Red Sea crisis: PMO to be updated on impact on trade, govt action 

The Prime Minister’s Office will take an update from the Commerce Department early next week on the impact of the continued hostilities in the Red Sea on the country’s exporters and importers and may then decide on whether more needs to be done in terms of assistance, sources have said.

“The Commerce Secretary has been reviewing the situation related to the Red Sea. He has also checked with different Ministries on what the situation is on the import side. What has emerged from these meetings is that while traders have been affected due to freight increase and some delay because of the longer route ships have to take to avoid the Red Sea, there aren’t any other major areas of concern. But bottom lines of exporters are being affected which is cause for worry,” a source tracking the matter told businessline.

• Also read: Diesel exports from India slip 45 per cent% in January as refiners avoid Red Sea

Commerce Ministry officials will meet PMO officials on February 12 to give a brief on the current situation based on interactions with other Ministries and Departments including Shipping, MEA and Finance.

Impact on trade routes

Shipments from India to Europe, US east coast, North Africa and parts of Asia, have almost stopped taking the Red Sea route as Yemen-based militant group Houthi has been attacking cargo ships in the region. These shipments (both exports and imports), which annually add up to about $230-240 billion, instead are being routed through the Cape of Good Hope in South Africa, which has resulted in increased transit time of about two weeks and a rise in shipping costs.

While the government has not been able to do much to check the escalation in shipping costs, which have gone up by close to 400 per cent in some cases, as it is controlled by the private sector, some steps have been taken to ease the availability of insurance.

• Also read: US, UK and allies strike Houthi-controlled areas of Yemen

“The government has directed Export Credit Guarantee Corporation Ltd (ECGC) to maintain moratorium on rates of insurance for the Indian exporters. ECGC continues to provide insurance cover to the exporters. Further, ECGC has not refused cover for export shipments routed through the Red Sea and the credit risk cover is being provided based on the risk assessment and credit worthiness of overseas buyers and terms of payment,” Anupriya Patel, Minister of State for Commerce and Industry, said in a Lok Sabha reply on Wednesday.

The Commerce Ministry had earlier urged the Finance Ministry to provide easy credit to exporters to help them tide over the situation.