Agri Business

Indian seafood industry fears further setback on freight hike, US retaliatory tariff

V Sajeev Kumar Kochi | Updated on May 03, 2021

India’s largest market of aquaculture shrimps is the US, accounting for about 50% of the country’s total production

Already beset with problems on the production and export fronts, the Indian seafood sector fears further setback due to the proposed retaliatory tariff by the US and impending freight rate hike.

US trade authorities are planning retaliatory tariffs against the imposition of two per cent tax by India on revenue generated by digital services offered in India.

One of the items mentioned is frozen shrimps. India’s largest market of aquaculture shrimps is the US, accounting for about 50 per cent of the country’s total production to the tune of $ 2.5 billion annually. The shrimp export sector, employing nearly 10 million people, mainly shrimp farmers, will get seriously affected, and requires urgent consideration from the government, a note prepared by Seafood Exporters Association of India said.

Freight rates have been progressively increased for reefer containers to the US from $3,500 in March 2020 to around $6,500 now. The note said the seafood industry has now been informed by Maersk lines that effective May 1, the rate will be $12,500. Following Maersk, the largest shipping line in the world, other shipping companies may follow suit. The same proportionate increase is the situation for other destinations in the world.

Effectively for the US, this works to a per kilogram freight cost increase from ₹16 to ₹60. There is absolutely no way of absorbing this in the selling prices, as the seafood market is almost buyer driven and not a sellers’ market.

The marine product exports sector after registering record growths year after year for the last 10 years (from a level of ₹8,000 crore in 2009-10 to ₹47,000 crore in 2019-20), has gone through its worst year in 2020-21 with a drop of a drop of 20 per cent in turnover, and volumes, said Alex K. Ninan, president of Seafood Exporters Association of India-Kerala Region.

The marine product export sector, which was most healthy just at the beginning of last year, had sure plans of ₹1,00,000 crore by 2025. All this looks very bleak and distant now. The sector is facing problems on all fronts of fiscal support, various major markets being disturbed or blocked, serious primary production source issues both in capture and culture fisheries, serious hike in freight and other costs, and erosion of net worth of many companies and the related finance support not coming from the banking sector, he said.

Business with China, which constitutes about 25 per cent of the total marine product exports from India, has been totally disturbed. The border issues have had an effect on normal flow of business.

The association has urged the Prime Minister Narendra Modi to include the issues on stringent measures on antibiotic residues in shrimp consignments which have been lower in the last few years than several other countries, in his trade talks at the India-EU Summit shortly.

The problem of the delay in release of MEIS from April to August 2020 amounting to ₹1,000 crore has been compounded by the fixation of a cap of ₹2 crore per exporter on the MEIS accruals at 5 per cent of FOB, for the period September to December 2020. The sector appealed for immediate introduction of Remission of Duties and Taxes on Exported Products (RODTEP) RODTEP Scheme in the place of MEIS.

Published on May 03, 2021

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