Editorial     

Published: January 31, 2024
Updated: January 31, 2024

Shipments flounder, govt fiddles

Widespread hopes that the US-led counter-attacks on Yemen rebel bases would stop Houthi attacks on ships transiting through the Red Sea-Suez Canal route have been belied. Just four days ago, INS Visakhapatnam, an Indian Navy guided missile destroyer, received a distress call from British oil tanker MV Merlin which had caught fire after a Houthi missile attack, and rescued 22 Indian and one Bangladeshi crew from the stricken vessel. Worse, a week earlier, the Houthi rebels attacked a patrolling vessel of the American Navy – the first such attack on an American naval ship in decades.

While the whole world is acutely aware of the damage being caused by Houthi terror strikes on shipping through the Red Sea-Suez Canal route, the Indian government does not seem to have taken the matter as seriously as it should have, considering the damaging impact on India’s maritime exports. As some wits put it, perhaps the government was too busy with the ‘pranpratistha’ of Shri Ram at the new Ayodhya temple! With New Delhi yet to quantify the damage to exports so far, it seems farfetched to expect it to take counter-measures to minimize the impact on the country’s exports of the Houthi rebel strikes.

According to a Delhi-based think tank, during the last two months of fiscal 2023, India is bracing for a potential $ 30 billion blow to its exports as escalating threats to cargo vessels in the Red Sea lead to a surge in container shipping costs. After studying the situation, the think tank has stressed that the crisis in the Red Sea could lead to a serious blow to India’s maritime trade, both in exports and imports.

The Houthi attacks in the aftermath of the Israel-Hamas conflict have turned the quickest marine route linking Asia with Europe through the Suez Canal totally unsafe. It has forced shippers to take a longer transit route around the Cape of Good Hope at Africa’s southern trip, thus making shipments both dearer and longer to deliver. According to the FIEO, after the Houthi attacks started, major cargo shipping lines have decided not to operate on the Red Sea route and almost 90 per cent of western hemisphere cargo – both inbound or shipped from India that used to go through the Red Sea — is now getting rerouted through the Cape of Good Hope. The remaining 10 per cent of Indian import or export cargo is either not moving or using a transit facility.

The resulting shortage of ships and an unbearable rise in freight charges have given a body blow to the viability of Indian exports.

According to the apparel exports industry, it will suffer a sharp setback if shipments do not reach destinations in time. Again, the unfortunate development may hurt manufacturing lines of sectors like electronics, automobiles, chemicals, consumer goods and machinery. At the same time, companies relying on just-in-time manufacturing can be vulnerable. If no steps are taken to mitigate the situation, Indian exports will suffer badly, adversely affecting the pace of economic growth of the country.

Now that the Ram temple celebrations and the Bihar political drama are over, the government should wake up and start taking urgent steps to save Indian exports. Since the government is clearly not in any position to silence the Houthi rebels, it should consider helping exporters by subsidising the higher freight, insurance costs, etc., to make exports economically viable. Steps should also be taken to enhance economic co-operation with West Asian countries and explore ways for a diplomatic outreach to Yemen, which is backing the Houthi rebels.