The ongoing geopolitical crisis in the Middle East has Notably impacted India's export sector, particularly in the eastern region. According to official reports, shipping costs for goods destined for Europe and Western markets have surged by 60% to 80%. This disruption has led to a nearly 50% decline in exports from Eastern India, leaving hundreds of containers stranded at the Kolkata Port. Mannu Chaudhary, President of the Calcutta Customs House Agents Association, stated that vessels are being rerouted around Africa instead of the Red Sea, leading to substantial increases in transit time and operational expenses.
Impact of Rerouting and Increased Freight Costs
Security concerns in the Red Sea have forced global shipping lines to alter their traditional routes, while vessels are now navigating via the Cape of Good Hope, which has drastically increased the distance traveled. According to industry representatives, this rerouting has caused a direct 40% increase in shipping costs. When combined with rising fuel consumption and higher insurance premiums, the total freight expenditure has escalated by up to 80%. This surge has placed a heavy financial burden on exporters from Eastern India who rely heavily on European markets, while the extended transit times have also led to a shortage of available containers for new shipments.
Operational Stagnation at Kolkata Port
The decline in export volumes and the unavailability of vessels have created operational bottlenecks at Kolkata Port. Hundreds of containers remain stationary within the port premises as exporters struggle to cope with the exorbitant freight rates. Officials have noted that a shortage of available containers has further complicated the situation. The slowdown in cargo movement is exerting pressure on the port's storage capacity, disrupting the entire logistics value chain and causing delays in delivery schedules. Many small-scale exporters have been forced to halt shipments as the freight costs now exceed their profit margins.
Challenges for Engineering and Manufacturing Sectors
5% growth for the current fiscal year. However, due to the prevailing crisis, growth is now expected to remain flat, mirroring last year's levels. In addition to shipping costs, a shortage of Liquefied Petroleum Gas (LPG), which is essential for the finishing process of engineering goods, has hampered production. Other sectors, including seafood, garments, and pharmaceuticals, have also reported significant export contractions. Perishable goods exporters are facing the most severe impact due to the prolonged transit times.
Government Approval of ₹497 Crore Relief Package
To mitigate the impact on the export community, the central government has approved a ₹497 crore relief scheme titled 'Resilience and Freight Intervention for Export Facilitation' (RELIEF). The primary objective of this scheme is to compensate exporters for the additional freight charges incurred due to international conflicts and supply chain disruptions. According to government officials, this financial intervention aims to maintain the global competitiveness of Indian products by offsetting the surge in logistics costs caused by external geopolitical factors. The funds will be disbursed following a verification process of the claims submitted by exporters.
Financial Support for MSME Exporters
The relief scheme includes specific provisions for Micro, Small, and Medium Enterprises (MSMEs). Under these guidelines, MSME exporters are eligible for a refund of up to 50% on freight and insurance charges. The government has capped this assistance at ₹50 lakh per exporter. This measure is designed to provide liquidity support to smaller players who are more vulnerable to cost fluctuations. Officials emphasize that this targeted support is crucial for ensuring that small-scale exporters can continue their operations despite the challenging global environment, as they often lack the financial cushion to absorb such steep increases in logistics costs.