Supply chain challenges might ruin exporters’ Russia plans

Indian exporters

Companies in Russia are showing immense interest in a range of items like food, pharma, etc, from India opening a wide opportunity for Indian exporters, but dispatching goods to the sanction hit nation is easier said than done.

As per official sources, the blockage at the Black Sea shipping route and suspension of non-essential bookings” to and from Russia by top global shipping firms have left the Indian exporters grappling with an acute shortage of containers.

Moreover, many Russian importers are keen on paying in the rouble, which may discourage many Indian exporters, said one of the sources.

Russia’s top food retailer, X5 in recent times has shown great interest in scaling up its imports from India. It wants 8,000 tonnes of shrimp, 2 lakh kg of tea and coffee, about two million rice packets, five million pieces of detergent powder and liquid, 1 lakh bottles of strong drinks (Rom and Whiskey), 1.2 lakh wine bottles, 80,000 pieces of textile products, five lakh liters of soda, one lakh liters of beer, among others, sources informed.

Already, a group of about 50 Indian exporters from the farm, food, and chemicals sector are visiting Russia intending to convert the inquiries into real contracts. The Federation of Indian Export Organisations (FIEO), too, is facilitating interactions between the Russian importers and domestic suppliers.

Exporters and official sources say that the supply-side challenges are too difficult to surmount at this point.

“Some shipments (to Russia) are going through Turkey and some through China’s Qingdao port. But the important point is that most of the shipping lines are not operating (for exports to Russia), so the volume of despatches is pretty low at this point,” FIEO director general and chief executive Ajay Sahai said.

The world’s top three container lines — Swiss-headquartered MSC, Denmark’s Maersk, and France’s CMA CGM — have temporarily suspended cargo shipments to and from Russia following Western sanctions in the wake of the Ukraine war.

According to World Container Index, the global freight rates stood at $7,768 per 40-ft container as of April 28, up 56% from a year before.

“Shipping cost is very high. Even if orders flow in, logistics challenges are there. But the good thing is that payment (for supplies made before the Ukraine war) has started flowing through non-sanctioned Russian banks,” he added. However, exporters are looking to convert inquiries into order at the earliest, so that, in the event of cessation of violence in Ukraine, goods can be dispatched swiftly.

While farm products made up 18% of India’s $3.2-billion exports to Russia between February last fiscal, pharmaceutical products accounted for almost 15%. India still had a goods trade deficit of $5.5 billion with Russia between April and February of FY22.

Source: Financial Express

Leave a Reply

Your email address will not be published. Required fields are marked *