The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme has been a central instrument of India’s export policy since its introduction in January 2021 as a WTO-compliant replacement for earlier export incentive programmes. It refunds domestic taxes that exporters cannot otherwise reclaim and that remain embedded in production costs. With the scheme scheduled to lapse in March 2026, the Union Budget 2026-27 was expected to provide clarity on its future.
That clarity has arrived, but with a clear fiscal signal. Budget documents show that the allocation for RoDTEP scheme has been cut by 45% to ₹10,000 crore for FY2026-27, down from ₹18,233 crore in the current year. The reduction comes at a time when exporters are contending with renewed geopolitical uncertainty and a more protectionist trade environment, particularly in the United States.
RoDTEP scheme emerged after the withdrawal of schemes such as MEIS following adverse WTO rulings that classified them as export-contingent subsidies. Its design rests on tax neutrality, not incentivisation. It refunds levies such as electricity duties, mandi fees, fuel taxes, and other state-level charges that lie outside the GST credit chain. Absent such remission, these costs feed directly into export prices, raising marginal costs in sectors where demand is acutely price-sensitive.
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A stabiliser for exporters
Since implementation, RoDTEP scheme has functioned as a stabiliser, particularly for MSMEs and labour-intensive sectors operating on thin margins. Export bodies, including the Federation of Indian Export Organisations and the PHD Chamber of Commerce and Industry, have repeatedly argued that the scheme reduces policy uncertainty and enables exporters to price contracts with greater confidence, even amid volatile demand and rising logistics costs.
The export data broadly aligns with this assessment. Merchandise and services exports in April 2025 were estimated at $73.8 billion, up from $65.48 billion a year earlier, a year-on-year increase of 12.7%. Export performance depends on many factors, but RoDTEP has acted as a buffer during periods of external stress rather than as a growth trigger.
The scale of the scheme underlines its importance. In FY2024-25, RoDTEP scheme covered 10,642 tariff lines at the eight-digit ITC(HS) level. For FY2025-26, budgetary allocation rose to ₹18,233 crore, with coverage extending beyond 10,750 product categories. Its fully digital system of duty credit scrips, linked to export value, has also reduced transaction costs and improved predictability compared to earlier regimes.
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A stabiliser, now under fiscal pressure
Since implementation, RoDTEP scheme has functioned as a stabiliser, particularly for MSMEs and labour-intensive sectors operating on thin margins. Export bodies have consistently argued that the scheme reduces policy uncertainty and enables exporters to price contracts with greater confidence, even amid volatile demand and rising logistics costs.
The export data broadly aligns with this assessment. Merchandise and services exports in April 2025 were estimated at $73.8 billion, up from $65.48 billion a year earlier, a year-on-year increase of 12.7%. RoDTEP did not drive this outcome on its own, but it cushioned exporters during periods of external stress.
The scale of the scheme explains why its recalibration matters. RoDTEP scheme covers over 10,000 tariff lines at the eight-digit ITC(HS) level and applies to exports from Domestic Tariff Area units, Advance Authorisation holders, Special Economic Zones, and Export Oriented Units. Cumulative disbursements stood at ₹57,976.78 crore as of March 31, 2025. The scheme’s fully digital system of duty credit scrips has also reduced transaction costs and improved predictability compared to earlier regimes.
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Budget signals and unresolved questions
The Budget has retained continuity on one front. Benefits for SEZs and EOUs have been extended till March 31, 2026, preserving a predictable framework in the final year of the scheme’s current life. But the sharp cut in allocation signals a clear intent to compress fiscal exposure rather than extend RoDTEP unchanged.
What exporters face now is not ambiguity about the direction of policy, but uncertainty about the magnitude and incidence of adjustment. A lower allocation implies either tighter rate rationalisation, slower disbursement, narrower coverage, or some combination of the three. Each option alters effective support across sectors and firm sizes. MSMEs, with limited pricing power and thinner balance sheets, are likely to feel the impact first.
An abrupt withdrawal has been avoided. But the Budget has also not laid out a formal multi-year glide path beyond March 2026. That leaves exporters pricing long-term contracts and planning capacity expansion with less visibility than the scheme’s scale would warrant.
Transition versus disruption
The fiscal signal in Budget 2026-27 reinforces the need for a managed transition rather than a cliff-edge exit. If RoDTEP is to be scaled down further or replaced, sequencing matters. A transparent reduction path would limit adjustment costs and reduce the risk of supply-side disruption. Without it, cost shocks will be absorbed unevenly across sectors and firm sizes.
At the same time, the Budget’s stance reflects competing claims on public capital. Large outlays are already committed to transport infrastructure, clean mobility, renewable energy, agriculture, and rural development. Export support cannot remain rebate-heavy indefinitely.
This strengthens the case for shifting the burden of competitiveness from fiscal remissions to structural cost reduction. Faster progress on ports, logistics, warehousing, and cold-chain infrastructure would lower trade costs more durably. Support for technology adoption, quality upgrades, and compliance with international standards would allow exporters to compete beyond price alone.
Global context raises the cost of missteps
The external environment amplifies the consequences of policy miscalculation. Trade conditions remain unsettled, with renewed tariff threats from the United States and fresh restrictions imposed by other markets. Fragmented supply chains and geopolitical tensions have already raised risk premia for exporters.
In this setting, RoDTEP has become more than a rebate mechanism. It is embedded in exporters’ operating assumptions. Budget 2026-27 has signalled fiscal tightening without triggering an immediate rupture. The next step must be explicit transition management. Stability, sequencing, and predictability now matter more than marginal savings from sudden withdrawal.
The task ahead is not to preserve RoDTEP indefinitely, but to exit it without destabilising India’s export base at a moment of global uncertainty.
Krish Doshi is a third year student and Dr Rituparna Kaushik is Assistant Professor – Economics at FLAME University, Pune.