Understanding The Difficulties Faced By Exporters In The COVID Era

1. Understanding The Difficulties Faced By Exporters In The COVID Era With lockdown restrictions being eased across India after the second COVID-19 wave, trade was expected to recover and pick up quickly. This hasn’t exactly panned out the way the Indian exporters were hoping for. The demand and order books for the exporters are robust but they are currently faced with a problem which probably the entire shipping industry hasn’t faced ever. There is currently severe shortage of containers and the ocean freight rates are sky rocketing every day. China manufactures close to 85% of shipping containers used across the globe. However, since the start of the pandemic, Indian exporters have struggled to get access to containers. The border situation between the two countries has not helped trade either. Today, it costs upward of $3000 to import an empty container from China - this is more than treble of the $250 to $300 it cost a few months ago. Currently, the waiting period for a container is 10 to 15 days. Scarce availability of containers and fluctuating container charges are disrupting the profits earned by exporters. Today, it costs around $7000 upwards to export shipments to the US (in a 40-feet container) - a jump from $2500 just a few months ago. This has created a serious issue with the exporters, as the export orders are ready to be shipped but at these escalated ocean freight rates, it puts the entire shipment into loss. But if the exporter waits for the ocean freight to come down or renegotiates the terms of the shipment his working capital is blocked till the shipments are not executed. The shutdown of a few Chinese ports following increasing COVID-19 infections has further hit a section of Indian exporters. The All India Spices Exporters Forum has complained that exporters who have signed off long-term Cost, Insurance and Freight (CIF) contracts are taking a hit as most customers refuse to revise contracts. This prevents exporters from competing in the global market. This crisis has hit exporters when they were expecting to reap the benefits of a rise in demand for merchandise. It also threatens to derail India's $400 billion target set for FY22 exports. The exponential jump in shipping costs has compelled the Indian government to consider introducing incentives to set up domestic shipping lines. It also plans to provide temporary fiscal support to exporters over the next 6 to 7 months - this will help to honour the supply commitments of exporters for that time period. The government is also planning to reintroduce the Transport and Marketing Assistance (TMA) scheme that will reimburse exporters of farm products a portion of freight charges and provide marketing assistance for selected agricultural produce.Exporters also allege that several global shipping companies have formed cartels. They say that this is evident in how the world's top 10 shipping

2. companies continue to earn massive increase in operating profits and revenues, even during the pandemic. Exporters also highlighted their concerns about blank sailing or void sailing, which occurs when ocean line service operators decide to skip a particular port, region, or entire leg on a route. This makes it even more difficult for exporters to gain access to ships. Indian exporters have asked the government to intervene and set up a public shipping company that serves as an umbrella organisation that protects their interests. As an alternative, the exporters also suggested scaling up of the Shipping Corporation of India or joining hands with private players such as Great Eastern Shipping and Essar. The biggest advantage of the Indian government stepping in to support exporters will be ensuring availability of ships and containers in India. The Christmas season and the winter orders that come along with it represents the most profitable period of the year for exporters. Unless immediate remedy for container shortage and high freight charges isn’t found, exporters will struggle to find solace during Christmas season and beyond in 2022.