Exports from Kolkata to Experience Setback as Freight Charges Surge 50% in Red Sea Conflict
Published on: January 29, 2024.
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Exports from Kolkata Port Facing Challenges Due to Red Sea Conflict
Exports from Kolkata port, the main gateway to eastern India, are experiencing significant obstacles due to geopolitical tensions, a government-imposed rice export ban, and soaring ocean freight costs. These challenges are causing concerns among officials about a potential slowdown in trade activities.
The impact of these hurdles is being felt by key export items such as engineering goods, shrimp, and rice. Freight charges, especially for West Coast destinations, have surged by 30-50% since December of the previous year. This increase is primarily due to major shipping lines rerouting vessels around the Cape of Good Hope as a result of the escalating conflict in the Red Sea, causing notable delays of 14-20 days.
The alternative shipping route has led to higher freight and insurance costs, putting additional pressure on exporters’ profit margins.
Challenges Posed by the Conflict
Debojyoti Basu, Vice President of the Calcutta Customs House Agents’ Association, highlighted the challenges faced by exporters. He mentioned, “Freight costs have soared, further hampering exports due to the recent ban on white and broken rice and 20% export duty on parboiled rice by the government.”
Basu added that Kolkata port used to handle approximately 2,000 containers of parboiled rice exports, mainly bound for Southeast Asia.
Suraj Agarwal, Director of Villa Group, a leading rice company, noted a significant decline in rice exports. He attributed this decline to the ban on non-basmati raw rice exports and the 20% export duty on non-basmati parboiled rice. Agarwal emphasized that these factors have resulted in a 50% reduction in export orders and significantly narrower profit margins.
Impact on Shipping Rates and Timelines
Rakesh Shah, former chairman of the Engineering Export Promotion Council (EEPC) India, highlighted the impact on shipping rates and timelines. He stated, “Shipping delays are jeopardizing adherence to Tariff Rate Quotas (TRQs) in Europe, potentially harming export opportunities.”
While Kolkata port authorities claim that they have not yet observed a significant impact on export volumes, the ongoing crisis regarding the Red Sea shipping route, which accounted for 50% of the country’s exports and 30% of imports last fiscal year, is expected to have varying effects depending on the industry.
Rathendra Raman, Chairman of Syama Prasad Mookerjee Port, Kolkata, anticipates a modest 5% 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% in the previous fiscal year, handling 65.66 million metric tonnes of cargo.
Source: Republic World
