Budgetary allocations for RoDTEP Scheme – imminent concerns

by | May 27, 2022 | Outlook

We kept you updated on various developments pertaining to RoDTEP Scheme. In this issue of NITYA Outlook, we are highlighting a looming concern which exporters should keep in mind in context of this Scheme.

  • Para 4.54 of Foreign Trade Policy, 2015-20 (‘FTP’) contains ‘Scheme Objective and Operating Principles’ relating to RoDTEP Scheme. Clause (v) of Para 4.54 provides that the Scheme will operate in budgetary framework and calibrations & revisions will be made to the Scheme benefits to ensure that claims do not surpass budgetary allocations made for each FY. This Clause also makes it clear that there is no provision for remission of arrears or carry forward of contingent liabilities to next FY.
  • For FY 2021-22, budgetary allocation for RoDTEP Scheme was 12,434 crores and actual merchandise exports were significantly higher than initial estimates. Accordingly, there is a likely possibility that RoDTEP claims received for FY 2021-22 exceed budgetary allocation. Similarly, budgetary allocation for FY 2022-23 is Rs. 13,699 crores.
  • In past as well, exporters witnessed budgetary allocation of Rs. 5,000 crores under MEIS Scheme for period September 2020 to December 2020. The DGFT portal stopped accepting claims once cap was breached without any provision or prior notice that claims will be entertained on FIFO basis. After representation from exporter community, the DGFT finally removed budgetary cap from MEIS Scheme and accepted all claims.
  • Since RoDTEP Scheme does not contain any methodology to resolve situation where claims received exceed budgetary outlay, it will be important to watch out as to how Government will address this situation in future.

NITYA Comments: In law, RoDTEP rates can be changed only with prospective effect. RoDTEP benefit accrued to exporters for exports already made (i.e. substantial condition of export of goods being fulfilled) cannot be denied in absence of any statutory provision to this effect. Further, rejection of any future claim by application of FIFO basis will be arbitrary being without any intelligible differentia as both classes of exporters (who have already generated scrolls and others who have not) are equally eligible for benefits under the Scheme. Hence, such denial / rejection (if any) will be amenable to challenge before the Constitutional Courts.

Nevertheless, exporters are advised to timely generate scrolls under the Scheme to avoid any dispute in future. Basis above, possibility of rates being reduced mid-year on account of total claims exceeding budgetary outlay is not ruled out.

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