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Impact of Sri Lankan economic crisis on Logistics and India

Sri Lanka's economic crisis has had a cascading effect on its maritime activity, especially that of the Colombo port, a key transshipment hub of the Southeast Asia region. Trade operations had slowed in Sri Lanka since February, owing to a massive forex crunch followed by fuel scarcity.

In the last few weeks, there had been a shift in cargo moving to Indian ports located in south and west India, mainly Cochin, Thoothukudi, Chennai, Mundra, and Pipavav. This cargo has added to the congestion in Sri Lanka, and more are expected to shift to Vallarpadam International Container Transhipment Terminal and ports in Tamil Nadu.

Truckload service issues owing to gasoline stockouts in Sri Lanka had led to vehicle shortages, with Colombo terminals facing container backlogs. This had led to ships diverting to Indian ports, but industry sources say the number is still less.

Several international shipping lines have begun skipping Colombo Port due to the current economic crisis and communicated the same to their customers. Maersk Line is diverting export shipments out of India's east coast to JNPT/Nhava Sheva with the help of dedicated block trains.

 India also depends on Colombo port in terms of global trade as 60 percent of India's transshipment is handled by the port. Earlier this February, Sri Lanka's forex crunch had hit Indian shippers, and there was also the issue of export cargo lying uncleared at Colombo port.

Challenges for India due to the Sri Lankan Crisis

India considerably relies on the Port of Colombo for global trade, given its status as a transshipment hub. The port handles 60 percent of India's transshipment cargo. India-linked cargo, in turn, accounts for 70 percent of the port's total transshipment volume.

However, thousands of containers sent from India to Sri Lanka, including for its consumption and transshipment cargo, have been lying uncleared at the port as authorities cannot afford to transfer containers between terminals. This has led to some build-up of cargo intended for Sri Lanka at Indian ports. Any disruption in operations at the Port of Colombo makes India vulnerable to increased costs and congestion issues. With so many challenges, there also is equal opportunities with India trying to scale up the southern ports as transshipment hubs to ease out the congestions happening at Colombo due to the crisis.

Contributor: Newton Vaz

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