Of course, exporters admit that shipping costs around the world have risen and India is not an outlier.

Apex export organization FIEO has approached the government to introduce a freight subsidy scheme for micro, small and medium-sized enterprises (MSMEs), at least temporarily, to mitigate the impact of a spike in shipping costs in the wake of the Russia-Ukraine to mitigate the crisis.

Speaking to Finance Minister Nirmala Sitharaman, the Federation of Indian Export Organizations (FIEO) said that high freight rates have already hit exporters in 2021 and are hurting their profitability. “We were looking for an easing of freight rates in 2022. However, recent global developments have pushed freight rates back up and we do not expect them to fall for the foreseeable future,” it said. “Our MSMEs need little support in the form of a freight subsidy scheme, which can be given for a limited period of time,” it added.

Of course, exporters admit that shipping costs around the world have risen and India is not an outlier.

Higher crude oil prices and an increase in insurance costs have further exacerbated already high global shipping costs and have had a sobering effect, particularly on dry cargo shipments. High costs will exacerbate supply-side problems and damage India’s ability to ship not only to Russia or Ukraine, but to other countries as well.

Global freight rates began to rise at a rapid pace in the wake of the 2020 Covid outbreak, peaking at $10,377 per 40-foot container in late September 2021, according to Drewry’s composite World Container Index. Prices then started falling to $9,051 on February 12, before rising again to $9,180 on March 10. The index is now up 83% from a year earlier.

The price of Brent crude rose again to $100 a barrel in intraday trading on Wednesday as concerns about dwindling demand from China eased slightly in the wake of another wave of Covid cases, although signs of progress in the peace talks between Russia and Ukraine weighed on the gains. †

The government is currently providing some support under the Transport and Marketing Assistance (TMA) scheme. But this is mainly intended for agricultural exporters. Under this scheme, which was reintroduced for tax purposes with greater coverage and more support, the Center reimburses exporters for a certain proportion of freight costs. The rates of assistance have been increased by 50% for exports by sea and 100% for those by air.

Ensuring reasonable shipping costs remains critical to meeting India’s lofty goods export target of $1 trillion by FY28. Exorbitant shipping costs have particularly affected small and medium-sized exporters. The country’s exports recovered strongly this fiscal year, after a pandemic-induced slump last year, and are likely to exceed a record $400 billion target.


This post Exporters demand freight subsidy to bridge Ukraine’s war impact was original published at “https://www.financialexpress.com/economy/exporters-seek-freight-subsidy-to-tide-over-ukraine-war-impact/2463358/”

LEAVE A REPLY

Please enter your comment!
Please enter your name here