A sustained rise in input and logistics costs, triggered by the West Asia crisis, is squeezing Indian exporters, with firms across sectors finding it increasingly difficult to pass on higher prices to global buyers. From engineering goods to garments, exporters say overseas customers remain highly price-sensitive, prompting companies to absorb the shock through cost-cutting, product tweaks and a sharper focus on the domestic market.
“Due to the surge in prices of industrial diesel, furnace oil and plastics, along with higher freight costs, input costs are up 10-15%. We have orders for the next three months, but costs have risen since those orders were placed. Customers are not always willing to accept higher prices,” said Sanjoo Tandon, vice-president (international business) at Eastman, an exporter of forging, machining and casting parts.
The pressure has intensified in recent weeks amid LPG shortages and soaring freight rates. Sameer Ralhan, owner of Punjab-based hand tools maker Sri Tools Industries, pointed to a fresh spike in March. “Input costs rose 4-5% in March alone, driven by higher prices of paper, cartons and rubber. Logistics costs can only be adjusted if demand and supply are aligned,” he said.
To cope, exporters are increasingly diverting part of their production to the domestic market, where some cost increases can be passed on. However, they caution that operational efficiency is also taking a hit.
“Higher input costs can be partly passed on domestically, but not in export markets, where buyers are extremely price-conscious and expect better pricing every year. At the same time, efficiency is being impacted due to scarcity of industrial gas and increased reliance on diesel,” said Gaurav Munjal, managing director of Hero Ecotech.
Others are making subtle changes to product design to protect margins. Eveline, a textile manufacturer supplying to global brands such as Van Heusen and Guess, said reducing value-added elements is emerging as a key strategy. “We cannot raise prices in export markets, so we are cutting down on embroidery and other handwork to offset higher costs. This helps absorb some of the pressure,” the company said.
Industry bodies warn that the stress is likely to persist in the near term. Federation of Indian Export Organisations (FIEO) president S C Ralhan said it may take a few months for exporters to absorb the cost increases. “Sectors already hit by US tariffs and heavily dependent on that market will see recovery only after the proposed India-US BTA comes into effect,” he said.