocation for RoDTEP was cut by 45 percent to Rs 10,000 crore for FY27, against Rs 18,233 crore in the current financial year. While the government may have its reasons, these reductions have come as a major shock to exporters at a time when they are already under significant pressure, notes Ralhan.

“I believe the government should urgently review these decisions at least once more. I have already communicated my concerns through a formal letter, and I sincerely hope the matter will be reconsidered in the interest of MSMEs and exporters,” says Ralhan.

Ajay Srivastava, Founder of the Global Trade Research Initiative (GTRI), says that exporters also face policy uncertainty as RoDTEP rates are revised frequently, making it difficult to factor rebates into long-term pricing and contracts. Announcing the scheme with a multi-year horizon, ideally five years, would provide predictability, enable firms to build remissions into costs and bids, and strengthen confidence in India’s export policy framework. For instance, the rebate on unginned raw cotton of staple length not exceeding 20 mm has been cut from 3.1% (capped at Rs 1.60 per kg) to 1.55%, with the cap lowered to Rs 0.80 per kg.

“Halving RoDTEP rates will raise the cost of exporting from India by reducing refunds of domestic taxes that exporters cannot otherwise recover. In price-sensitive sectors, even a 1–2% increase in costs can decide whether orders are won or lost. 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,” adds Srivastava.

Sanjay K. Jain, Chairman of the ICC National Textiles Committee and Managing Director of TT Textiles, says the development has hit exporters hard. “RoDTEP is just paying back taxes paid by exporters and is based on calculations. It is shocking to see an across-the-board 50% cut with immediate effect. All existing orders already booked will be badly impacted, and India’s competitiveness in merchandise exports will reduce. Sudden changes in policy without any warning are deeply disturbing.”

Textile exporters flag twin impact of RoDTEP non-grant and RoSCTL cut

Echoing similar concerns, home textile exporter Sukhvinder Pal Singh & Sons (HUF) urges authorities to intervene, stating that the non-grant of over 50 percent of eligible RoDTEP benefits has already severely affected exporters’ margins and working capital. The company says the proposed reduction in RoSCTL rates will further increase the burden on exporters and weaken the competitiveness of Indian textile products in international markets. It warns that such policy changes directly affect export pricing, order inflows, and long-term business sustainability, particularly for MSMEs operating on thin margins. “Continued reduction in export incentives would inevitably lead to a decline in export volumes and erosion of global market share. If both RoDTEP reductions and RoSCTL cuts are implemented together, it could significantly dent the export business while adversely affecting employment and foreign exchange earnings,” says Sarabpreet Singh, Business Head, Sukhvinder Pal Singh & Sons.

Taking a formal route to address the industry’s concerns, Vikas Singh Chauhan, Director at the Home Textile Exporters’ Welfare Association (HEWA), tells ET Online that the industry body has filed a petition opposing any changes to RoSCTL. “When the world order is in chaos, transit times are longer, and the global market is reeling with uncertainty, India is actually in a better position to gain market share."But, this move by the government—denying exporters their refunds in the name of rationalization—is deeply concerning. In a rational approach, it is not about predetermined rates; it is about real data being calculated, and every HS code should have different rates of increment or reduction, not a straight 50% deduction across the board. MSME exporters will be the biggest hit. I hope the government will not reduce RoSCTL, as the textile sector is the largest employment-generating sector and any change will severely damage the industry,” he adds.

[The Economic Times]