Trade, import, and export for MSMEs: The international shortage of shipping containers is possessing an effect on micro, modest and medium exporters as nicely with freight prices jumping more than 350-400 per cent in the previous year for essential areas like the US, Europe, Latin America, and Africa. According to specialists, a mixture of components as a outcome of the pandemic has led to a shortage of obtainable containers for exporters like MSMEs. Amid Covid, the volume of shipping vessels in operation was also most likely lowered that had led to a lesser quantity of containers obtainable even though a bigger set of containers had remained at inland depots and stuck at ports such as in the US and China.
This has impacted the turnaround time for containers that has ultimately led to delay in shipments. The post-Covid recovery in international trade amid container shortage and delay in shipments have triggered an improve in freight prices. Consequently, MSMEs and other exporters have been dealing with liquidity challenges as payments for goods exported are delayed.
“It is emanating from the disruption caused by the pandemic and the fallout continues. Freight rates have gone up 350-400 per cent on an average basis for shipping to Europe, the US, Latin America, Africa in September from the year-ago period. There are around 340 odd vessels that are still waiting at the US port and it shows that there is congestion at various ports. So one part of the problem is that large ships are not operating in full capacity,” Ajay Sahai, Director General and CEO, Federation of Indian Export Organisations (FIEO) told TheSpuzz Online. Moreover, no orders had been placed for new containers for the duration of the pandemic and in meantime, quite a few containers had been abandoned also as they had grow to be obsolete and old, Sahai added.
AV Vijayakumar, Chairman at Federation of Freight Forwarders’ Associations in India (FFFAI) echoed that one of the big causes for the shortage is the congestion at the US and Chinese ports even though there is a shortage of shipping space as nicely mainly because exports have been enhanced globally. “MSMEs have been affected very badly due to this with increased freight rates. For instance, from Chennai to the US, the present pricing is $12,000-13000 from earlier around $3,000. Similarly, for European ports, it is now $3500-4,000 from $750-800 earlier. Even if you have the container but you don’t have the space, then how would you transport. That’s also because there is a shortage of ships available. So, when shipments get delayed then automatically payment also gets delayed,” Vijayakumar told TheSpuzz Online.
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HKL Magu who runs export property Jyoti Apparels and ships knitted and readymade garments to enterprises in the US, Europe, Canada, South America, and South Africa stated he has been paying 5-6X more for container rates due to the shortage of containers. The cost paid has gone up to $10,000 for exporting to the US. “If we were paying $2,000 earlier, now we are paying $10,000 for shipping to the US. We are ready with the goods but there is no space and that naturally affects the working capital while I see this to be a temporary impact. With the disbursement of export incentives, which are yet to begin, it might ease the working capital issue,” Magu told TheSpuzz Online.
The government had last week announced that it will release Rs 56,027 crore in the existing monetary year against pending export incentives due to more than 45,000 exporters, about 98 per cent of which had been modest exporters in the MSME category. The incentives due to exporters belonged to distinct export promotion schemes such as MEIS, SEIS, RoSL, RoSCTL, other scrip-based schemes relating to earlier policies, and the remission assistance for RoDTEP and RoSCTL schemes for exports made in the 4th quarter of FY21.
Importantly, the delay in receiving a container goes up to 3-4 weeks from earlier two-3 days. With respect to lack of space on the ship, the containers are sailed in more than one voyage, possibly spread more than one or two months and considering the fact that the containers are not shipped in one go, the small business cycle of exporters is elongated, stated Sahai.
The Central Bureau of Indirect Customs (CBIC), noted Sahai, has now asked customs to give clearance to about 20,000 containers stuck at a variety of ports in India in order to be obtainable to exporters as quickly as doable. Moreover, there is also demand from exporters to regulate the export of empty containers. Sahai stated that it could be on the lines of Kolkata port that has restricted the export of empty containers to one hundred. Also, a freight assistance scheme is amongst the ideas made by FIEO to the government up to March next year to assistance exporters who have been incurring losses.