India bats for local production of corrugated steel to increase manufacturing of containers

With the Red Sea conflict causing an increase in insurance and freight rates globally, Indian exporters are exploring ways to mitigate the impact of extended turnaround times for shipping vessels and containers. This is due to ships opting for a longer route around Africa's Cape of Good Hope instead of the usual Suez Canal route.

Noting a rise in the Drewry Freight Index attributed to increased freight costs, Dr. Ajay Sahai, the DG and CEO of the Federation of Indian Exporters Organization (FIEO), emphasised the necessity for more containers for coastal shipping to avoid repositioning charges.

While acknowledging that manufacturing of shipping containers is already underway in Bhavnagar, Gujarat, by various private companies, he urged for backward integration and local production of corrugated steel used in containers—a component not currently produced in India.

Dr. Sahai clarified that the impact of the Red Sea conflict on insurance costs doesn't arise until shipments reach importers. He mentioned that few insurers in India provide cargo insurance, and the role of ECGC becomes significant during global liquidity crunches.

Highlighting that major companies like IKEA and Walmart have pre-negotiated and discounted contracts with shipping companies, he pointed out that shipping companies often recover losses from smaller exporters and suppliers when there's a nomination involved.

In opposition to the current losses borne by Indian exporters, he recommended tax concessions to attract global shipping lines to India by incentivising the registration of shipping vessels under the Indian flag.

Sahai drew attention to China's artificial lowering of product prices in areas where India has implemented PLI schemes.

He advocated for an increase in Rupee trade, citing instances where Rupee payments have commenced in trade with Russia, UAE, and Sri Lanka. Stressing the importance of facilitating the supply of goods to India in Rupees and encouraging the use of available Rupees among global traders, he mentioned that some global suppliers of sunflower oil have agreed to trade in Rupees.