Due to the Red Sea conflict causing a surge in global insurance and freight rates, Indian exporters are actively seeking strategies to alleviate the impact of prolonged shipping vessel and container turnaround times. This is a consequence of ships opting for an extended route around Africa's Cape of Good Hope instead of the traditional Suez Canal route.

Dr Ajay Sahai, the DG and CEO of the Federation of Indian Exporters Organisation (FIEO), highlighted the rise in the Drewry Freight Index, attributing it to escalated freight costs. He stressed the urgency of securing more containers for coastal shipping to avoid repositioning charges. While private companies are already manufacturing shipping containers in Bhavnagar, Gujarat, Dr Sahai urged for local production of corrugated steel, a component not presently manufactured in India, through backward integration.

Dr Sahai clarified that the impact of the Red Sea conflict on insurance costs only manifests when shipments reach importers. He noted the limited availability of cargo insurance from Indian insurers and highlighted the significant role of ECGC during global liquidity crunches.

Pointing out that major companies like IKEA and Walmart have pre-negotiated contracts with shipping companies, Dr Sahai emphasized that shipping companies often recover losses from smaller exporters and suppliers, especially in cases involving nominations.

In response to the losses incurred by Indian exporters, Dr Sahai recommended tax concessions to attract global shipping lines to India, encouraging the registration of shipping vessels under the Indian flag. Drawing attention to China's practice of artificially lowering product prices in areas covered by India's PLI schemes, he advocated for an increase in Rupee trade. He cited examples of Rupee payments in trade with Russia, UAE, and Sri Lanka, underlining the importance of facilitating Rupee-based transactions and encouraging global traders to utilize available Rupees. Dr Sahai mentioned successful instances where global sunflower oil suppliers agreed to trade in Rupees, emphasizing the potential benefits of such arrangements.