India’s exports hit a record high of $35.2 billion in the month of July which is the highest-ever monthly figure in the country’s history. However, exports in India now face a fresh hurdle due to Global Container shortage and hike in freight rates. A broad range of exported items across various industries could get hit due to the Global container shortage. The Global Container shortage is due to congestion at Chinese ports that have been closed or operating at a lower capacity after fresh restriction were announced due to Covid-19 in China. The problem is also caused due to high demand for containers in the United States and Europe which has resulted in increased rates of containers.
According to media reports, the charges on containers have increased to record high level in the past 10-15 days. The charges for getting a container to or from India have more than doubled to $7,000-$10,000, compared to $3,000-$4,000 a few months ago, as per the industry executives; however the final cost also depends on the distance covered. This has become a critical hurdle for MSME, who hugely depend on the exports as their source of income.
The Federation of Indian Exports Organization (FIEO), the apex body for exporters in India had asked the government to release approximately 25,000-30,000 containers that are lying dormant across different ports in the country because of the issues with the customs department. This Container shortage has caused a hurdle to some low value exports items which are exported in high volumes, these items mainly include granite, tiles, tea, rice and furniture while other categories have completely stopped.
According to industry experts Indian Exports might fell sharply due to the shortage of containers and high freight rates. Due to Covid-19 there was significant decrease in number of shipping vehicles operating over the globe which has caused many empty containers not being picked up and getting stuck in inland depots and ports for a long duration. There is also a problem of congestion and long waiting times at key ports like USA which is increasing the turnaround time for containers. The faster than expected recovery in international trade and lack of availability of containers has pushed up freight rates significantly over the past year while some key international routes have seen increase in freight rates of over 500 per cent compared to last year in September.
The impact of container shortage on Indian exporters
Exporters from India are facing problems like delays in shipments and liquidity issues as they have to wait longer to receive payment from importer for exported goods. Exporters have noted that usually a shipment which used to take around 45 days are now taking around 75-90 days which is causing payment delays of 2-3 months for exporters, liquidity crunch is being faced by small exporters, high turnaround time for ships in India is also adding to the problem of container shortage faced by exporters in India.
Exporters have demanded the government to curb and regulate the export of empty container from all Indian ports after the Kolkata port restricts the number of empty containers permitted to be exported to 100 per vessel for a period of 3 months, as some countries are paying a premium for empty containers, and this was further adding to container shortage. Exporters have demanded from government to provide support schemes for exporters who are incurring losses due to high freight rates. Exporters are also asking the government to push back on a move by shipping lines to offer priority bookings at higher rates, asking that shipping lines revert to taking bookings on a first come first serve basis.
The government is helping to address this issue by providing a temporary relief to the exporters in India as the Central Bureau of Indirect Customs (CBIC), asked customs to give clearance to around 20,000 containers stuck at various ports in India to be available to exporters as soon as possible. Central Bureau of Indirect Customs (CBIC) has also asked field units to immediately eliminate unclaimed or confiscated items and transfer import cargo pending inquiry to warehouses, to free up shipping containers.
In the medium term, exporters have called on the government to take steps to boost the manufacturing of containers in India. The FIEO Board has requested the field units to give month-to-month updates on containers which were held up by intelligence companies or caught in courtroom instances and have been subsequently freed up. The Board mentioned issued directions to field units to “Dispose expeditiously the unclaimed/uncleared/seized/confiscated goods including that are holding up containers, whenever it becomes necessary to detain the imported cargo, pending completion of enquiry/investigation, such cargo should be removed to a customs warehouse and the container can be released for further use,”
In a gathering held by commerce and industry minister Piyush Goyal on the problem. Industry has sought authorities intervention, in search of that motion of empty containers out of India be curtailed and a freight help scheme. However, in a gathering held by commerce and industry minister Piyush Goyal earlier this week on the problem. The authorities additionally cautioned that arbitrary levy of cost could appeal to the eye of the Competition Commission of India. Shipping industry has in flip mentioned that orders for brand new containers and container ships had been being positioned, apart from repositioning of present containers. The CBIC mentioned on Saturday that it has taken numerous measures over final 12 months to tackle container shortages together with a particular drive to free up all out there containers which resulted within the launch of almost 14,000 containers.