Exports from Kolkata Port Could Be Impacted by High Freight Rates, Rice Ban, and Geopolitical Turmoil
Published on: January 29, 2024.
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Exports from Kolkata port, a major gateway to eastern India, are facing significant challenges due to various factors such as geopolitical tension, a government-imposed rice export ban, and soaring ocean freight costs. These challenges have the potential to slow down trade activities and have already impacted key export items like engineering goods, shrimp, and rice.
The surge in freight charges, especially for West Coast destinations, is a direct result of the escalating conflict in the Red Sea. Shipping liners are rerouting vessels around the Cape of Good Hope to avoid the Red Sea, causing delays of 14-20 days. This alternative route has led to higher freight and insurance costs, which are putting more pressure on exporters’ margins. The sudden increase in freight costs has disrupted cost structures and caused delays in export consignments. Some exporters are even forced to withhold orders due to the financial strain caused by soaring freight costs and administrative delays.
Adding to the challenges, the government has recently imposed a ban on the export of white and broken rice and has implemented a 20% export duty on parboiled rice. This ban and duty have particularly affected the export of parboiled rice to Southeast Asia, which used to account for a significant portion of Kolkata port’s export volume. Along with the rising freight costs, these factors have contributed to a decrease in rice exports by over 33% for some companies, resulting in a loss of USD 80 per tonne in the last 20 shipments.
The disruption in the Red Sea shipping route is not only causing shipping delays but also jeopardizing adherence to Tariff Rate Quotas (TRQs) in Europe, potentially harming export opportunities. The ongoing crisis in the Red Sea shipping route, which accounts for a significant portion of India’s exports and imports, will have varying impacts on different industries.
While the Kolkata port authorities claim that they have not witnessed a substantial impact on export volumes yet, it is evident that the challenges faced by exporters at the Kolkata port are causing significant concerns. It is essential for the government and relevant authorities to address these challenges promptly and find solutions to ensure the smooth functioning of trade activities through the Kolkata port.
Overall, the combination of geopolitical tensions, the rice export ban, and skyrocketing ocean freight costs are posing major obstacles for exporters at the Kolkata port. Immediate measures should be taken to mitigate these challenges and support the exporters in maintaining their competitiveness in the global market.
Source: [Devdiscourse](https://www.devdiscourse.com) (opens in a new window)
