With persistent global uncertainty slowing down goods exports from India, the government is looking to extend export benefits under the popular Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to the chemicals, pharmaceuticals and iron & steel sectors beyond September 30, 2023, when it is set to lapse.

“Looking at the export prospects and the available budget for the scheme for this fiscal, it seems there will be enough funds available to continue the RoDTEP  scheme for the chemicals, pharmaceuticals and iron & steel sectors beyond September 30 2023. While the tenure of the extension is yet to be decided, it could be up to six months till the end of the fiscal,” an official tracking the matter told businessline.

However, the government is unlikely to extend the scheme for the identified sectors in perpetuity, like all other sectors covered under the scheme, as funding may be an issue at any time in the future, the official explained.

The RoDTEP scheme refunds exporters the embedded duties/taxes that are not rebated under other schemes. These include VAT on fuel used in transportation, mandi tax and duty on electricity used during manufacturing. As the scheme refunds input taxes that are calculated transparently, it complies  with WTO norms.

When the scheme was announced in January 2021, it covered 8,731 items from most export sectors except for organic and inorganic chemicals, pharmaceuticals and iron & steel, which covered most engineering items.

However, the government later decided to extend the scheme to the excluded sectors as well, which expanded the list of eligible items to 10,342, per DGFT figures. However, the benefits were extended only for the December 2022-September 30, 2023 period.

“Since the chemicals, pharma and iron & steel items account for a large chunk of India’s exports, the RoDTEP payout to these would also be substantial. That is why the government may want to have the flexibility of extending the benefit of the scheme to these sectors when there is enough fund available and withdraw it when finances are an issue,” the official explained.

Allocation for the RoDTEP scheme in FY 2023 was  increased by 10 per cent to Rs 15,069 crore, from Rs 13,699 crore in 2022-23. Exports in April 2023, on the other hand, declined by 12.7 per cent to $34.66 billion as recessionary trends in many Western economies and Russia’s continued war in Ukraine made an `active impact’.

“As export of goods is slowing down, claims for RoDTEP are not likely to rise significantly this year as they are directly linked to the exports carried out. So, the Commerce Department is unlikely to over-spend the allocation made under the scheme even if is extended to the identified sectors beyond September 30,” the official said.