Govt to hold talks with exporters as Iran-Israel conflict stalls shipments, drives up costs

Mint

8 hours ago

New Delhi: As the armed conflict between Iran and Israel threatens to disrupt trade routes across West Asia, the government will talk to exporters to assess the impact and chart a response, three officials aware of the development told Mint.
The discussions will be aimed at safeguarding India's exports to the United Arab Emirates, Saudi Arabia, Qatar, Oman, Iran, Iraq, Kuwait, and Israel, along with major European markets, the officials said on the condition of anonymity.
The conflict has escalated concerns over the safety of cargo passing through the Strait of Hormuz and the Red Sea, a critical maritime corridor for Indian exports. Shipping delays, rising freight charges, and limited insurance coverage are already being flagged by exporters and trade bodies, they said.
Also read: Mint Explainer: How the Israel-Iran conflict can crash India's growth party
'As the situation has escalated only recently, we are closely monitoring developments and will engage with exporters and relevant industry groups to formulate a strategy that minimises the disruption to trade," said one of the three officials cited above. 'The discussion will be centred around finding a way out of the crisis and ensuring that trade flows are preserved to the extent possible."
Export promotion councils, including those representing engineering goods, basmati rice, textiles, and pharmaceuticals, have raised an alarm.
'The geopolitical tensions will have a major impact on India's export-oriented trade to Europe and West Asia, as the Red Sea is a key route," said Arun Kumar Garodia, former chairman of the Engineering Export Promotion Council (EEPC).
'The conflict will force shipments to take alternate, longer routes via the Cape of Good Hope (South Africa), adding to the cost burden on traders and importers," he said. 'This disruption is likely to affect India's overall trade performance, which may be reflected in the coming months' export data."
Queries emailed to the commerce ministry remained unanswered till press time.
Also read: Mint Explainer | Strait of Hormuz: Will Iran shut the vital oil artery of the world?
For trade promotion bodies, the key concern is the 50% rise in shipment costs just days after the escalation began, and these are anticipated to increase even more after 1 July, the second official quoted earlier said.
Basmati exporters have raised concerns over growing uncertainty in the Iranian market, one of India's top destinations for the commodity. With consignments lying at Indian ports and many shipments in transit, exporters fear that any delay could cost them the critical mid-June to mid-July delivery window, before Iran begins harvesting its domestic rice crop.
'Iran typically imposes a seasonal import ban by mid-July to protect local farmers. If tensions persist, we could miss the shipment window entirely," said Satish Goel, president of the All India Rice Exporters Association (AIREA).
India's rice exports to Iran rose to $757.30 million in FY25 from $689.80 million a year earlier, accounting for nearly 76% of India's total agricultural shipments to the country. Iran alone buys around one million tonnes of Indian basmati rice annually, or about 12% of India's total basmati exports, which stood at $5.94 billion in FY25.
'We are in a Catch-22 situation. With tensions escalating, many exporters have put their shipments on hold, even though consignments are already lying at the ports," Goel said. 'If the situation doesn't stabilise soon, exporters could end up bearing heavy losses."
According to exporters, some ships in transit may be forced to turn back if the conflict drags on, while insurance remains another sticking point.
Also read: India in anti-dumping crosshairs: US, Pakistan target Indian exports at WTO
'The major concern flagged by trade bodies is that many of these consignments may not be insured, as insurance companies typically refuse coverage for shipments headed to war or conflict zones," said the third official.
Several other Gulf nations and nearby economies may face trade disruptions if shipping lanes become inaccessible or unsafe.
The UAE, one of India's largest trading partners, could face delays in receiving food items, textiles and engineering goods. Saudi Arabia, Oman, Qatar, Iraq, and Kuwait are similarly vulnerable due to their dependence on maritime imports, the official said.
'The ongoing Iran-Israel conflict is expected to significantly impact India's trade with Europe, given that much of the cargo to the continent transits through the Red Sea and the Suez Canal," said S. Ramakrishna, former chairman and now advisor of the Federation of Freight Forwarders' Associations in India (FFFAI).
India's exports to Europe stayed almost unchanged over the previous year at $98.34 billion in FY25, according to official trade data.
Israel, which imports high-value Indian goods like pharmaceuticals and machinery, may also experience setbacks in port operations and air cargo services if the situation escalates.