India’s exports to Russia plummeted 38% between April and June from a year before in the wake of the Ukraine war, even though its imports jumped 369%, boosted by energy purchases. Consequently, the trade deficit with Russia surged to $8.8 billion in the June quarter itself, exceeding that of $6.6 billion in the whole of last fiscal, latest official data showed.

While exports stood at just over $0.4 billion, imports spiked to almost $9.3 billion in the first quarter.

Senior official and trade sources told FE that exports have plunged, as key global shipping lines are still reluctant to take bookings for Russia, making it difficult for Indian suppliers, especially the small ones, to despatch dry cargoes. Even when the bookings are made, the freight and insurance charges remain elevated due to enhanced risks.

Moreover, receiving payments for supplies still remains a challenge and takes time, thanks to Western sanctions on key Russian banks. The Reserve Bank of India’s guidelines last month, allowing the settlement of international trade in the rupee, are yet to find takers among banks. So, Indian exporters haven’t been able to take advantage of the renewed Russian interest in Indian products after the Ukraine conflict, the sources said.

Also Read: India likely to curb broken rice exports

However, India’s purchases from Russia have picked up pace, as the importers — mainly oil companies – are large players who have the ability to order a ship-load of crude oil. Moreover, Moscow is offering a discount on oil, offsetting the impact of elevated shipping costs.

In contrast, many Indian exporters to Russia are relatively small players, who ship out in limited volumes. So, container availability has turned out to be a big challenge for them.

“There is a huge potential of scaling up exports to Russia. But to be able to exploit that potential, the logistics and banking issues need to be sorted out particularly for small players,” said Ajay Sahai, chief executive and director-general of the Federation of Indian Export Organisations (FIEO).

Pharmaceutical products made up 19% of India’s exports to Russia in the June quarter, followed by organic chemicals (13%) and capital goods (8%). As much as 86% of India’s imports from Russia comprised energy products.

From farm and food products to pharmaceuticals and FMCG products, firms in sanctions-hit Russia have evinced unusual interest in sourcing a broad range of items from India. But, as FE had reported on May 3, despatching goods to Russia by taking advantage of the opportunities is easier said than done.

The latest firm to show interest in scaling up its imports from India was X5 Group, Russia’s top food retailer. Earlier this fiscal, it wanted to source 8,000 tonne shrimp, 2 lakh kg of tea and coffee, about 2 million rice packets, 5 million pieces of detergent powder and liquid, 100,000 bottles of strong drinks (rum and whiskey), 120,000 wine bottles, and 80,000 pieces of textile products, among others, one of the sources said.

Similarly, in a communication to its members on April 7, state-backed pharma export body Pharmexcil has said the Indian embassy in Moscow has been approached by Russian firms. “While some of them required assistance in getting suppliers of some particular pharmaceuticals, others are interested in distributing them,” it said. The Russian companies that have shown interest include New Technologies, Pharmstandard, Pharmamed and Simkodent.