The Russia-Ukraine feud has plunged Indian commodity exports to the region into disarray, with port disruptions and payment delays hitting shipments.
Russia is a major export destination for various products from India. Indian exports to Russia came to over $2.5 billion out of a total bilateral trade of $8.1 billion in 2020-21. Ukraine is also a growing market for Indian exports, albeit on a smaller scale.
The movement of food products such as tea, seafood and coffee, which are among the important items exported from India to Russia, has been impacted by the conflict between the two European nations.
Exporters are expecting the government to take steps to redeem the situation as there are goods in transit that have been stuck midway. The recent announcement by major shipping lines Maersk and MSC to suspend operations to Russia may force exporters to stop sending consignments to the country till the tussle is resolved.
Russia is the largest importer of Indian tea, accounting for 17-18 percent of the total volume of the beverage exported from the country. "The rouble has fallen to 100-110 a dollar from 74-75. Russians may not want to buy at this rate,’’ said Anshuman Kanoria, Chairman of the Indian Tea Exporters Association.
He also expressed concern over the revision of policy by the Export Credit Guarantee Corporation putting Russia under the restricted cover category. "The export to Russia will depend on the length of the war, sanctions from the West and the Indian government’s stand on the issue.’’
The conflict has broken out at a time when tea exports are yet to recover from the blow dealt by Covid-19. Indian tea exports have fallen below 200 million kgs after a long time. Tea exports in 2021 stood at 195.50 million kgs, per Tea Board data, about 7 percent below the low of 209.72 million kgs in 2020. In the pre-Covid years, exports hovered around the 250 million kg mark.
Seafood stuck
As for seafood, exporters are in danger of losing a market that was developed over the last few years. The industry expects exports to be worth $180 million in FY22 against $150 million in the previous year. But according to industry sources, the situation does not look promising, with around Rs 500 crore worth of seafood stuck in transit.
"Russia buys a lot of shrimp as well as cephalopods such as squid, cuttlefish and octopus from India. A lot of consignments are in transit. Access to St Petersburg, the main port in Russia, seems to be blocked. We are not sure whether the Black Sea ports are open,’’ said Anwar Hashim, MD of Abad Fisheries.
In recent years the Indian seafood sector has penetrated the market in Russia as well in neighbouring countries such as Ukraine, Belarus, Kazakhstan and Moldova, through the efforts of the Marine Products Export Development Authority and exporters. Ukraine currently imports $10 million worth of seafood from India.
Shipping woes
Shippers, too, are anticipating payment problems. "The move by the western nations to block Russian banks’ access to the Swift international payment system may cause payment delays. Earlier the trade was in roubles but now it is entirely in dollars,’’ Hashim said.
Russia is the fourth-largest buyer of coffee from India after Italy, Germany and Belgium. In 2021, the country bought 11,241 tonnes, about 5 percent of the total coffee exports from the country. Ukraine is the tenth biggest buyer of Indian coffee.
Russia’s purchases from India are mostly confined to instant coffee. It used to buy raw coffee from India earlier but has now shifted to other cheaper origins. "Russia accounts for 20 percent of our total exports,’’ said Challa Shrishant, MD of CCL Products, the biggest exporter of instant coffee from India. "We are assessing the impact of the war as some of our consignments are on the way. We also need clarity as to where we should transport the consignment, for which we have received payment."
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