Indian exporters have asked the central government to help facilitate more credit as freight rates have jumped nearly 300 per cent due to the disruption in the Red Sea route forcing global shipping lines to take longer trade routes, which is ultimately affecting exports of low value items such as Basmati rice. Increasing attacks on ships sailing in the Red Sea region since November 2023 have forced shippers to consider the alternative, longer route past the Cape of Good Hope, which has not only stretched delivery time by 15 to 20 days, but also increased the transit cost substantially because of incremental freight rates and insurance premium. Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai told The Indian Express that freight costs have surged by 300 per cent as global shipping lines are taking the Cape of Good Hope route, which is why exporters have sought more credit to match the rising cost of shipments to Europe. Meanwhile, ratings agency Crisil on Thursday said that players operating in sectors such as agricultural commodities and marine foods could see a significant impact due to the perishable nature of their goods or lean margin profiles, which limit their ability to absorb the risks from rising freight cost. “Not all sectors are expected to be impacted to the same extent. In fact, for agricultural commodities like Basmati rice (30-35% of production is shipped to these regions), exporters are feeling the pressure as rising freight cost has curbed exports and a part of their inventory is now being sold in the domestic market, leading to a moderation in realisations,” the report said. Indian companies use the Red Sea route through the Suez Canal to trade with Europe, North America, North Africa, and parts of the west Asia. Crisil said that these regions accounted for 50 per cent of India’s exports worth Rs 18 lakh crore and 30 per cent of imports worth Rs 17 lakh crore last fiscal. “Marine foods –predominantly shrimp and prawn – could also see a significant impact as 80-90 per cent of the production is exported, more than half of it through the Red Sea. Their perishable nature and lean margins make exporters vulnerable to rising freight cost and competitive pressure from Latin American suppliers,” the report added. Written by Ravi Dutta Mishra New Delhi | January 26, 2024 04:06 IST Newsguard Follow Us Red Sea, Red Sea woes, Exporters seek increased credit, freight rates jump, exports, Indian express business, business news, business articles, business news stories The Indian Express had earlier reported that the finance ministry is set to hold a high-level meeting on February 5 to ensure smooth trade payments amid challenges emanating from the disruption in the Red Sea region. Indian exporters have asked the central government to help facilitate more credit as freight rates have jumped nearly 300 per cent due to the disruption in the Red Sea route forcing global shipping lines to take longer trade routes, which is ultimately affecting exports of low value items such as Basmati rice. Increasing attacks on ships sailing in the Red Sea region since November 2023 have forced shippers to consider the alternative, longer route past the Cape of Good Hope, which has not only stretched delivery time by 15 to 20 days, but also increased the transit cost substantially because of incremental freight rates and insurance premium. Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai told The Indian Express that freight costs have surged by 300 per cent as global shipping lines are taking the Cape of Good Hope route, which is why exporters have sought more credit to match the rising cost of shipments to Europe. ADVERTISEMENT Meanwhile, ratings agency Crisil on Thursday said that players operating in sectors such as agricultural commodities and marine foods could see a significant impact due to the perishable nature of their goods or lean margin profiles, which limit their ability to absorb the risks from rising freight cost. “Not all sectors are expected to be impacted to the same extent. In fact, for agricultural commodities like Basmati rice (30-35% of production is shipped to these regions), exporters are feeling the pressure as rising freight cost has curbed exports and a part of their inventory is now being sold in the domestic market, leading to a moderation in realisations,” the report said. Festive offer Indian companies use the Red Sea route through the Suez Canal to trade with Europe, North America, North Africa, and parts of the west Asia. Crisil said that these regions accounted for 50 per cent of India’s exports worth Rs 18 lakh crore and 30 per cent of imports worth Rs 17 lakh crore last fiscal. “Marine foods –predominantly shrimp and prawn – could also see a significant impact as 80-90 per cent of the production is exported, more than half of it through the Red Sea. Their perishable nature and lean margins make exporters vulnerable to rising freight cost and competitive pressure from Latin American suppliers,” the report added. The Indian Express had earlier reported that the finance ministry is set to hold a high-level meeting on February 5 to ensure smooth trade payments amid challenges emanating from the disruption in the Red Sea region.