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Exports from Kolkata Port Under Threat Due to Rising Freight Rates, Rice Ban, and Geopolitical Turmoil

Rice ban

The bustling Kolkata port, a pivotal gateway to eastern India, is grappling with a multitude of challenges that threaten to hinder its vital role in the region's exports. Officials have highlighted the escalating geopolitical tensions, a recent government-imposed ban on rice exports, and the exponential surge in ocean freight costs as major impediments to the smooth flow of exports.


In recent weeks, key export items, including engineering goods, shrimp, and rice, have borne the brunt of these challenges, causing disruptions in trade dynamics. Freight charges, particularly for West Coast destinations, have skyrocketed by 30-50% since December last year, owing to the intensifying conflict in the Red Sea, as stated by officials. The majority of shipping liners are opting to reroute vessels around the Cape of Good Hope to evade the Red Sea, causing significant delays of 14-20 days.


This diversion has led to a notable increase in freight and insurance costs, placing additional strain on exporters' margins. The sudden spike in freight charges has prompted the temporary hold-up of several export consignments, impacting the timely delivery of goods.


Debojyoti Basu, Vice-President of the Calcutta Customs House Agents’ Association, highlighted the severity of the situation, stating, "Freight costs have soared to USD 400-500 per 20ft container and USD 600-700 for 40ft container shipments to the UK."

Adding to the challenges, the recent government ban on white and broken rice, coupled with a 20% export duty on parboiled rice, has further hampered exports. Kolkata port, traditionally witnessing around 2,000 containers of parboiled rice exports, primarily to Southeast Asia, is now facing a significant setback.


Rakesh Shah, former Chairman of the Engineering Export Promotion Council (EEPC) India, emphasized the broader implications of the Red Sea shipping disruption. He stated, "The disruption in the Red Sea is driving up short-term container shipping rates and impacting timelines, jeopardizing adherence to Tariff Rate Quotas (TRQs) in Europe."


Despite these challenges, Kolkata port authorities claim they haven't observed a substantial impact on export volumes yet. Rathendra Raman, Chairman of Syama Prasad Mookerjee Port, Kolkata, anticipates a modest 5% growth in traffic for the current fiscal year 2023-24, citing geopolitical headwinds. He projected the port to conclude the year with 68 million tonnes of cargo traffic.


As the port grapples with the intersection of geopolitical uncertainties, a rice export ban, and escalating freight rates, stakeholders are closely watching how the situation unfolds, hoping for a resolution that safeguards the vital trade lifeline of Kolkata.

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