Dr Vidhu Sekhar P, Assistant Professor, Department of Fashion Management Studies, National Institute of Fashion Technology, Daman Campus.
Dr Tanmay Kandekar, Associate Professor, Department of Fashion Management Studies, National Institute of Fashion Technology, Mumbai Campus.
The government’s swift, back-to-back policy interventions at the close of FY26—restoring full RoDTEP benefits, extending RoSCTL, and introducing concessional customs duty relief for SEZ units operating in the Domestic Tariff Area—deserve recognition as a coordinated and responsive attempt to shield India’s export sector from mounting global pressures. However, recognition should not be mistaken for adequacy. The Indian textile and apparel industry is the largest manufacturing employer and a vital source of foreign exchange—these steps, though encouraging, offer only temporary relief rather than a long-term strategic solution.
The Directorate General of Foreign Trade (DGFT) had, through a March notification, slashed RoDTEP benefit rates by 50 per cent across the board. This was a setback to exporters already grappling with freight surges, war-era logistics disruptions through the Strait of Hormuz, and a weakening rupee. The subsequent restoration of full RoDTEP benefits, made retrospective from February 23 to March 31, 2026, was an act of generosity to face the global disturbances.
Simultaneously, the Textiles Ministry extended the Rebate of State and Central Taxes and Levies (RoSCTL) scheme — which reimburses embedded non-GST state and central taxes on apparel, garments, and made-ups — by six months, up to September 30, 2026. The RoDTEP scheme, which covers the broader textile value chain beyond apparel, was similarly extended to September 30. The Central Board of Indirect Taxes and Customs (CBIC) also notified a one-time duty relief window allowing eligible SEZ manufacturing units to sell into the Domestic Tariff Area at concessional customs duty rates ranging from 5 to 12.5 per cent, valid through March 31, 2027.
Why Textiles Demand a Different Standard
Textiles and apparel are not just another export category. They represent the s most labour-intensive manufacturing sector. From the powerloom clusters of Surat and the hosiery mills of Ludhiana to the garment factories of Bengaluru and the made-up units of Panipat, the textile chain employs tens of millions of workers — many of them women, many in tier-2 and tier-3 towns where no alternative industrial employer exists. When an exporter loses a contract because a competitor from Bangladesh or Vietnam has already factored stable government support into their pricing, the ripple does not stop at the factory gate. It reaches the worker’s household.
Punjab’s textile exports alone stand at approximately Rs 12,421 crore annually. Haryana, with Panipat now carrying the distinction of being called the Textile City of India, is growing rapidly as an export hub. These are not abstract numbers. They represent thousands of looms, millions of man-hours, and a fragile ecosystem of MSMEs, which form the backbone of India’s apparel export machine and are disproportionately vulnerable to pricing uncertainty.
RoDTEP is not a subsidy. It must be understood clearly as a reimbursement mechanism. It refunds to exporters the embedded central, state, and local taxes (including electricity duty and VAT on fuel used
in manufacture and distribution) that have already been paid but are not covered by any other existing refund mechanism. The Global Trade Research Initiative (GTRI) has correctly noted that the effective duty cut under the current concessional rates is small — around one percentage point for many products — and the absence of IGST relief further limits the incentive. The duty cut is real but insufficient.
Refund rates under RoDTEP typically range from 0.3 to 3.9 per cent of the FOB value of exported products. These are thin margins operating within a product universe where the difference between winning and losing a global tender can be 0.5 per cent. When exporters lack clarity on whether RoDTEP will continue beyond March 31—let alone at what rates—they are unable to price forward contracts with confidence. As a result, they adopt a cautious approach, quote conservatively, and often lose business to competitors in countries where policy support is assured over longer, multi-year horizons. This is not a hypothetical problem. It is happening today. Exporters were hesitant to sign forward contracts, unwilling to factor RoDTEP benefits into their pricing because the rates post-April 1 were unclear until the last moment.
The Case for a Five-Year Moratorium
The solution is not another six-month extension. The solution is to fix RoDTEP rates for five years. From FY2027 to FY2031, the rates for textile and apparel exports should stay stable, predictable, and not change every year due to budget adjustments. The logic is straightforward. Global buyers — European retailers, American brands, Gulf importers — plan their sourcing calendars twelve to eighteen months in advance. They negotiate multi-year supply agreements. An Indian exporter competing with a Vietnamese or Bangladeshi mill cannot offer competitive long-term pricing if the cost of their government-embedded tax reimbursement is unknown from one financial year to the next.
