Fruits, vegetables’ exports may face turbulence as air freight to Europe hiked
Bengaluru, Kochi, April 7
The latest hike in airfreight rates to some destinations such as Europe is set to add to the cost challenges of the exporters of perishables like fruits and vegetables.
Trade sources said the airfreight rates have increased by up to 50 per cent over the past few days to around ₹300 per kg to European destinations on rise in crude oil prices following the the Russia-Ukraine conflict.
Insignificant in short-term
Gurmukh Roopra, CEO of Namdhari Group – the largest exporter of baby corn and vegetables to Europe-, said in the short term, the impact of the freight hike may not be significant as the costs will be passed on to the consumer or the supermarkets. However, the challenge is that if the increase sustains for a period of time, there might be a strategic shift as consumers may look at other origins. For crops that India has a competitive advantage, it is not easy to shift, he said.
Namdhari Group exports about 200 tonnes of baby corn, vegetables like bell peppers, chilli, okra and fruits such as watermelon, mangoes and grapes among others.
Though the air and sea freight rates had gone up during the pandemic, there has been no dip in export volumes. “In fact, we have seen an increase in demand because of challenges in other parts of the world and we have been able to maintain supply due to the backward integration,” Roopra said.
Rise in global demand
Despite increase in freight costs due to supply chain disruption over the past several quarters, Indian exports of food products have witnessed an increase on rising global demand.
As per the latest official data available for the April-February period of 2021-22 fiscal, fruit and vegetable exports grew around 16 per cent to $1.415 billion (₹10,525 crore) compared with $1.223 billion in the same period a year ago. Fresh fruit exports stood at 9.87 lakh tonnes valued at $702 million, an increase of 21 per cent, while fresh vegetable shipments were 2.10 million tonnes, valued at $713 million, up 11 per cent over the corresponding period.
Kerala shippers unaware
Exporters from Kerala to Gulf countries said they are not aware of any proposal to hike air freight tariff for export cargo, but see a looming threat of a rate increase. Kerala normally exports around 150 tonnes of fruits and vegetables on a daily basis to Gulf countries, mainly from three airports in the State. However, this figure has come down in the recent period due to subdued demand in the Gulf markets after Covid, which reduced the purchasing capacity of people. This has reflected in the overall sales.
Dil Koshy, Secretary, Agriculture Products & Processed Food Exporters Association (APPEXA), Kerala, said the ever-increasing rates by airlines have forced many exporters in the State to shift a portion of their consignment by sea mode to Gulf countries much before the outbreak of Covid. Though it started in a limited way a few years back from Cochin and Tuticorin ports, the movement is still continuing.
Sea route too preferred
“Today overseas buyers are not concerned whether their consignment is lifted by air or sea. They need cargo in good quality and at affordable rates. So long as sea shipments are affordable, overseas buyers would also prefer the sea route. End consumers are more rational now and demand better quality products which can be moved by ships”, Koshy said. With technological advancements, he said perishable commodities can be delivered to buyers in reefer containers within three to five days of voyage. The fragile nature of commodities cannot be seen in vegetables and fruits.
PE Ashraf Ali of Pomona Exports in Kozhikode said the Gulf sector has not yet increased the freight rates, but airlines are still charging air bubble freight charge at ₹100 per kg, despite normal flights commencing operations. However, the trade here foresees a threat of hiking the charge at any time.
Kerala’s fruits and vegetable exports focus mainly on Gulf countries and shipments to Europe are very minimal. “We are keeping our fingers crossed especially when there is a declining demand for fruits and vegetables in West Asian markets. This is evident in the daily shipments from the State which witnessed a considerable reduction”, he said.
April 07, 2022