Govt acted swiftly, but more support needed to cushion war impact

Strait of Hormuz disruption strains India's trade, prompting swift policy action, but experts call for a targeted support package to ease logistics and cost pressures

Assurance of safe and free navigation for commercial vessels through the Straits of Hormuz has emerged as one of the central issues in the ongoing West Asia conflict. The peace talks at Islamabad on Saturday have failed. So, the disruptions in oil and gas supplies that have affected businesses and households across the world will continue. That is bad news for Indian importers and exporters.

 

Like most governments, our government did not anticipate the crisis. Yet, once the scale of the disruption became evident, it moved on several fronts to contain the damage. The commerce ministry restored the 50% cut in entitlements under the Remission of Duties and Taxes on Export Products (RoDTEP) scheme and extended the full entitlement for another six months. Export obligation periods under the duty exemption and export promotion capital goods schemes were extended till the end of August 2026. A time-bound support for “resilience and logistics intervention for export facilitation” (Relief) scheme was extended to exporters. Imports of 40 materials required as inputs by downstream industries have been allowed duty free. Units in Special Economic Zones have been allowed to sell goods in the domestic tariff area at reduced Customs duty. Additional Customs duty on aviation turbine fuel has also been reduced.

 

The government has taken other steps as well. Excise duties on petrol and diesel have been cut to soften the pass-through of higher global crude prices to Indian consumers and businesses. Export levy has been imposed on diesel and aviation turbine fuel to preserve domestic availability. Domestic LPG production from refineries has been stepped up and supply of LPG and PNG has been prioritised for essential sectors, so that household and institutional demand is met without disruption. Agencies involved in transportation, including ports and shipping lines, have been told not to raise charges unduly. Facilitation has been provided for clearance of goods reimported due to war-related disruption. A multi-disciplinary help desk has been set up for exporters facing logistics and shipping difficulties. Inter-ministerial meetings are held regularly to address the trade impact of ocean transport disruption, especially rising freight costs, shipping delays, shortage or non-availability of containers and port congestion.

 

Overall, the responses include tax relief, domestic fuel supply protection, export controls, shipping risk management, trade facilitation and inter-ministerial coordination. The government deserves appreciation for responding quickly to an unforeseen crisis. Yet, more can and should be done.

 

A temporary “trade disruption package” with automatic triggers would help. It may provide time-bound partial reimbursement of abnormal freight and war-risk insurance spikes beyond a threshold, interest subvention on import credit for select commodities, waiver of penal interest due to shipment delays attributable to the conflict, and easier restructuring of trade loans for otherwise standard accounts affected by the war. Better monitoring and quicker clearance of consignments held up due to documentary mismatch arising from rerouting, split consignments, transhipment charges and delayed vessel calls are also necessary. So are faster disbursal of GST refunds, duty drawback and duty credits, and close monitoring of opportunistic levies such as war surcharge, bunker adjustment factors, rerouting surcharge, excessive demurrage and higher billing for crisis-affected routes.

 

A timely, calibrated and temporary support package at this stage would protect export competitiveness, stabilise essential imports and prevent avoidable stress in the trade ecosystem that is already operating under considerable strain.

email: tncrajagopalan@gmail.com