A five-year rate lock would do several things simultaneously. It would allow exporters to commit to long-term contracts with confidence. It would allow MSMEs to invest in capacity, technology upgrades, and compliance without fear that the economic case will evaporate mid-cycle. It would signal to global buyers that India is a reliable, long-horizon sourcing destination and not a market that lurches between policy extensions and rate cuts.
Geopolitical Tailwinds India Cannot Afford to Waste
The argument for long-term policy certainty is made more urgent by the geopolitical moment. Global supply chains are fragmenting. The US-Israel-Iran conflict has disrupted West Asian maritime corridors, with the Strait of Hormuz effectively halted for significant stretches — a route through which roughly a fifth of the world’s oil flows. Freight rates have climbed by as much as 40 per cent. Export payment cycles have stretched to 450 days. The Iran crisis is casting a long shadow over Gujarat’s export hubs, including the ceramic, textile, and engineering clusters of Surat, Morbi, and Rajkot.
And yet, precisely because global supply chains are being restructured, India has a window. Multinational firms are reassessing their dependence on Chinese manufacturing. India’s geopolitical neutrality, its large domestic market, its expanding network of free trade agreements with Australia, the UAE, the UK, and the EU, and its Production Linked Incentive schemes — these are collectively creating the conditions for India to emerge as a credible alternative assembly and sourcing hub. The
PLI programme has already generated over Rs 20.4 trillion in cumulative production and sales across 14 sectors as of early 2026. We need to capitalise on this window if its exporters are pricing their products under a cloud of policy uncertainty every six months. The geopolitical tailwind is real.
The SEZ Relief: Sensible, But Partial
The Finance Ministry’s notification allowing SEZ units to sell in the Domestic Tariff Area at concessional duty rates — ranging from 5 to 12.5 per cent, with a minimum value addition requirement of 20 per cent and a domestic sales cap of 30 per cent of the unit’s highest FOB export value — is a pragmatic response to the problem of idle capacity. With export disruptions absorbing orders and freight costs compressing margins, SEZ manufacturing units have been left operating below capacity. Allowing calibrated DTA sales gives them an outlet.
For the textile and apparel SEZ units, which manufacture yarn, woven fabrics, umbrellas, silk and related products, and iron and non-alloy steel goods among the listed inclusions, the relief is genuine and operational. It optimises capital deployed in SEZ infrastructure without compromising the export-oriented character of those zones.
Policy Decision is Proactive
The government has demonstrated responsiveness. RoDTEP rates for textiles and apparel should be locked for five years, with transparent rate schedules published for FY2027 through FY2031. Industry needs horizon visibility, not quarterly reassurance.
Second, the underfunding of export support schemes must be addressed structurally. For FY27, the total RoDTEP allocation is Rs 15,728 crore, of which Rs 5,346 crore is earmarked for clearing past dues — leaving only Rs 10,382 crore for fresh benefits. This is insufficient for a scheme covering 10,780 products across the entire DTA, EOU, AA holder, and SEZ exporter universe. The government must either increase the allocation or ring-fence a guaranteed textile-apparel tranche.
Third, the supply chain wounds inflicted by the West Asia conflict require sector-specific logistics relief — extended export credit timelines, faster export credit flows, and targeted support to offset rising freight and insurance costs. The RBI has already moved to extend export credit timelines to 450 days. This needs to be complemented by cost relief, not just timeline extension.
Fourth, the threat of Chinese dumping — of yarn, fabric, and finished garments at predatory prices — remains structurally unresolved. A five-year rate moratorium on RoDTEP gives Indian exporters pricing visibility, however, it is not sure that they will get a level playing field against subsidised Chinese competition. The government’s trade defence mechanisms need to be sharper, faster, and more proactive.
Conclusion
The restoration of full RoDTEP benefits, the extension of RoSCTL, and the SEZ duty relief notification are welcome. They reflect both the industry’s capacity to articulate its concerns and the government’s capacity to respond under pressure. These moves strengthen India’s hand in the short term. But the textile and apparel sector, which employs more people than any other manufacturing industry, generates substantial forex, which anchors entire regional economies from Punjab to Tamil.
The world is restructuring its supply chains. We, for the first time in a generation, are genuinely in the running to capture a transformative share of global textile and apparel sourcing. The policy makers are confident that the policy architecture will match the ambition of the moment.
