India’s government told all major ports that the coronavirus fight is a valid reason to halt some port operations, leaving traders in disarray about the flow of goods in and out of the world’s seventh-biggest economy.
Ministry of Shipping advised ports they may consider the Covid-19 pandemic as grounds for invoking force majeure, a clause absolving companies from meeting their contractual commitments for reasons beyond their control, according to a letter Tuesday seen by Bloomberg. Several ports and terminals have done so already, while also saying they aim to maintain operations as the government deemed shipping an “essential service.”
Indian ports and terminals have started to declare force majeure after Prime Minister Narendra Modi locked down Asia’s third-biggest economy to curb the spread of coronavirus.
Commodity traders and shipbrokers said they were seeking to assess the impact of the measures and the possible next steps for deliveries into the country, which is a major importer of oil and coal. Companies declare force majeure — meaning “superior force” — when they’re unable to meet contractual obligations because of circumstances beyond their control.
The move follows Prime Minister Narendra Modi’s three-week lockdown on India’s 1.3 billion people, the most far-reaching measure by any government amid the pandemic. The declarations set off a wave of confusion, with traders and shipbrokers trying to assess whether the measures would halt operations at ports, which include some of the country’s biggest handlers of oil, liquefied natural gas and shipping containers.
‘Doing Our Best’
“It doesn’t mean our operations are going to stop. All it does is free us from the commercial liabilities that arise out of disruptions caused by the coronavirus,” said P.L. Haranadh, deputy chairman at Visakhapatnam Port Trust, a government-owned port. “Operations have slowed because several staff may be reluctant to come to work fearing health issues. With limited resources, we’re doing our best to ensure that supplies of essential commodities, such as coal, crude oil and containers are maintained.”
Similar restrictions have been announced at ports including Haldia, Vizag, Gangavaram, Paradip, Krishnapatnam, Kakinada, New Mangalore, Goa, Dharma and Gopalpur, according to commodities researcher ICIS.
India’s lockdown is constraining the movement of people and materials to and from the country’s ports, the group said in a letter to shippers that was seen by Bloomberg. The group declared the force majeure, saying it won’t be responsible for any charges related to vessel delays, though it also said it would try to continue operating its ports.
Most Indian ports are continuing to work with minimal workforce, a person with knowledge of the matter said, adding that only labor-intensive work is facing delays. Oil operations aren’t affected, according to two shipping company officials. R. Ramachandran, refinery director at Bharat Petroleum Corp. said the company does not foresee any problems importing and exporting petroleum products or berthing ships except for few protocols that have to be followed. LNG imports into the country have yet to be affected either, according to traders.
Still, shipping data is signaling that ports may already be backed up. The number of vessels anchored at sea off India has risen 22% to 78 from a week earlier, according to tracking data compiled by Bloomberg. Chemical and oil product tankers accounted for most of that increase.