FIEO Calls for RBI Liquidity Support Amid Rising Freight Costs Due to West Asia Conflict
FIEO urges RBI to provide liquidity support amid West Asia conflict
Business Standard
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The Federation of Indian Export Organisations (FIEO) has requested the Reserve Bank of India (RBI) to provide liquidity support for exporters facing increased freight costs due to the ongoing conflict in West Asia. Freight rates have surged by 300-400%, causing delays in shipments and elongating payment cycles, impacting exporters' working capital.
- 01FIEO urges RBI for liquidity support as freight costs rise sharply due to West Asia conflict.
- 02Freight rates to some Middle Eastern countries have surged by 300-400%.
- 03Export payment cycles have extended from 30-60 days to 90-120 days.
- 04RBI has extended export credit timelines and support measures for exporters.
- 05India's export sector remains resilient despite geopolitical tensions.
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The Federation of Indian Export Organisations (FIEO) has urged the Reserve Bank of India (RBI) to provide liquidity support to exporters as freight costs have sharply increased due to the ongoing conflict in West Asia, which has persisted for nearly two months. Ajay Sahai, the director general and CEO of FIEO, reported that freight rates to some Middle Eastern countries have surged by 300-400%, significantly impacting air shipments and causing delays in the supply chain. Previously, shipments to the U.S. took about 50 days; this has now extended to 90 days, while payment cycles have elongated from 30-60 days to 90-120 days. The RBI has previously extended key trade relief measures, allowing exporters to benefit from an extended timeline for the realization and repatriation of export proceeds, now set at 15 months. Additionally, the enhanced export credit period has been extended to 450 days for disbursals until June 30, 2026. Despite the challenges posed by the conflict, India's export sector has shown resilience, with growth anticipated to reach 7% this year. However, rising geopolitical tensions and logistical challenges, such as rerouting shipping lines, continue to pose risks to trade and economic stability.
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The liquidity support from RBI could help exporters manage increased operational costs and cash flow challenges, ensuring they can continue to operate effectively amidst rising freight costs.
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