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Sunday, September 26, 2021

Container crunch takes toll on freight rates: Lock empty cases, say exporters

Freight rates to a number of key ports have risen by over 300 per cent since August 2020.

Written by Karunjit Singh | New Delhi |
September 11, 2021 1:38:30 am
Experts said even though the shortage and high freight rates were international issues, persistent structural worries had led to Indian exporters facing a worse situation. (File)

In light of rising freight rates due to the global container shortage, exporters have called on the government to provide freight subsidies and curb the movement of empty cases out of India.

Freight rates to a number of key ports have risen by over 300 per cent since August 2020. Exporters have also called for the release of about 20,000 containers that have been abandoned or detained by various agencies to augment their supply, The Indian Express has learnt. The government is currently in talks with key stakeholders to help exporters deal with the shortage and rise in freight rates.

Delays in unloading of containers at various ports due to Covid-related curbs and an unexpectedly quick recovery in global trade has led to an international container shortage.

“Some countries are putting a premium on the import of empty containers,” said Ajay Sahai, director general and CEO, Federation of Indian Export Organisations (FIEO), adding this was compounding the container shortage.

Sahai said the Kolkata port had restricted the export of empty containers to a maximum of 100 per vessel for a three-month period and that other ports should also curb the export of empty containers. An exporter said the shortage meant that companies did not know when materials would reach their destination and that long delays in shipments reaching their destinations were leading to working capital issues, as payments were being delayed by 2-3 months.

The FIEO has also called for a freight support scheme for all exports till the end of the fiscal — by when freight rates are expected to normalise. The FIEO has recommended that such a scheme also be applicable to LCL (Less than Container Load) cargo to ensure that small exporters are not excluded.

Exporters have also said the option of priority booking offered by some shipping lines was adding to freight costs. “Priority booking should be stopped and revert to first come, first served booking,” Sahai said. Commerce Minister Piyush Goyal had recently said at a meeting with textile exporters that the government “cannot mandate or force (these freight) rates” since if government forced the rates downwards, then shipping firms could also demand a hike in rates when they are low.

Experts said even though the shortage and high freight rates were international issues, persistent structural worries had led to Indian exporters facing a worse situation.

“The average turnaround time for ships in India is about 2.7 days while the world average is 23.5 hours,” said Biswajit Dhar, professor at JNU’s Centre for Economic Studies and Planning, noting that this was adding to container shortage for Indian exporters.

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