Exporters to Russia seek Centre, RBI's help to clear stuck payments

Tea, steel, chemical and pharmaceutical exporters to Russia are seeking intervention by the government and the Reserve Bank of India (RBI) as millions of dollars in payments are stuck because of sanctions imposed by the West that isolated Russian banks from the global financial system, said people with knowledge of the matter.

The disruption to Indian companies' cash flows could have a ripple effect with them delaying payments to workers and suppliers and possibly missing payments to lenders, they said.

Russian entities have been excluded from the global Society for Worldwide Interbank Financial Telecommunication or SWIFT platform as part of the sanctions.


Many tea exporters from south India haven't received payments from Russian buyers.

"The rupee payment has come but the dollar payment has not yet come," said South India Tea Exporters Association chairman Dipak Shah. "We are clueless (about) when the exporters will get their payments."

Queries Sent to Russian Banks
"We are writing to the Reserve Bank of India to intervene so that the estates do not face any operational difficulties," he said.

India is the largest exporter of tea to Russia, amounting to 43-45 million kg annually. Of this, 20-25 million kg is exported from estates in south India.

Companies have sent queries to Russian banks with presence in India which opened letters of credit (LCs), an instrument issued against export consignments, on behalf of Russian importers.

"Those LCs are facing technical difficulties as transfer of consignment documents is stuck, leading to payment uncertainties for exporters," said a banker involved in the process.

Some steel manufacturers are also planning to write to the central bank on payments being stuck.

Pharma companies are also taking up the issue with New Delhi. "They are either checking with importers' lenders or raising the issue of faltering payments with New Delhi," said a banker. Pharma companies generally use airlines to send their export consignments instead of ships to Russia.

In 10 months of FY22, India's exports to Russia totalled $2.85 billion against $7.90 billion of imports, according to Bank of Baroda Economic Research data.

Large Russian banks with a presence in India include VTB, Sberbank and Gazprombank. Russia's state-owned development bank VEB is also engaged in such trades.

VEB and the RBI have likely finalised an alternative transaction platform to facilitate bilateral trade after Western sanctions firewalled Moscow's access to SWIFT, ET reported on March 30.

"It is not only tea which is facing the pain of delayed payments," said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO). "Engineering, chemicals, plastics too are suffering as their payments have got stuck."

Russia's invasion of Ukraine has sent freight rates surging again and worsened container shortage.

"We have asked the government to provide some kind of trade subsidy to MSMEs," said Sahai.

The ripple effect of the sanctions will especially hit low-value, high-volume cargo, impacting several Indian exporters, according to FIEO.

Exporters need more working capital and banks should step up to provide this, according to companies. The government could also consider higher interest subvention for all types of exports, said Indian Tea Association secretary Sujit Patra.