MSME Export Sector is Hit by Increasing Freight Charges and Extended Turnaround Times

MSME exporters across various sectors are grappling with the severe impacts of increased freight charges, prolonged cargo turnaround times, and steep hikes in insurance premiums due to ongoing geopolitical tensions and global economic instability. The Russia-Ukraine conflict, coupled with the Iran-Israel tensions, has resulted in a crippling impact on the MSME export sector.

According to Balkrishan Sharma, Business head and Chief Executive of Yarn Business at RSWM Limited, a leading yarn and knitting fabric manufacturer, exporters are facing multiple challenges. These include the non-availability of containers, a multifold rise in freight charges, and a steep increase in cargo insurance premiums.

Sharma highlighted that freight charges have surged five to ten times, with rates for a single container shipment to Turkey, Italy, and the US reaching around $2,700, $2,500, and $3,600, respectively, from the previous rates of around $500, $600, and $300. Additionally, the turnaround time for shipments has doubled, reaching around 60 to 70 days for Europe and the US, compared to the previous 25 and 20 days, respectively.

The surge in insurance premiums by around 30% and the significant increase in raw material prices due to the 3% to 5% rise in crude oil prices have further compounded the problems for exporting units in the country.

Sharma emphasized that small players are the biggest sufferers, as unlike the MSMEs, larger players have the financial muscle to withstand the challenges. Most units are currently operating at around 50% of their respective capacities, and the industry has also witnessed job losses.

An industry source revealed that out of 60 major exporting units in Ahmedabad, only three units are operating at near-full capacity, while the remaining 57 units are operating at around 50% capacity. Even large players like Raymond and Arvind are reportedly struggling due to the continued muted demand in European markets.

Priyam Patel, Managing Director of NK Proteins Private Limited, a leading edible oil player in Gujarat, echoed similar concerns. The tensions in the Red Sea region have led to a surge in freight charges, while transit times have nearly doubled, resulting in shipment delays as freighters are forced to take longer routes. Europe, being a key export market, has seen upward pressure on freight charges.

Ashwin Thakkar, Vice President of the Textile Association of India, acknowledged the escalating tensions due to the Iran-Israel conflict and the potential impact on global markets, affecting businesses. However, he highlighted that the declining trade with Iran might provide a cushion to the textile sector.

Balkrishan Sharma concluded that while the Russia-Ukraine conflict has been ongoing since March 2022, war fatigue appears to have set in, and the anxiety of war is subsiding. However, he emphasized the need for the government to take firm steps to safeguard the interests of small players in exporting industries, as they are also major employment generators, and it may take another 15 to 20 months for the situation to normalize.

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