Exporters have sought the Union government’s assistance for getting insurance for shipping consignments amidst the ongoing crisis in the Red Sea. According to sources, several private insurance companies have stopped providing insurance for shipping consignments on the route.
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“Insurance is turning into a big problem for exporters. While freight rates have increased by over two and a half times, getting an insurance cover is also proving to be difficult,” said an industry source. The premium for insurance cover has been hiked by several companies while many private insurers have stopped offering insurance due to lack of under writing support.
Yemen-based Houthi rebels have in the last two months attacked merchant ships travelling through the Red Sea, which is usually used by Indian ships going to Europe and the east coast of the US. Ships are now being forced to go around the Cape of Good Hope to avoid the attacks, which is increasing both the travel time as well as length.
Underwriters have increased rates by as much as 1% of the value of the ship for vessels that travel through the Suez Canal and even for vessels that take the longer route to go around the Cape of Good Hope.
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Exporters are understood to have taken up the issue with the commerce ministry, which has held several meetings with them.
An inter-ministerial panel headed by Commerce Secretary Sunil Barthwal with participation from officials from the ministries of external affairs, defence, shipping and the department of financial services had held a meeting on the Red Sea crisis on January 17 to review the situation. It had also asked the department of financial services to ensure adequate credit flow to exporters who have been facing higher shipping costs and many are also withholding consignments.
There is concern that India’s exports could be impacted by as much as $ 30 billion in the current fiscal if the crisis in the Red Sea continues. Almost 80% of India’s exports to the US and Europe and parts of West Africa used to travel through the Suez Canal route.
