Export Promotion Schemes in India: RoDTEP, EPCG and SEZ (IIBF ITF 2026)

Every AD bank officer dealing with exporters needs a working command of the export promotion schemes in India that shape a client's landed cost, working capital cycle and compliance calendar. From the RoDTEP duty remission credited after shipment to the duty-free capital goods imported under EPCG, these schemes decide whether an Indian exporter is price-competitive in a foreign market. For the IIBF ITF paper, examiners test both the mechanics of each scheme and the export obligation that comes attached to it — get the obligation wrong and you have described a subsidy, not a remission.

This article walks through the four pillars of India's export incentive architecture — RoDTEP, Advance Authorisation, EPCG, and the SEZ/EOU route — the way a bank's trade finance desk actually encounters them: at the time of sanctioning a packing credit limit, at the time of verifying an export obligation discharge certificate, and at the time of advising a client on landed-cost competitiveness.

📈 RoDTEP: Remission of Duties and Taxes on Exported Products

RoDTEP replaced the Merchandise Exports from India Scheme (MEIS) with effect from 1 January 2021, after MEIS was flagged as a prohibited export subsidy at the WTO. RoDTEP is structured differently on purpose: it is a remission scheme, not an incentive scheme. It refunds embedded central, state and local duties, taxes and levies that are not already neutralised under GST input tax credit or the Duty Drawback Scheme — think VAT on fuel used in transportation, mandi tax, electricity duty, and stamp duty on export documentation.

Rates are notified product-wise (HS code-wise) under Appendix 4R of the Foreign Trade Policy and are administered by the DGFT in coordination with the Department of Revenue. The refund is not paid in cash; it is credited as a transferable duty credit e-scrip in the exporter's electronic ledger on the ICEGATE portal, which can be used to pay basic customs duty on imports or sold to another importer. Because RoDTEP has no export obligation attached, it is the simplest scheme in this group for banks to explain to first-time exporters, and it is also the one most frequently confused with drawback in ITF exam questions.

💡 Exam Tip: RoDTEP is a remission of un-refunded taxes, not an export subsidy — this WTO-compliance distinction is a recurring MCQ trap.

🏭 Advance Authorisation and EPCG: Duty-Free Inputs and Capital Goods

The Advance Authorisation Scheme, issued under the current Foreign Trade Policy, allows duty-free import of inputs that are physically incorporated in the export product, with a normal allowance for wastage. It carries a minimum value-addition condition and an export obligation that must generally be discharged within 18 months of the authorisation date, extendable on payment of composition fees. Inputs and capital goods procured under the authorisation are subject to an Actual User condition until the exporter obtains an Export Obligation Discharge Certificate (EODC) from the DGFT — a document bank credit officers should always ask to see before closing an export finance file.

The Export Promotion Capital Goods (EPCG) Scheme works on the same duty-free logic but for machinery rather than inputs: it permits import of capital goods for pre-production, production and post-production at zero customs duty, provided the exporter undertakes an export obligation equal to six times the duty saved, to be fulfilled over six years in prescribed blocks. EPCG is popular with manufacturer-exporters upgrading production lines, and merchant exporters can also avail it if tied to a supporting manufacturer. Both schemes are administered by the DGFT under the Foreign Trade Policy, and both require the bank financing the underlying transaction to track the export obligation period as a covenant, not just a compliance formality.

Candidates preparing the regulatory framework chapter should note that both schemes sit within the same Foreign Trade Policy chapter on duty exemption and remission, administered through the same DGFT authorisation and redemption process, which is precisely why ITF papers often pair them in a single comparative question.

🌐 SEZ and EOU: Export Manufacturing Hubs

Special Economic Zones operate under the SEZ Act, 2005 and SEZ Rules, 2006, which treat a notified zone as territory outside India's customs area for trade, duty and tariff purposes. SEZ units get duty-free import and domestic procurement of goods for authorised operations and exemption from customs duty and GST on qualifying transactions. Historically SEZ units also enjoyed a phased income-tax deduction under Section 10AA of the Income Tax Act, though candidates should treat this benefit as subject to the sunset conditions prescribed for units and confirm current applicability rather than assuming an open-ended tax holiday. In return, every SEZ unit signs up to a positive Net Foreign Exchange (NFE) obligation, tracked over a five-year period from the start of production.

Export Oriented Units (EOUs) offer a similar duty-free import and procurement benefit but for standalone units located outside a formal SEZ enclave, operating under the Foreign Trade Policy rather than the SEZ Act. EOUs also carry a positive NFE obligation over five years and are permitted a capped level of domestic tariff area (DTA) sales on payment of applicable duty. For a bank, the practical difference between an SEZ unit and an EOU client shows up in documentation — SEZ units route customs formalities through the zone's own customs authority, while EOU clients deal with the jurisdictional customs office directly.

⚠️ Common Mistake: Candidates often assume SEZ and EOU units have no export obligation because inputs are duty-free — both carry a positive Net Foreign Exchange condition that must be met.

🏦 How Banks Support Export Promotion Schemes

AD banks sit at the operating centre of every one of these schemes even though none of them is a banking product in itself. Packing credit sanctioned against an Advance Authorisation or EPCG order factors in the duty saved and the export obligation timeline when the bank sets drawing power and repayment milestones. When a shipment is finally realised, the bank certifies the export under the relevant trade finance documentation trail that DGFT and customs rely on to close the authorisation and release the RoDTEP e-scrip.

Credit appraisal teams also need to read these schemes together with the exporter's realisation record, since a client leaning heavily on duty-free imports without matching export performance is a red flag for both the bank and DGFT. This is one reason the ITF syllabus links scheme mechanics tightly to the broader facilitation bodies chapter — DGFT, EPCs and customs each play a distinct role in sanctioning, monitoring and redeeming these benefits, and a bank officer who understands the handoffs between them can price and monitor export credit far more accurately.

Working capital and post-shipment structuring around these schemes overlaps closely with what you study in post-shipment credit in export finance, and exporters who route payments through GIFT City structures often bring in the parallel IFSC and IFSCA framework that CAIIB BFM candidates study separately.

🎯 Getting Exam-Ready on Export Promotion Schemes

The examiner's favourite angle on this topic is the export obligation attached to each scheme, because that is what separates a genuine trade-facilitation measure from an outright subsidy under WTO rules. Anchor your revision around four questions for every scheme: what benefit does it give, who administers it, is there an export obligation, and over what period must it be fulfilled. Once those four answers are automatic, the comparative MCQs in this area stop being a guessing game.

Revisit the risk management chapter alongside this topic, since banks underwriting export credit against these schemes are effectively underwriting the exporter's ability to meet the obligation, not just the shipment itself. For a broader view of how these schemes fit the exam's weightage, check the IIBF ITF exam pattern before your next revision cycle, and browse more scheme-linked coverage on the international trade finance tag hub. Ready to test yourself? Attempt a chapter-wise mock on iibf.store's CAIIB course page and track your readiness before exam day.

🧠 Practice MCQs: Export Promotion Schemes

Want chapter-wise mock tests with 100+ MCQs? Start practising free →

Frequently Asked Questions