India’s top export body Federation of India’s Export Organisations (FIEO) has put a formal request to the Indian government to invest in developing its own shipping line to control the ever-rising freight rates.
“The container shortage, non-availability of vessels and high container freight rates have affected our exports as well as the profitability of exporters”, told newly elected FIEO President, Dr. A. Sakthivel, to Container News.
FIEO held an online press interaction on India’s Foreign Trade on 28 June and the body highlighted that India is moving towards a trillion-dollar economy which will lead the remittance for freight to US$100 billion.
“If the Indian shipping lines get 25% of the business, we have a captive market of over US$25 billion waiting. The Government may provide some financial support either through liberal lending or through tax benefits to facilitate the same”, stated FIEO in its suggestions section to the government.
The Indian export body’s statements come in the backdrop of exorbitant freight rates since the beginning of the pandemic in 2020. Sakthivel told Container News that, “there is huge demand and supply gap which has led to a few stakeholders putting regular bookings on hold while containers are being allocated only to those exporters who are paying a 100% premium.”
The freight rates have reached all-time high levels since the pre-pandemic periods. Sending a 40′ container from India to the United States before the Covid-19 crisis cost US$2,000 which shot up to US$4,500 in 2020 and is oscillating between US$6,200-US$6,500 currently. Rates for India to Europe box transportation have also skyrocketed from US$1,200-US$1,500 to a whopping US$5,500.
Sakthivel explained that having an indigenous shipping line may not solve the problem completely but can command a fair share of India’s (Exports – Imports) EXIM cargo and soften freight rates.
Experts believe freight rates will tone down by October-November 2021 hoping the efficiency at ports would restore by then.