 "Inter-ministerial meeting next week to discuss ongoing Red Sea crisis")
The commerce department has initiated an inter-ministerial consultation with top officials from four ministries --- external affairs, defence, shipping, and finance ministry --- to formulate measures to tackle the impact on trade due to the ongoing Red Sea crisis, a senior government official said on Thursday.
The recent attacks by Houthi militants in the Red Sea have effectively closed one of the world’s main trade routes.
As a result, the cost of freight and insurance has risen since shippers are now diverting their consignments through the Cape of Good Hope route.
“Inter-ministerial consultation with officials from the department of commerce, ministry of defence, finance (department of financial services), shipping and external affairs will take place next week. There will be discussions on the measures that can be taken,” a senior government official said.
As exporters are feeling the pinch of the additional freight cost, some shipments are being held back.
Containers could face delays of 12-14 days in their turnaround time although there was no shortage of containers. The government fears this will become a major cause of concern if this crisis continues.
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Last week, Commerce Secretary Sunil Barthwal chaired a meeting with exporters and concerned stakeholders to understand their challenges.
“During the stakeholder consultation, we discussed the issue faced by them. The stakeholders pointed out that only 8 per cent of trade is using the Red Sea route, while the remaining 92 per cent is taking the Cape of Good Hope. An additional congestion charge (levied during this season) has also contributed to the higher freight cost,” the official said.
Since the shipments to the United States (US), Europe, and West Asia are being affected due to the disruption, the government will attempt to divert more trade towards the east, especially to Australia, since a free trade agreement is already in place with that country.
According to an initial assessment conducted by a New Delhi-based think tank Research and Information System for Developing Countries, India may face a $30 billion impact on its exports due to the crisis. Last year, India’s exports stood at $451 billion.
The commerce department is also computing the official estimates on the impact of the Red Sea crisis on exports. It is expected to share the data on the estimated impact next week.
Separately, it has also set up a ‘strategy group’, to deal with the geopolitical challenges the world has been facing over the past two years.