An inter-ministerial meeting on Red Sea crisis on Wednesday has asked Department of Financial Services (DFS) in the finance ministry to monitor the credit requirements of exporters and ensure that credit flows to them are maintained, a senior official said Wednesday
“We have told DFS to monitor what is the amount of bank credit and to ease the bank credit,” the official said. The department has also been asked to keep an eye on insurance costs for shipping, the official said after the meeting.
The group will meet again soon.The meeting which saw the participation of the ministries of commerce, shipping, defence and external affairs was told that so far there has not been any drop in volumes of trade from major ports.
The shipping ministry was asked to monitor the volumes which are stable so far. “Currently we are monitoring that the volume should not get affected.” The defence ministry informed at the meeting that it has improved its surveillance in Arabian Sea and put more mechanisms in place for smooth movement of traffic.
The defnce ministry has also been involved in the discussions because 10 Indian warships with marine commandos have been deployed for partoling in the region. The ministry of external affairs is negotiating with affected countries to find a credible solution soon to the crisis.
The cost and turnaround time of shipments have increased as two shipping lines including Maersk have stopped services but volume is not affected, the official said.He said so far there has just been time and cost impact, nothing else.
In the rapidly escalating situation in the region the shipping rates on some routes have gone up by six times. Exporters fear that the impact could come in a big way if the situation does not normalise.The government may have to look at alternate routes.
The ministry has also been talking to exporters. In December no impact of the crisis was seen on headline export numbers. Most of the shipments to Europe and the US are going through the Cape of Good Hope.
On its part the ministry of commerce has asked Export Credit Guarantee Corporation (ECGC) not to increase the premium on credit insurance and other related services.The insurance covers enable the banks to extend timely and adequate export credit facilities to the exporters.
A strategic group has also been formed within the commerce ministry at the level of additional secretaries to keep a close eye on the situation. Since mid-November, Houthi rebels, who control large parts of Yemen, have been targeting commercial ships traversing through the lower Red Sea to show their solidarity with Gaza and protest against Israel’s force projections in the region. In response the US and UK
Different reports have said the conflict in the Red Sea is leading to increased shipping costs by 40-60%, insurance premiums by 15-20% and delays of up to 20 days due to rerouting of some ships away from Suez Canal.