India’s Foreign Trade Policy (FTP) provides a range of export subsidies and incentives to enhance the global competitiveness of Indian goods and services. These incentives aim to reduce production and transaction costs, encourage product and market diversification, and promote value-added exports. By easing financial and compliance burdens, such schemes help exporters, especially MSMEs, access global markets. Incentives are aligned with WTO norms, focusing on remission of duties, interest support, and logistics development.
Major export Promotion Incentives currently offered in India:
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Remission of Duties and Taxes on Exported Products (RoDTEP)
The RoDTEP scheme replaces earlier export incentives like MEIS and aligns with WTO rules. It reimburses embedded central, state, and local duties and taxes that are not refunded under other mechanisms. These may include fuel, electricity duties, mandi tax, and transport levies. The refund is issued as transferable electronic scrips, usable for paying basic customs duty. RoDTEP benefits all sectors and is automated through the Customs EDI system. It ensures that Indian exports remain competitive in price and do not carry the burden of unrebated taxes, supporting sectors like textiles, engineering, and agriculture.
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Duty Drawback Scheme
Under the Duty Drawback Scheme, exporters are refunded customs and central excise duties paid on inputs used in the manufacture of export goods. The refund is available in two forms: all-industry rate and brand rate, depending on the product and the exporter’s input structure. The drawback is processed by customs after shipping bill submission. It improves liquidity and helps exporters lower the cost of production, especially in sectors like garments, electronics, and leather goods. The scheme is essential for ensuring that duties paid on domestically sourced or imported inputs do not inflate the export price, thus maintaining global competitiveness.
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Advance Authorization Scheme
The Advance Authorization Scheme allows duty-free import of raw materials, inputs, and components used in manufacturing export products. The authorization is granted before exports and is subject to value addition norms. Import duties like Basic Customs Duty, IGST, and Compensation Cess are exempted. This scheme is useful for exporters in sectors like pharmaceuticals, engineering, chemicals, and gems and jewellery. It reduces input cost and ensures timely production. Export obligation must be fulfilled within a specified time frame. This incentive supports large-volume exporters who rely heavily on imported raw materials and wish to optimize their production costs.
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Export Promotion Capital Goods (EPCG) Scheme
The EPCG scheme allows import of capital goods (such as machinery and equipment) at zero customs duty for producing exportable goods. In return, exporters commit to meeting a specific export obligation within six years, based on the value of imported machinery. This scheme benefits industries requiring modernization and technological upgradation, including textiles, automobile, engineering, and agro-processing sectors. It reduces capital investment cost and boosts productivity. The EPCG scheme supports India’s objective of becoming a global manufacturing hub by encouraging firms to adopt world-class technology and expand their export potential without a heavy initial financial burden.
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Interest Equalization Scheme (IES)
The Interest Equalization Scheme provides an interest subsidy on pre- and post-shipment credit in Indian rupees to eligible exporters, especially MSMEs and labor-intensive sectors. Currently, the subsidy is 3% for all eligible exporters and 2% for other manufacturers. This helps reduce the cost of borrowing and encourages timely fulfilment of export orders. The scheme supports exporters in overcoming financial constraints and competing with international players who may enjoy lower financing costs in their countries. It is implemented through scheduled banks and monitored by the Reserve Bank of India (RBI) under the guidance of the Ministry of Commerce.
