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Mint
15-06-2025
- Business
- Mint
Govt to hold talks with exporters as Iran-Israel conflict stalls shipments, drives up costs
New Delhi: As the armed conflict between Iran and Israel threatens to disrupt trade routes across West Asia, the government will talk to exporters to assess the impact and chart a response, three officials aware of the development told Mint. The discussions will be aimed at safeguarding India's exports to the United Arab Emirates, Saudi Arabia, Qatar, Oman, Iran, Iraq, Kuwait, and Israel, along with major European markets, the officials said on the condition of anonymity. The conflict has escalated concerns over the safety of cargo passing through the Strait of Hormuz and the Red Sea, a critical maritime corridor for Indian exports. Shipping delays, rising freight charges, and limited insurance coverage are already being flagged by exporters and trade bodies, they said. Also read: Mint Explainer: How the Israel-Iran conflict can crash India's growth party 'As the situation has escalated only recently, we are closely monitoring developments and will engage with exporters and relevant industry groups to formulate a strategy that minimises the disruption to trade," said one of the three officials cited above. 'The discussion will be centred around finding a way out of the crisis and ensuring that trade flows are preserved to the extent possible." Export promotion councils, including those representing engineering goods, basmati rice, textiles, and pharmaceuticals, have raised an alarm. 'The geopolitical tensions will have a major impact on India's export-oriented trade to Europe and West Asia, as the Red Sea is a key route," said Arun Kumar Garodia, former chairman of the Engineering Export Promotion Council (EEPC). 'The conflict will force shipments to take alternate, longer routes via the Cape of Good Hope (South Africa), adding to the cost burden on traders and importers," he said. 'This disruption is likely to affect India's overall trade performance, which may be reflected in the coming months' export data." Queries emailed to the commerce ministry remained unanswered till press time. Also read: Mint Explainer | Strait of Hormuz: Will Iran shut the vital oil artery of the world? For trade promotion bodies, the key concern is the 50% rise in shipment costs just days after the escalation began, and these are anticipated to increase even more after 1 July, the second official quoted earlier said. Basmati exporters have raised concerns over growing uncertainty in the Iranian market, one of India's top destinations for the commodity. With consignments lying at Indian ports and many shipments in transit, exporters fear that any delay could cost them the critical mid-June to mid-July delivery window, before Iran begins harvesting its domestic rice crop. 'Iran typically imposes a seasonal import ban by mid-July to protect local farmers. If tensions persist, we could miss the shipment window entirely," said Satish Goel, president of the All India Rice Exporters Association (AIREA). India's rice exports to Iran rose to $757.30 million in FY25 from $689.80 million a year earlier, accounting for nearly 76% of India's total agricultural shipments to the country. Iran alone buys around one million tonnes of Indian basmati rice annually, or about 12% of India's total basmati exports, which stood at $5.94 billion in FY25. 'We are in a Catch-22 situation. With tensions escalating, many exporters have put their shipments on hold, even though consignments are already lying at the ports," Goel said. 'If the situation doesn't stabilise soon, exporters could end up bearing heavy losses." According to exporters, some ships in transit may be forced to turn back if the conflict drags on, while insurance remains another sticking point. Also read: India in anti-dumping crosshairs: US, Pakistan target Indian exports at WTO 'The major concern flagged by trade bodies is that many of these consignments may not be insured, as insurance companies typically refuse coverage for shipments headed to war or conflict zones," said the third official. Several other Gulf nations and nearby economies may face trade disruptions if shipping lanes become inaccessible or unsafe. The UAE, one of India's largest trading partners, could face delays in receiving food items, textiles and engineering goods. Saudi Arabia, Oman, Qatar, Iraq, and Kuwait are similarly vulnerable due to their dependence on maritime imports, the official said. 'The ongoing Iran-Israel conflict is expected to significantly impact India's trade with Europe, given that much of the cargo to the continent transits through the Red Sea and the Suez Canal," said S. Ramakrishna, former chairman and now advisor of the Federation of Freight Forwarders' Associations in India (FFFAI). India's exports to Europe stayed almost unchanged over the previous year at $98.34 billion in FY25, according to official trade data. Israel, which imports high-value Indian goods like pharmaceuticals and machinery, may also experience setbacks in port operations and air cargo services if the situation escalates.
