Coimbatore Textile Exporters Urge Government to Restore RoDTEP Scheme Rates
Textile exporters in Coimbatore have issued an urgent appeal to the Union government, calling for the immediate restoration of the original rates and value caps under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. They warn that a recent 50% reduction in benefits, effective from February 23, poses a severe threat to the industry's viability and global competitiveness.
Industry Shock Over Abrupt Policy Change
Industry representatives have expressed deep concern over the sudden cut in RoDTEP benefits, describing it as a shock to sectors already under significant strain. The power loom, handloom, spinning, and yarn fabrics segments are particularly vulnerable, facing mounting pressures from both domestic and international challenges.
The RoDTEP scheme, introduced in January 2021, is designed to refund unrebated embedded taxes and duties on exported products. Its primary objective is to ensure zero-rating of exports, thereby enhancing the global competitiveness of Indian goods. By providing tax refunds, the scheme aims to level the playing field for exporters operating in an increasingly competitive international market.
Global Competition and Cost Disadvantages
Exporters highlight that Indian firms are competing directly with counterparts in Vietnam, Bangladesh, Turkey, and China, where robust and stable remission mechanisms are firmly in place. Even a marginal cost disadvantage of 1% to 2% could lead to a significant diversion of orders and a dangerous erosion of price competitiveness, they caution. This scenario threatens to undermine India's position in key export markets.
Stable RoDTEP rates are deemed crucial for fully leveraging the recently concluded free trade agreements with major economies such as the United Kingdom, the European Union, and the United States. Any reduction in benefits could negate the advantages offered by these trade pacts, limiting their potential impact on export growth.
Impact on Profitability and Employment
The erosion of RoDTEP benefits is expected to hurt profitability, reduce capacity utilization, and negatively affect employment in labour-intensive textile clusters across the region. RoDTEP scrips play a vital role in improving liquidity for Micro, Small, and Medium Enterprises (MSMEs), which often face high interest costs and financial constraints.
Restoration of the earlier rates is seen as essential to safeguard jobs, boost exports, and help achieve the ambitious target of $100 billion in textile exports by 2030, according to industry stakeholders. The scheme's continuity without reductions is viewed as a cornerstone for sustaining growth and stability in the sector.
Voices from Industry Associations
Durai Palanisamy, President of the Southern India Mill's Association, has formally appealed to the Centre to restore the previously notified RoDTEP rates and value caps. Under the original scheme, textile exporters received tax refunds ranging from 2.5% to 4.7%, providing a critical financial cushion.
G Arulmozhi, President of the Open and Spinning Mills Association, emphasized that the 50% cut represents a major setback for the textile industry. The sector has already been grappling with immense challenges over the past six months, particularly due to import duties imposed by the United States. The reduction in refund rates is feared to push the industry into further distress, exacerbating existing difficulties.
Both leaders have urged the government to restore the original scheme and continue implementing tax relief measures without any reductions, underscoring the need for policy stability to support export-oriented industries.
