November 5, 2020: While the impact of the lockdown has been acute and immediate for Indian businesses, for a while now, the country is facing another challenge — a crippling shortage of containers for sending out export cargo. This has especially hit the exporters hard as they struggle to take advantage of economic recoveries in other countries.
According to news reports, prices of shipping containers to destinations such as the US and Africa have more than doubled and there is a three-week backlog to secure a booking at some Indian ports.
At the same time, according to news reports, in the recent months, sea freight charges saw one of the highest-ever increases, as much as 60%, as shipping companies hiked rates substantially. There has been an increase in freight costs of 20-30% in October alone. Air freight is also up by 30-40% owing to reduced overseas flights due to the pandemic.
Faheem Agboatwala of Hi-Tech Printing Services, a pharma exporter, said his business has taken a hit due to the increase in container cost, not to mention the delay in sending out deliveries.
“Sea freight is up by 20-35% in the last six months,” Agboatwala said, adding, “It’s chaos out there.”
Even book exports have been equally hit. K Selvakumar of Lovely Offset said the company has suffered a severe setback due to the development. “If you want to ship a large volume, then you seriously have an issue,” he said. “Usually we book two weeks in advance. Now the average time is at least three weeks, sometimes even more.”
According to Rajnish Shirsat, co-founder and CEO, R&S Enterprises, the whole balance has been disrupted. “With few ships and planes coming to India, the outgo has also been affected. To book a shipping vessel to Africa its taking more than 30 days which otherwise was happening in a week or so. The air cargo has also been affected with few people flying to India. So few planes are coming here, and again, with few flying abroad, the cargo is also not getting full. Most importantly, exporters cannot commit a schedule for deliveries affecting order confirmations,” he explained.
Shashi Ranjan of Manipal Press added, “We are able to get containers from Mangalore port in two to three days as of now. However, we are not sure if we will get same in future as import has come down.”
According to the Union ministry of commerce and industry sources, while India’s exports rose for the first time in six months in September, imports fell 19.6% compared with the same period last year.
Again, the restrictions on imports from China, which came into effect after 20 Indian soldiers were killed in June, are contributing to the overall slump. The quarantine period for vessels from China is 14 days compared with seven days for ships from other countries, driving up costs.
According to exporters, this disruption was causing uncertainty. With planning going haywire due to restrictions, shipments started getting delayed. Before the shortage began in September, companies could expect to secure a container within two weeks.
On 21 October, the commerce ministry called a meeting with container shipping liners to address the current capacity shortage and rising freight rates. The move follows separate interventions by the US and Chinese authorities in September aimed at curbing blank sailing and record high prices in the trans-Pacific route.
According to a source at the Federation of Indian Export Organisations (FIEO), the ministry discussed the issue of high container rates, unfair demurrage charges, all the issues raised by the exporters. The commerce ministry has also asked FIEO to submit container requirements of exporters for next two months. FIEO had earlier called for a government regulatory body to address limited container availability and a steep hike in prices.
PrintWeek’s take: According to a news report published on 4 November, pharma export from the country is likely to cross the USD 23-billion mark for the first time in the fiscal year. Meanwhile, shipment of pharma products is likely to rise by 22% in this fiscal. Under these circumstances, the government should take proactive action and make things better to ensure growth of much-needed exports.