Mint
27-05-2025
- Business
- Mint
Level playing field: Government restores duty, tax benefits for certain categories of exporters to boost competitiveness
ew Delhi: The government has decided to restore certain tax and duty benefits for specified categories of exporters in a move aimed at reviving the competitiveness of India's overseas trade. 'The Government of India has announced the restoration of benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for exports made by Advance Authorization (AA) holders, Export-Oriented Units (EOUs), and units operating in Special Economic Zones (SEZs),' the commerce and industry ministry said in a statement on Tuesday. 'The benefits will be applicable for all eligible exports made from 1 June.' The reinstatement comes about four months after the benefits for these categories were suspended, causing concern among exporters reliant on duty-free schemes. The decision is part of a broader effort to ensure a level playing field for all exporters, irrespective of the route they use. The RoDTEP scheme had been operational for exports from domestic tariff areas (DTA) even after the benefit was withdrawn for AA, SEZ and EOU shipments on 6 February this year. The RoDTEP scheme, introduced in January 2021 after the World Trade Organization ruled against India's earlier export incentive programmes, is meant to neutralise the burden of non-creditable taxes and levies—such as electricity duties and mandi fees—that are not refunded through other mechanisms. Its design is WTO-compliant, and it is entirely digital, allowing for direct transfer of benefits to exporters. Exporters said the restoration offers relief when global demand remains uneven and domestic exporters are coping with thin margins. For small and medium enterprises (SME), which often operate on tight margins, such financial support can make a meaningful difference in pricing their products competitively. "This is a much-needed relief for the SME export community. The withdrawal of RoDTEP benefits earlier this year had disrupted pricing models for many small and mid-sized exporters, especially those operating through SEZs and under advance authorisation. Restoring these incentives will help us compete more confidently in global markets," said Vinod Kumar, president of the India SME Forum. According to government data, India disbursed over ₹ 57,976 crore in RoDTEP benefits from January 2021 to March 2025. The government has earmarked ₹ 18,233 crore for the scheme in FY26. The benefits will now support 10,780 trade lines for DTA exports and 10,795 product lines for AA, SEZ, and EOU shipments, suggesting that the government intends to ensure broad sectoral support. While industry leaders largely welcomed the move, some of them said the effectiveness of the reinstatement will depend on timely reimbursements and clarity in claim processing. The decision is seen as a much-needed correction in policy, reaffirming India's intent to create a predictable and equitable export regime amid tightening global competition, said Arun Kumar Garodia, former chairman of the Engineering Export Promotion Council. According to Ajay Srivastava, co-founder of the Global Trade Research Initiative (GTRI), the government's stop-and-start approach to RoDTEP undermines the scheme's very purpose and its repeated withdrawal for key export categories creates serious uncertainty. 'Exporters, especially SMEs, find it difficult to price products or commit to long-term contracts when they cannot rely on consistent support," Srivastava said. "The reinstatement of benefits from 1 June is a welcome step, but it also raises a fundamental question—why were they cut off mid-cycle in the first place? If India wants to position itself as a predictable and competitive export hub, RoDTEP coverage must be uninterrupted for at least five years. Frequent policy shifts erode trust and hurt our export credibility in global markets.' Micro, small and medium enterprises contribute about 45% of India's total exports, playing a key role in sectors such as textiles, engineering goods, pharmaceuticals, and gems & jewellery. The total number of MSMEs registered on the Udyam Registration Portal and Udyam Assist Platform was almost 59 million as of 31 January 2025. From 1 July 2020 to 31 January 2025, 71,178 units were deregistered because they had shut down. The data also indicated that 203 million people were employed in MSMEs as of 16 July 2024.
