Textile Stocks Plunge up to 6% as RoDTEP Incentive is Cut by 50%

Textile Stocks Decline Following RoDTEP Rate Reduction

On February 24, textile stocks such as Gokaldas Exports, Arvind, and others fell by up to 6% after the government reduced the rate of duty benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme.

The RoDTEP Scheme, launched in 2021, provides a refund of taxes, duties, and levies incurred by exporters during the manufacturing and distribution of goods. However, with immediate effect, the Directorate General of Foreign Trade (DGFT) has reduced the applicable RoDTEP rates to 50% of the existing rates.

As of 10 am on February 24, shares of Vardhman Textile, Arvind, and Gokaldas Exports were trading 6.2%, 5.8%, and 5.5% lower, respectively. Other textile companies, including Indo Count Industries, Welspun Living, and Kitex Garments, were trading 2.5% to 3.1% lower.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The reduced rates and value caps have been met with criticism from the Federation of Indian Export Organisations (FIEO), with President S C Ralhan requesting the government to reconsider the decision. The reduction comes at a challenging time for Indian exports, which are facing significant global headwinds, including slowing demand, increasing uncertainty, and rising protectionism.

India's exports rose marginally by 0.61% to $36.56 billion in January, while the trade deficit widened to a three-month high of $34.68 billion, according to government data released on Monday.

RoDTEP Refund Ranges: 0.3% to 3.9% Existing RoDTEP Rates: 100% of notified rates and value caps New RoDTEP Rates: 50% of notified rates and value caps