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Finance Ministry Enlists RBI, IRDAI To Monitor Export Costs Amid Red Sea Crisis

Updated: Apr 11, 2024 04:54:27pm

New Delhi, Apr 11 (KNN) The Indian Ministry of Finance has reached out to the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDAI), and other bodies to address challenges faced by exporters due to disruptions in Red Sea shipping routes caused by Houthi rebel attacks on cargo vessels.

In a letter last month, the Ministry urged the RBI, IRDAI, and Exim Bank to closely monitor export credit availability and potential insurance premium hikes that could increase costs for Indian exporters. 

A senior government official stated regulators will "keep a watch and take necessary action" after discussions with the Commerce Ministry and industry stakeholders, reported ET.

The move comes as the Houthi rebels have expanded attacks on commercial ships beyond Israeli-linked vessels, prompting major shipping lines to re-route around the Cape of Good Hope rather than using the Suez Canal. This has led to soaring freight rates and transportation expenses.

While Indian exports have remained largely unaffected by re-routing shipments away from the Red Sea chokepoints, the cost increases pose a risk. 

The Shanghai Containerised Freight Index surged over 1,000 points between October 2022 and January 2023.

The International Monetary Fund warned the shipping disruptions have impacted global supply chains, with Suez Canal trade down 50 per cent and Panama Canal volumes dropping 32 per cent in early 2023 compared to 2022 levels.

Indian authorities have directed banks to account for higher freight and insurance costs when providing new credit limits to exporters and businesses. 

Officials say the impact on India's exports has been minimal so far by re-routing, but want to ensure trade financing and insurance policies accommodate the increased expenses.

As the crisis in Red Sea shipping lanes continues, the government monitoring will aim to support Indian exporters in accessing affordable export credit and insurance to maintain competitive global trade flows.

(KNN Bureau)


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