Trade In The Line Of Fire

Corporate Update

Trade In The Line Of Fire

As tensions escalate around the Strait of Hormuz, global attention is rapidly shifting to another critical chokepoint - the Bab al-Mandeb. Following failed talks with Iran in Pakistan, Donald Trump has signalled a potential blockade of Hormuz, with Iran warning of retaliation at Bab al-Mandeb. With nearly 12% of global oil flows moving through this narrow corridor, the risks are immediate and systemic - threatening supply chains, trade stability and global economic momentum.

With no clear end to the conflict in sight, the Government of India is moving swiftly to cushion the impact, rolling out targeted policy measures to support trade and industry while containing rising inflationary pressures.

MMF Gets Strategic Shield

In a timely intervention to cushion industry from global disruptions, the Government of India has announced full customs duty exemption on select petrochemical inputs critical to polyester and man-made fibre (MMF) textiles. The move, effective until June 30, 2026, comes against the backdrop of ongoing conflict in West Asia, which has strained global supply chains and pushed up input costs.

The relief targets key raw materials that form the backbone of India’s synthetic textile value chain. Among the most significant are Purified Terephthalic Acid (PTA) and Monoethylene Glycol (MEG), the two primary building blocks for polyester fibre and yarn production. The exemption also covers Polyethylene Terephthalate (PET) chips, widely used in fibre manufacturing, and Polybutylene Terephthalate (PBT), a specialised engineering polymer with textile applications.

In addition, intermediates such as methanol and acetic acid have been included, alongside polymers like polypropylene and polyurethanes.

By removing customs duty on these inputs, the government aims to stabilise raw material availability and ease cost pressures across the MMF textile ecosystem.

The move is expected to support manufacturers by improving margins and ensuring continuity in production, especially at a time when global demand remains uneven. It also strengthens the competitiveness of Indian MMF textiles in export markets, where cost efficiency is a key differentiator.

Export Backlog Crushed

In a sharp administrative push, the Directorate General of Foreign Trade has delivered a breakthrough in clearing long-pending export compliance cases, dramatically accelerating the issuance of Export Obligation Discharge Certificates (EODCs). The time-bound special drive, conducted from March 1 to March 31, 2026, has significantly eased pressure on exporters and strengthened India’s trade facilitation framework.

EODCs are critical for closing export obligations under schemes like Advance Authorisation (AA) and Export Promotion Capital Goods (EPCG). They enable the release of bank guarantees and bonds, while reducing compliance burdens. The latest campaign has turned this traditionally slow process into a high-speed clearance mechanism.

The results are striking. EODC approvals surged 242% month-on-month under the AA scheme and 234% under EPCG. A total of 12,690 certificates were issued in March alone, compared to just 3,747 in February - a 3.39x jump. This single-month performance stands out against 44,018 approvals recorded over the previous eleven months combined.

Backlog reduction has been equally aggressive. The campaign cleared 59% of pending AA cases and 54% under EPCG. Processing efficiency reached near saturation levels, with 97% of AA cases and 98% of EPCG cases handled during the month.

Most notably, in-progress cases plunged 74%, dropping from 15,360 at the start of March to just 3,966 by April 1, despite 6,740 new cases being added during the period.

With momentum firmly established, the government has extended the drive until May 31, 2026.

Ports Back On Track

India has moved swiftly to contain the fallout from disruptions in the Strait of Hormuz, with nearly 90% of backlog cargo cleared across major ports following urgent government intervention. The crisis, triggered by geopolitical tensions in West Asia, had slowed vessel movement and strained port operations. But a coordinated response has helped restore stability with minimal trade disruption.

Union Minister of Ports, Shipping and Waterways Sarbananda Sonowal, who chaired a high-level review meeting, credited continuous monitoring and rapid decision-making for the turnaround. He emphasised that proactive measures ensured cargo flows were normalised quickly, preventing a deeper logistics bottleneck at a critical time for trade.

Key ports, including Jawaharlal Nehru Port, Deendayal Port Authority, New Mangalore Port Authority and Mumbai Port, have largely cleared stranded cargo. Officials attributed this to a combination of operational innovations, better yard utilisation and tighter coordination across logistics chains.

