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The Commerce Department is set to hold an inter-ministerial meeting to strategise on dealing with the disruption in India’s international trade caused by the Yemen-based Houthis attack on cargo ships in the Red Sea, official sources said. The attacks have led to a steep increase in costs of shipping and insurance.
Senior officials from the Ministry of External Affairs (MEA), the Department of Financial Services (DFS), Ministry of Shipping and Ministry of Defence are expected to participate in the meeting that will take note of the problems faced by traders in sending and receiving shipments from India’s key markets in Europe, US east coast and parts of West Asia and Africa and brain-storm on what the government could do to minimise damage, a senior official said.
Meeting next week
“The inter-ministerial meeting tentatively scheduled next week will look at all problems flagged by the industry so far including increase in shipping and insurance costs, imposition of various surcharges by shipping lines and various concerns on taking the much longer route through the Cape of Good Hope. Let us see what comes out of it,” the official said.
Ways to increase trade with countries like Australia, with which we already have a free trade pact, and which does not fall in the crisis-ridden route, will also be explored.
It is being estimated by industry and some research bodies that in the current fiscal itself, India’s exports could be lower by $20-30 billion if the Red Sea crisis continues. “We will see if the EXIM bank and the ECGC can do something to help exporters in meeting some of the challenges including meeting higher insurance costs and surcharges,” the official said.
To keep pace with the volatility in the global economy, the Commerce Department has also set up an intra-department strategy group to discuss major international developments on a daily basis and analyse if there is need for action, he added.
Attacks on cargoes
Since November 2023, the Houthi militia have been carrying out attacks on cargo ships in the Red Sea to show support for the Palestinians in the on-going Israel-Hamas war.
The Red Sea is a critical trade route for India with about $230-240 billion worth of imports and exports shipped through the waters every year. With big shipping lines like Maersk suspending their operations through the route, most consignments are now being routed through the Cape of Good Hope in South Africa, which is longer by about 14 days.
The Indian Navy has so far provided escort for some ships along the coastline up to some distance in the Arabian Sea but not beyond, another official added. “The US-led security coalition that is operating in the Red Sea has provided some support. But the risk is so high that only an estimated 8 per cent of shipments using the route are continuing to do so,” the official said.
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