Red Sea crisis: Commerce Ministry asks DFS to maintain credit flow to exporters

NEW DELHI : The Commerce Ministry has asked the Department Of Financial Services (DFS) under the Ministry of Finance to maintain credit flow to exporters amid disruptions in the Red Sea route that could potentially impact over 80 per cent of the exports going to Europe, a senior government official said after an inter-ministerial meeting on Wednesday.

The high level inter-ministerial meeting was chaired by Union Commerce Secretary Sunil Barthwal and saw officials from Ministry of External Affairs, Defence Ministry, Shipping Ministry and DFS. This meeting comes after External Affairs Minister Shri S Jaishankar started his two day visit on Sunday after the US and the UK launched military strikes in Yemen in response to Houthi rebel attacks on shipping in the Red Sea.

“We are monitoring the issue closely… DFS has been asked to maintain credit flow to the exporters. And what we are gathering is that the volumes from major ports are not impacted. We have asked the shipping ministry to monitor the volumes too. Time and cost will be impacted because instead of going through the Suez Canal, shipments are going through the cape of good hope,” the official said.

Freight rates to Europe have more than doubled due to security tension in the Red Sea region. Fears of disruptions in the Red Sea region have risen and oil prices have begun inching up ever since the US and the UK on Friday attacked Houthi rebels in Yemen in retaliation for the attacks on their commercial ships in the Red Sea region.

According to the Commerce and Industry Ministry, consignments have been put on hold due to high freight and surcharges and the sailing of most of the ships have been impacted and generally postponed by 2-3 weeks as the incoming ships, with longer routes, are getting delayed.

Indian shipments of low-value products such as agriculture and textiles to Europe are primarily expected to face the impact of disruption in the Red Sea region due to surging freight costs. Earlier, the government had asked Export Credit Guarantee Corporation (ECGC) not to raise insurance premiums amid rising cost of shipping to Europe.