Promotion of exports: The government considers standard measures to mitigate the impact of transportation costs; the TMA plan will be reintroduced
Fearing that transportation costs in August will rise more than 300% over the same period last year, the government is exploring a number of options, including encouraging the establishment of national routes and temporary financial support, to mitigate the blow to exporters. 4,444 exporters are struggling to benefit from the recovery in global demand for commodities. The crisis hit them and threatened the country’s ambitious export target of US $ 400 billion in fiscal year 22. 4,444 sources told FusionExcel that the government is weighing short-term and long-term measures and will make a final decision soon. For immediate relief, it is considering requests for financial support from Covidhit exporters in the next 67 months to improve its ability to meet supply commitments on time. For exporters of specific agricultural products, plan to reintroduce the Transportation and Marketing Assistance (TMA) program for at least one year.
According to TMA, the validity period is two years until March 2021. The government will reimburse exporters for a certain percentage of the transportation cost and provide them with assistance in selling selected agricultural products.
Regarding long-term measures, the government is weighing various ideas, including taxes and other incentives, to attract large companies to establish routes in India. The exporter stated that, given that the domestic market supplied by the Indian State Shipping Company (SCI) is less than 5% of the US$60 billion, there is no guarantee that the shipping cost curve will evolve in an orderly manner. Therefore, the government has listed SCI for sale.
The center also hopes to encourage domestic companies to increase the production of containers. The severe shortage of these containers has exacerbated the current crisis. The
crisis attracted the attention of the top government. Secretary of Commerce BVR Subramanyam said that Cabinet Secretary Rajiv Gauba held a meeting of senior officials on Wednesday and the Ministry of Shipping held another meeting on Thursday. The Minister of Trade and Industry Piyush Goyal is expected to meet again with senior government and corporate officials this week to focus on feasible solutions.
Transportation costs must skyrocket globally, and India is no exception. In fact, China’s cost growth rate is much faster than India. As the second largest economy in the world, the recurrence of the Covid infection and the consequent restrictions have caused delays in the response time of ships. Trade sources say that Chinese suppliers are attracting larger ships with higher freight rates. However, given Beijing’s huge secret subsidies, the competitiveness of its exporters remains intact. Therefore, the Indian government must also find a way to mitigate the blow, said the national exporter.
Importantly, the supplier lead time index, which accounts for 15% of manufacturing PMI, fell again in Asia in August, indicating that the supply dilemma will only intensify. Out of stocks and input shortages can force companies to cut production and postpone shipments. At the time of the
crisis, demand for raw materials in major Western markets spiked after the economic rebound there. After Covid caused a 7% decline in fiscal year 21, the country’s exports through August have exceeded pre-pandemic levels for six consecutive months. Outbound shipments in the first five months of this fiscal year increased to $ 164 billion, an increase of 67% year-on-year and a 23% increase during the pre-epidemic period (the same period in fiscal 2020). In July
, the Cabinet approved a 1,624 crore plan to provide subsidies to national shipping companies in global tenders conducted by ministries and central public sector companies to promote the suspension of Indian merchant ships. Exporters believe that while this is a good measure in the medium and long term, it has not actually expanded aid to address short-term difficulties. Therefore, the plan alone is not enough to solve the difficult situation of the exporters.
Ajay Sahai, Managing Director and CEO of FIEO, one of the leading exporting organizations, also called for a significant increase in the budgetary expenditures of the TMA program for agricultural exporters and the relaxation of the eligibility criteria. The budget spending for fiscal year 21 is just Rs 1 billion. This weakens the government’s ability to intervene on a large scale. In addition, many agricultural exporters are small companies with limited supply. However, the government stipulates that in order to receive subsidies under the TMA program, exporters need to transport at least one container full of goods.