As Middle East turmoil persists, basmati exporters from Punjab and Haryana face fresh trouble with cargo vessels seeking offloading of consignments and insurers withdrawing cover for over 4 lakh tonnes of basmati worth ₹3,500– ₹4,000 crore (approx $40milion) in transit.
According to the data from the Agricultural and Processed Food Products Export Development Authority (APEDA), India exports 70% basmati grain to the Middle East, and a major share belongs to Iran. The annual trade is worth over ₹50,000 crore.
According to Ranjit Singh Jossan, vice-president of rice exporters association, the rising geopolitical tensions have disrupted global maritime transportation, leaving Indian exporters grappling with unprecedented challenges.
“Almost all major international shipping lines have suspended fresh bookings. Vessels transiting through the Arabian Sea and the Indian Ocean toward various global destinations have reportedly begun offloading containers at intermediary foreign ports instead of proceeding to their final destinations,” he said.
He claimed that companies are diverting cargoes arbitrarily, leading to additional port rent and demurrage charges. “Notices demanding thousands of additional dollars are being served on exporters. These practices are unprecedented, leading to heavy losses by certain shipping operators,” he said.
A basmati exporter pegged losses to nearly ₹7,500 crore due to stock of premium grain being stuck at different unknown location and the scenario.
{{/usCountry}}A basmati exporter pegged losses to nearly ₹7,500 crore due to stock of premium grain being stuck at different unknown location and the scenario.
{{/usCountry}}“Hopes of recovering those stocks are dim in case they do not reach the destinations. As per our estimates, total stocks worth ₹20,000 crore are in transit for different global destinations,” he said.
As per a recent notification issued by the Iranian government, exports of grains from Iran have been temporarily banned. A large number of Indian exporters route their shipments through Iran as transit cargo to several countries. From Bandar Abbas port in Iran, consignments are typically transported onward to destinations such as Afghanistan, Turkey, and Uzbekistan.
Exporters fear that authorities could also stop these transit shipments by citing the new notification. If such restrictions are enforced, Indian exporters will face heavy financial losses.
Citing security threats, shipping companies are reportedly reluctant to dispatch vessels into open waters. As a result, several scheduled sailings from Indian ports have been indefinitely postponed, creating panic in the export sector, disrupting the supply chain, informed Ashok Sethi, director, basmati exporters association.
“The insurance companies have suspended the issuance of new marine insurance policies until further notice, citing prevailing war conditions. They say that coverage does not apply during war-like situations, creating significant uncertainty for exporters,” Sethi added.
The basmati exporters, according to Sethi, have taken up the matter with APEDA on Tuesday, that our entire trade, material and payments are at risk. “Shocking that there is not a word of assurance from the government,” he said.
Shipment costs skyrocketing
The shipment cost has also risen exponentially, as against $350 for a 20-foot container being charged, the price has skyrocketed to nearly $3,700. The sharp rise is primarily impacting cargo moving through the Red Sea route. At the same time, bookings and new shipments to ports connected through the Strait of Hormuz have reportedly been suspended almost completely.
Shipments that were already sailing towards the Middle East are also being subjected to additional charges. Shipping lines have begun issuing notices demanding emergency freight increase (EFI) charges ranging from $2,000 to $5,000 for a 20-foot container.