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Exports from Kolkata port may be hit due to soaring freight rate, rice ban, geopolitical turmoil

Freight charges, especially for West Coast destinations, have surged by 30-50% since December last year due to the escalating conflict in the Red Sea, according to the officials. Most major shipping liners are rerouting vessels around the Cape of Good Hope to avoid the Red Sea, causing significant delays of 14-20 days, one official noted.

Exports from Kolkata port, a gateway to eastern India, are encountering several challenges, including geopolitical tensions, a government-imposed rice export ban, and skyrocketing ocean freight costs, officials said on Sunday. Key export items, such as engineering goods, shrimp, and rice, have been impacted in recent weeks, they added.

Freight charges, especially for West Coast destinations, have surged by 30-50% since December last year due to the escalating conflict in the Red Sea, according to the officials. Most major shipping liners are rerouting vessels around the Cape of Good Hope to avoid the Red Sea, causing significant delays of 14-20 days, one official noted.

Shipping through this alternative route has resulted in higher freight and insurance costs, further squeezing exporters’ margins, the official stated. This sudden hike has disrupted cost structures and led to the temporary hold-up of several export consignments.

“Freight costs have soared to USD 400-500 per 20ft container and USD 600-700 for 40ft container shipments to the UK,” said Debojyoti Basu, vice-president of the Calcutta Customs House Agents’ Association.

He also mentioned that the recent ban on white and broken rice and a 20 per cent export duty on parboiled rice by the government have further hampered exports. Kolkata port used to witness around 2,000 containers of parboiled rice exports, primarily to Southeast Asia, he noted.

Soaring freight costs and administrative delays are squeezing profits and forcing some exporters to withhold orders. India’s export control removed 9 million metric tonnes of grain from the international market since August, significantly impacting global prices.

“Our company’s overall rice export has decreased by more than 33%. This significant decline can be attributed to two factors. First, the total ban on non-basmati raw rice exports, a key product from West Bengal, has severely impacted our sales. Second, the 20% export duty on non-basmati parboiled rice, coupled with increased transportation costs due to the Red Sea issue,” said Suraj Agarwal, director of Villa Group, a leading rice company.

These factors have resulted in a loss of over USD 80 per tonne in the last 20 shipments, he claimed. “This has made us uncompetitive and led to a 50%t reduction in export orders and significantly narrowed our profit margins. The export business of non-basmati rice cannot sustain for long if these factors do not change in the next 6 months,” he said.

Rakesh Shah, former chairman of the Engineering Export Promotion Council (EEPC) India, commented, “The disruption in the Red Sea, a crucial global shipping lane, is driving up short-term container shipping rates and impacting timelines. Shipping delays are jeopardizing adherence to Tariff Rate Quotas (TRQs) in Europe, potentially harming export opportunities.”

The ongoing crisis around the Red Sea shipping route, which accounts for 50% of the country’s exports and 30% of imports last fiscal, will vary depending on the industry, according to a report. However, the Kolkata port authorities claim that they haven’t observed any substantial impact on export volumes yet.

Syama Prasad Mookerjee Port, Kolkata, chairman Rathendra Raman recently said the SMP anticipates just a 5% growth in traffic for the current fiscal year 2023-24 owing to geopolitical headwinds. He said the port may conclude the year with 68 million tonnes of cargo traffic. In 2022-23, the Kolkata Dock System and Haldia Dock Complex achieved double-digit growth of 12.5% over the previous fiscal year, handling 65.66 million tonnes of cargo.

https://www.cnbctv18.com/economy/exports-from-kolkata-port-may-be-hit-due-to-soaring-freight-rate-rice-ban-geopolitical-turmoil-18907581.htm QR Code

Published Date: January 28, 2024

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