Inter-Ministerial meeting to address the shipping crisis

Commerce Ministry has called an inter-ministerial meeting on the crisis on January 17^th to address the issues faced by exporters in view of the restrictions in movement of ships in the Red sea shipping channel. Senior officials from five ministries — external affairs, defense, shipping and finance (department of financial services) and commerce — will participate in the deliberations

India’s outward remittance on transport services is increasing with rising exports according to the FIEO, “We remitted over  80 billion US dollars as transport service charges in 2021. Around 80 per cent of India’s merchandise trade with Europe passes through the Red Sea and substantial trade with the US also takes this route. Both these geographies account for 34 per cent of the country’s total exports.

Exports to Europe, the east coast of the US and Latin America are facing problems due to the crisis. The route starts from major Indian ports like Mumbai, JNPT, or Chennai, heads westward through the Arabian Sea, enters the Red Sea, and navigates through the Suez Canal into the Mediterranean Sea

The trade route of Bab-el-Mandeb Strait, the Suez Canal, and the Red Sea is shorter and faster than the Cape of Good Hope route, making it the preferred option for most shipping companies. Due to attacks, shipping lines have reduced their movement through the Red Sea and are taking the longer route via the Cape of Good Hope, encircling the African continent.

The Red Sea strait is vital for 30 per cent of global container traffic and 12 per cent of world trade. About 95 per cent of the vessels have rerouted around Cape of Good Hope adding 4,000-6,000 nautical miles and 14-20 days to journeys.

The Cape of Good Hope route is longer and slower, but it avoids the potential for delays or disruptions at the Suez Canal.It is typically used for bulk cargo shipments where time is less critical or when political instability in the Middle East raises concerns about using the Suez Canal.

The route starts from the same Indian ports, heads southward across the Indian Ocean, rounds the Cape of Good Hope at the southern tip of Africa, and then sails northward along the west coast of Africa before entering the Mediterranean Sea and reaching European ports.

The Indian private sector may be engaged to develop such shipping lines as this will also reduce arm twisting by foreign shipping lines according to exporters.