(INDIA) — The Indian government halved Remission of Duties and Taxes on Exported Products (RoDTEP) benefits to 50% of notified rates and value caps with immediate effect, squeezing profit margins for textile and auto exporters amid weak global demand and rising costs.
The cut took effect through DGFT Notification No. 60 dated February 23, 2026, and applied across a wide span of merchandise shipments that previously claimed the tax-refund support.
Exporters said the sudden reduction hit pricing that had been built around the earlier RoDTEP levels, leaving less room to absorb higher input costs and to match rivals in overseas markets where price differences can decide orders.
Changes under the scheme covered all product categories under over 10,000 eight-digit ITC(HS) tariff lines, including textiles, leather, engineering goods, handicrafts, sports goods, and autos.
Rebates calculated on FOB export value dropped across the affected lines, with one example showing unginned raw cotton falling from 3.1% (capped at ₹1.60/kg) to 1.55% (capped at ₹0.80/kg cap).
Another set of items moved from 2% (₹50/kg cap) to 1% (₹25/kg cap), and one illustration of the impact showed refunds dropping from ₹20 to ₹5 on a 20-kg shipment.
RoDTEP began on January 1, 2021, as a WTO-compliant replacement for MEIS, with the policy designed to refund unrebated taxes such as state fuel and electricity duties and mandi charges.
Officials have framed the scheme around tax neutrality rather than subsidies, with exporters using the refunds to keep export pricing aligned with global competitors when domestic levies remain embedded in cost.
The latest reduction also aligned with Union Budget 2026-27, which slashed the RoDTEP allocation by 45% to ₹10,000 crore for FY2026-27 from ₹18,233 crore in FY2025-26 as part of fiscal consolidation.
Government figures showed cumulative disbursements at ₹57,976.78 crore as of March 31, 2025, a tally exporters and trade bodies have cited in arguing that the scheme has become embedded in routine export costing.
A separate DGFT notification on February 24, 2026 restored agriculture, dairy, meat, and marine sectors to prior rates, leaving much of manufacturing—especially labour-intensive segments—facing the halved RoDTEP benefits.
Textile and auto exporters warned that the immediate cut created a mismatch between negotiated export prices and expected refunds, raising the likelihood that firms would have to ship at thinner margins or at a loss if they could not renegotiate contracts.
The Confederation of Indian Textile Industry (CITI) warned of losses on locked orders priced with full benefits, pointing to the difficulty of revisiting terms once buyers have finalised purchase orders and delivery schedules.
S C Ralhan, president of the Federation of Indian Export Organisations (FIEO), called the move a shock for exporters dealing with US tariffs, raw material hikes of 20%+ including wool from New Zealand, and competition from Vietnam and Bangladesh.
Piyush Baranwal, honorary secretary of the All India Carpet Manufacturers’ Association, said the atmosphere in the sector was depressed, with firms facing pressure from both demand conditions and the shrinking cushion offered by the RoDTEP refunds.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said cost increases of 1-2% can decide orders in price-sensitive sectors, a dynamic exporters said became more acute once refunds under notified rates were cut in half.
Avinash Gupta, director of RN Gupta and Company Ltd, said booked rebates now eroded margins, underscoring how firms that had built expected refunds into their internal costing could see profit margins compress once the benefit was reduced midstream.
Sarvadnya Kulkarni, CEO of General Instruments Consortium, flagged the impact on precision manufacturing when competing against China and Southeast Asia, where even small pricing differences can shift sourcing decisions.
Exporters across sectors urged an immediate review of the decision, tying their appeal to geopolitical turmoil and the compliance framing of the program, while also pointing to the scheme’s expiry on March 31, 2026.
With the expiry date approaching and an extension described as unclear, exporters said planning became harder for companies that must quote prices months in advance and commit to raw-material procurement and production schedules.
MSMEs and employment-heavy textile segments also argued against further reductions, warning against cuts similar to RoSCTL at a time when firms are already confronting higher input bills and uncertain demand.
The financial market reaction tracked the industry unease, with stocks in textiles remaining under pressure as of February 24, 2026.
For exporters, the immediate test will be whether buyers accept revised pricing or whether companies carry the reduced refunds through their balance sheets, as the halved RoDTEP support narrows the buffer that many had treated as part of routine export realisations.
Government Halves Rodtep Refunds, Squeezing Exporters’ Profit Margins
India has reduced RoDTEP export tax-refund benefits by 50% for most manufacturing sectors to align with a reduced federal budget allocation of ₹10,000 crore. Effective immediately, the move impacts textiles, autos, and engineering goods. Industry leaders warn that the sudden cut erodes margins on locked-in contracts and weakens India’s competitive standing against global rivals in price-sensitive markets during a period of rising raw material costs.
