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Updated January 28th, 2024 at 17:42 IST

Red Sea conflict: Exports from Kolkata to be hit amid 50% surge in freight charges

Key export items such as engineering goods, shrimp, and rice have felt the impact in recent weeks.

Business Desk
Exports
How Red Sea conflict impacts exports from Kolkata | Image:Unsplash
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Red Sea conflict affects exports: Exports from Kolkata port, a pivotal gateway to eastern India, are encountering significant challenges, including geopolitical tensions, a government-imposed rice export ban, and soaring ocean freight costs. These obstacles have raised concerns among officials about a potential slowdown in trade activities.

Key export items such as engineering goods, shrimp, and rice have felt the impact in recent weeks. Officials point to a surge of 30–50 per cent in freight charges, particularly for West Coast destinations, since December of the previous year. The escalating conflict in the Red Sea has led major shipping lines to reroute vessels around the Cape of Good Hope, causing substantial delays of 14–20 days.

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The alternative shipping route has resulted in higher freight and insurance costs, putting additional pressure on exporters' margins.

Challenges posed by conflict

Debojyoti Basu, Vice President of the Calcutta Customs House Agents' Association, highlighted the challenges, stating, ''Freight costs have soared, further hampering exports due to the recent ban on white and broken rice and 20 per cent export duty on parboiled rice by the government.''

He added that Kolkata port used to witness around 2,000 containers of parboiled rice exports, primarily to Southeast Asia.

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Suraj Agarwal, Director of Villa Group, a leading rice company, noted the significant decline in rice exports, citing the ban on non-basmati raw rice exports and the 20 per cent export duty on non-basmati parboiled rice. He emphasised that these factors have led to a 50 per cent reduction in export orders and significantly narrowed profit margins.

Impact on shipping rates

Rakesh Shah, former chairman of the Engineering Export Promotion Council (EEPC) India, highlighted the impact on shipping rates and timelines, stating, ''Shipping delays are jeopardising adherence to Tariff Rate Quotas (TRQs) in Europe, potentially harming export opportunities.''

While Kolkata port authorities claim they haven't observed a substantial impact on export volumes yet, the ongoing crisis around the Red Sea shipping route, which accounted for 50 per cent of the country's exports and 30 per cent of imports last fiscal year, is expected to have varying effects depending on the industry.

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Syama Prasad Mookerjee Port, Kolkata, Chairman Rathendra Raman anticipates a modest 5 per cent growth in traffic for the current fiscal year 2023–24 due to geopolitical headwinds. Despite challenges, the port achieved double-digit growth of 12.5 per cent in the previous fiscal year, handling 65.66 million metric tonnes of cargo.

(with PTI inputs)

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Published January 28th, 2024 at 17:42 IST

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