Beyond restoring operations, the government has turned its focus to easing financial stress on trade stakeholders. Sonowal directed port authorities to ensure immediate implementation of relief measures, including waivers on ground rent and concessions on reefer charges. The emphasis is clear: support exporters, importers and logistics players without delays or procedural hurdles.

In a sharp warning, the minister also cautioned against profiteering during the crisis. He instructed the Directorate General of Shipping to enforce transparency in shipping charges, stressing that extraordinary situations must not be exploited at the cost of industry.

Grievance redressal systems are also being strengthened to ensure faster resolution of stakeholder concerns. The government has reiterated its commitment to maintaining readiness as the global situation evolves, signalling a hands-on approach to safeguarding India’s trade flows.

The message is unambiguous: even amid global disruption, India’s ports will not be allowed to stall.

SEZ Duty Reset

In a decisive move to revive manufacturing momentum, the Government has notified conditional concessional customs duty on goods cleared from Special Economic Zones (SEZs) to the Domestic Tariff Area (DTA). The measure targets idle capacity, aiming to unlock scale, cut costs and strengthen resilience amid ongoing global trade disruptions.

The policy is expected to benefit nearly 1,200 SEZ manufacturing units, allowing them to sell part of their output domestically at reduced duty rates. However, the window is tightly calibrated. Eligible units can clear goods into the DTA up to 30% of their highest annual Free on Board (FOB) export value recorded in any of the last three financial years. To prevent misuse, export-linked benefits such as duty drawback on inputs will not be allowed on these supplies.

Strict value addition norms have been built in. Units must ensure a minimum 20% value addition within the SEZ, calculated through a defined formula based on input costs and assessable value. Compliance will be monitored through certification by Development Commissioners, backed by mandatory declarations and audit provisions under SEZ Rules, 2006.

The concessional framework spans a wide manufacturing base, including textiles, chemicals, plastics, metals, machinery and transport equipment. However, sensitive sectors such as agriculture, gems and jewellery, petroleum, vehicles and toys remain excluded.

Effective from April 1, 2026 to March 31, 2027, the move directly addresses a long-standing disadvantage. Under Section 30 of the Special Economic Zones Act, 2005, DTA sales were treated as imports, making SEZ products less competitive in the domestic market.

This reset changes the equation - freeing capacity, improving price competitiveness and giving SEZ manufacturers a critical buffer in an uncertain global trade environment.

War Credit Backstop

India is preparing a major financial backstop to protect businesses hit by the escalating Iran war, signalling a decisive policy response to external shocks. The government plans to roll out sovereign credit guarantees covering loans worth US$ 26.7 billion, aimed primarily at small and vulnerable enterprises facing supply disruptions and rising costs.

Sectors such as textiles and glass are already under strain, with supply chains from the Middle East disrupted by the ongoing US-Israel-Iran conflict. For India, the world’s third-largest oil importer, the risks extend further - fuel inflation, input cost spikes and slowing growth.

Under the proposed framework, the government will offer up to 90% guarantee on loans of up to ₹100 crore, significantly reducing risk for lenders and ensuring credit continues to flow. The scheme, expected to run for four years, could cost the exchequer ₹17,000–18,000 crore.

The model mirrors the emergency credit guarantee programme deployed during the COVID-19 crisis, which helped businesses stay afloat amid economic shutdowns. The objective now is similar: prevent a liquidity squeeze from turning into a solvency crisis.

This is a pre-emptive strike. By stepping in early, India aims to stabilise industry, protect jobs and maintain production continuity. In a volatile geopolitical environment, credit access is becoming as critical as supply chains - and New Delhi is moving quickly to secure both.

Following failed talks with Iran in Pakistan, Donald Trump has signalled a potential blockade of Hormuz, with Iran warning of retaliation at Bab al-Mandeb. With nearly 12% of global oil flows moving through this narrow corridor, the risks are immediate and systemic - threatening supply chains, trade stability and global economic momentum. With no clear end to the conflict in sight, the Government of India is moving swiftly to cushion the impact, rolling out targeted policy measures to support trade and industry while containing rising inflationary pressures.

Previous News