$1-bn Indian exports may go up in smoke due to Ash clouds

It was yet another hard day at work for Delhi-based silk exporter Subhash Mittal under the scorching sun, when he heard a volcano had erupted somewhere in the icy peaks of Iceland. Little did he know that the spewing mount would affect him as well.

Like Mittal, thousands of businessmen worldwide have suffered following cancellation of flights as the the volcanic ash clouds continued to spread across the the European skies.

Exporters are increasingly becoming jittery of making huge losses and apprehend large-scale cancellation of orders and delay in payments. High-end merchandise exports from India worth $1 billion are likely to be affected due to the air travel crisis, said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO).

“Exports worth $10 billion are shipped annually by air via European air routes. For EU, consignments worth $1 billion is exported monthly. This is likely to be hit but it is yet to be evaluated. The problem would aggravate if the crisis is prolonged,” he told Business Standard.

While bulk orders for cheaper products are shipped, high-end luxury items and perishable products are sent by the air route from India. Exporters, particularly, those dealing with new clients are more at risk of losing their business, rejection of shipment and cancellation of order bookings, Sahai added.

According to industry estimates, exporters are incurring a daily loss of around Rs. 20 crore. In Maharashtra, exporters have stopped buying fresh vegetables and fruits from farmers because they expect air services to resume after April 23.

“All consignments are stranded. Even though it is too early to say what the impact would be like, it should not be much. But if the problem continues, then the loss would be substantial. However I think there would be no crisis as such,” said Mehul Choksi , chairman and managing director, Geetanjali Group.

Airspace over Ireland, Germany, Netherlands and Spain was closed by ash cloud till late Monday afternoon while airports like Heathrow, Brussels, Frankfurt, Charles De Gaulle and Schipol remained virtually shut.

Industry sources said nearly 225 tonnes of vegetables and fruits are exported to Europe and the Gulf, out of which 150 tonnes are sent from Maharashtra and the rest from Kerala, Andhra Pradesh and Karnataka.

Some of the airlines that have decided on routing their flights through Athens and South Africa, are demanding exorbitant freight charges. “Freight costs have almost doubled due to this. Consignments are stranded leading to massive delay in delivery. While buyers understand the problem, the risk of losing the client remains. If this continues for long, we are going to incur heavy losses,” said Mittal, who is also chairman of the Indian Silk Promotion Export Promotion Council.

A total of 313 airports have been paralysed, with more than 63,000 cancellations of flights since April 15, leading to a complete standstill of intra-European mobility by air, stated an official statement by the Airports Council International (ACI) Europe.

“Indian vegetables and fruits are in large demand in Europe and the Gulf. Although exports to Europe have come to a halt since the last eight days, the Gulf has given a much needed relief to exporters. However, the large amount exported to Europe either remains unsold or is being sold in the retail markets in India.Besides, exporters will have to pay a penalty of Rs 2 to 2.50 lakh per week for not meeting the export commitments to European buyers,” said Kaushal Prakash Khakhar, CEO of Kaybee Exports.

Source : Business Standard. 20/04/10

 

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