Govt has set up inter-ministerial group to monitor West Asia crisis: Goyal

Exporters have expressed apprehensions that escalating tensions in the West Asian region due to joint attacks by the US and Israel on Iran may impact India's trade

The government has set up an inter-ministerial group to monitor developments in West Asia on a daily basis and assess potential vulnerabilities in shipping, logistics, exports and critical imports, Commerce and Industry Minister Piyush Goyal said on Tuesday.

Exporters have expressed apprehensions that escalating tensions in the West Asian region following a joint attack by the US and Israel on Iran could disrupt shipping routes, push transportation costs and insurance premiums.

"We have set up an inter-ministerial group that meets on a daily basis and is closely monitoring the developments in West Asia to assess any vulnerabilities -- in our shipping, in our logistics, in our export or even critical imports and we will coordinate with inter-ministerial actions," Goyal said while addressing a post-Budget webinar.

During the first meeting of the group on Tuesday, he said different ministries have suggested certain things.

"We shall work on those and we continue to look for your valued suggestions in the ministry of commerce so that we can ensure the minimal impact of the West Asia crisis," he added.

In a social media post, the minister said the meeting was held with all stakeholder ministries, key logistics and trade facilitation partners to review the emerging geopolitical situation and its potential impact on India's exports and imports.

"The Modi government's readiness to facilitate trade operations was reiterated through measures such as procedural flexibility in export-related authorisations; coordination with customs and port authorities to ensure smooth clearance; and engagement with financial and insurance institutions to safeguard exporter interests," he said.

In this context, he said the 'inter-ministerial group (IMG) for supply chain resilience' has been created, comprising members from Department of Financial Services, Ministry of External Affairs, Ministry of Shipping, Ports and Waterways, Ministry of Petroleum and Natural Gas and Central Board of Indirect Taxes & Customs, to facilitate effective coordination, monitoring and follow-up.

The government, he said, remains firmly committed to enabling a stable and responsive trade environment for our traders and exporters, safeguarding their interests and ensuring seamless operations.

A 24x7 help desk has also been set up at the Directorate General of Foreign Trade (DGFT) for exporters and importers.

Commenting on the tensions in the West Asian region, Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said the situation is uncertain at the moment.

He said shipping lines have imposed a surcharge or contingency charge in the range of USD 1,000-4,000.

"This will push transportation charges. Sadly these charges have also been imposed on consignments that have already left the ports," Sahai said, adding that shipping lines are not getting insurance cover if they are passing through the Red Sea.

Exporters are apprehensive that extension of the conflict in other parts of the Arab world may have an impact on movement of goods through Bab-el-Mandeb, Red Sea, and Suez Canal.

The Bab-el-Mandeb Strait is a crucial shipping route for traders connecting the Red Sea and the Mediterranean Sea to the Indian Ocean.

The route starts from major Indian ports like Mumbai, JNPT, or Chennai, heads westward through the Arabian Sea, enters the Red Sea, and navigates through the Suez Canal into the Mediterranean Sea. From there, ships can reach various European ports, depending on their destinations.

If disruptions occur on this route, shipping lines may divert vessels via the Cape of Good Hope, circumnavigating Africa, which could add an estimated 15-20 days to transit times for shipments to Europe and the US.

Any disruptions in logistics would push costs related to shipping, containers, demurrage and insurance. It will in turn make goods uncompetitive. Re-routing of goods will also delay shipments.