Industry Experts Weigh in On the Impact of Geopolitical Disturbances on SMEs

The prolonged conflicts between Russia and Ukraine, and Iran and Israel, along with economic instability in American and European markets, have sent shockwaves through the micro, small, and medium-sized enterprise (MSME) sector. As a result, increased freight charges, prolonged cargo turnaround times, and soaring insurance premiums have forced many export-oriented units to slash their outputs, with most currently operating at around 50% of their capacities.

Brij Mohan Sharma, Joint Managing Director of RSWM Limited, LNJ Bhilwara Group, a leading yarn and knitting fabric manufacturer, shed light on the challenges emanating from the global turmoil. He shared that exporters are grappling with numerous issues including container shortages, exorbitant freight charges, and a significant rise in cargo insurance premiums due to ongoing crises in the Middle East and Europe.

Freight charges have skyrocketed by five to ten times their previous rates, with costs for single container shipments to Turkey, Italy, and the US soaring to approximately USD 2,700, USD 2,500, and USD 3,600 per container respectively, compared to previous rates of around USD 500, USD 600, and USD 300 per container. Additionally, cargo turnaround times have more than doubled, reaching approximately 60 to 70 days for Europe and the US, compared to previous turnaround times of 25 to 20 days respectively.

Brij Mohan Sharma, Joint Managing Director of RSWM Limited, LNJ Bhilwara Group

He further noted that there has been a 30% increase in insurance premiums, compounded by significant spikes in raw material prices due to the 3% to 5% surge in crude oil prices, exacerbating challenges for exporting units in the country. “Small units are currently bearing the brunt of these challenges, lacking the financial resilience of larger enterprises, which are better equipped to weather the storm,” he added

Ashwin Thakkar, Vice President of the Textile Association of India, highlighted the broader implications of geopolitical tensions on the textile sector, emphasizing the need for government intervention to safeguard the interests of small players.

Freight charges have surged, and transit times have nearly doubled, causing shipment delays as vessels are forced to take longer routes – echoed other industry experts. While the Russia-Ukraine conflict may be showing signs of easing, it will still take considerable time for normalcy to return. Experts suggest that the government must take decisive action to protect the interests of small players, who are crucial to employment generation in the exporting industries.

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