Shipping costs are rising again in 2026, and this time the pain is landing hardest on exporters who thought the worst of the freight crisis was behind them. If you run an export business out of India, you’ve probably already felt it: a quote that was fine last month suddenly no longer covers your freight line, and your buyer isn’t interested in hearing why. That mismatch between what you promised and what it now costs to deliver is exactly where margins get quietly destroyed.
This isn’t a vague “logistics is expensive” complaint. There’s a specific, traceable chain of events behind it, and understanding that chain is the first step to protecting what’s left of your margin.
What’s Actually Driving the Rise in 2026
The core problem goes back to the Red Sea. Since late 2023, Houthi attacks on commercial vessels have forced most carriers to avoid the Suez Canal entirely and reroute around Africa’s Cape of Good Hope instead. As of January 2026, only about 26 containerships were sailing through the Suez Canal, compared with 175 taking the longer Cape route, well below the roughly 80 weekly Suez transits that were normal before the crisis. That detour alone adds 7 to 14 days to a typical Asia-Europe voyage and eats up an estimated 2.5 million TEU of global shipping capacity just to keep existing schedules running.
Carriers briefly tested a return to the Red Sea in late 2025 and early 2026. Then in late February 2026, US and Israeli military strikes against Iran ended any hope of a large-scale return for the year, and vessels were redirected back to the Cape route to protect crews. What analysts now describe as a temporary detour has effectively become a semi-permanent pricing factor for the year.
For Indian exporters specifically, the picture got worse fast. Freight rates on Asia-West Asia routes reportedly jumped from $1,200 to $1,800 per FEU, up to $3,500 to $4,500 per FEU, and some routes saw increases of 250 to 300% once war-risk surcharges were added on top. Add to that Brent crude oil pushing past $105 a barrel and maritime war-risk insurance premiums surging by over 1,000% on affected routes, and container shipping rates on some corridors were set to climb by as much as 40% starting April 1, 2026. India’s merchandise trade deficit widened to $27.10 billion in February 2026, nearly double the figure from a year earlier, with rising freight costs cited as a direct contributor.
Why This Hits Indian Exporters Harder Than Most
Freight cost increases don’t land evenly across every exporter. Labour-intensive, thin-margin sectors like textiles, garments, and leather goods absorb the biggest hit, because they typically operate on margins too tight to simply pass the increase on without losing the order to a competitor. Industry bodies have repeatedly warned that even a small cost disadvantage can push buyers to shift orders to competitors like Bangladesh or Vietnam, which is exactly the kind of order diversion India can’t afford while chasing its stated goal of $2 trillion in exports by 2030.
There’s also a compliance and forecasting problem layered on top of the pure cost problem. Roughly 70% of Indian decision-makers say cross-border trade has become more complicated, and freight forwarders themselves aren’t optimistic either, with 92% expecting tighter margins in 2026 due to geopolitical risk and surcharges. When the people moving the cargo expect it to get harder, exporters planning shipments six months out are effectively pricing in the dark.
The Government Response: RoDTEP and RELIEF
To its credit, the government hasn’t ignored this. Two schemes matter right now if you’re exporting from India.
RoDTEP (Remission of Duties and Taxes on Exported Products) refunds embedded taxes and duties that would otherwise sit buried in your export cost, and it’s confirmed to continue at existing rates at least through 30 September 2026. Rates generally range between 0.3% and 4.3% of export value depending on the HS code, and on a large turnover that’s not trivial: even a 1% swing in RoDTEP on a ₹10 crore export turnover works out to roughly ₹10 lakh in annual incentive value. In late February 2026, the government actually cut RoDTEP rates by 50%, then reversed that decision within a month and fully restored rates from 23 February 2026, specifically citing the pressure of West Asia freight disruptions on exporters.
The second, newer scheme is RELIEF (Resilience & Logistics Intervention for Export Facilitation), approved on 19 March 2026 with an outlay of roughly ₹497 crore. It’s built specifically around the Gulf and West Asia shipping crisis. It covers three groups: exporters already insured by ECGC get compensation of up to 100% of eligible losses for shipments made between 14 February and 15 March 2026, exporters shipping between 16 March and 15 June 2026 can access up to 95% risk coverage through ECGC, and MSME exporters who weren’t insured at all during the disruption window can claim a partial reimbursement of up to 50% of incremental freight and insurance costs, capped at ₹50 lakh per exporter. It’s worth being clear-eyed about this scheme too: it’s explicitly time-bound and not designed as a permanent fix, so exporters shouldn’t build long-term pricing models around it being there indefinitely.
How Exporters Can Actually Protect Their Margins
Government relief helps, but it isn’t a substitute for how you run pricing and freight decisions inside your own business. A few practical shifts make the biggest difference.
Stop pricing freight as a fixed line item. Treating freight as a controllable, variable cost rather than a fixed external expense is what separates exporters who protect margins from those who absorb every shock. Build your quotes with a freight buffer instead of locking in today’s rate for a shipment three months out.
Use contract rates as your baseline, but keep spot access open. Analysts recommend working with a freight forwarder that gives you both contract and spot rate access, so you get a stable floor while still being able to grab a spot rate when it dips below your contract price. Locking in even 10 to 30% of your volume for a defined quarter, once rates look favourable, reduces your exposure to sudden spikes.
Model two scenarios for every major shipment, not one. Given how unpredictable the Red Sea situation has become, it makes sense to run your landed cost calculation both for a “Suez closed” scenario and a “Suez open” scenario, so a sudden shift in the geopolitical situation doesn’t blow up a quote you already committed to a buyer.
File RoDTEP claims correctly, every time. A surprising number of exporters lose rebate value not because they’re ineligible, but because of avoidable mistakes: failing to properly declare RoDTEP intent at the shipping bill stage, or misclassifying HS codes, which directly changes the rebate rate you’re entitled to. Given how often the rates themselves change, this is worth a dedicated documentation check on every shipment rather than a one-time setup.
Take ECGC and RELIEF cover seriously if you ship to the Gulf or West Asia. For MSME exporters especially, the RELIEF scheme’s reimbursement mechanism exists precisely because so many smaller exporters didn’t hold ECGC insurance when the surcharges hit. If you’re shipping into an affected corridor, getting that cover in place before dispatch, not after, is what actually determines whether you can claim anything back.
Diversify routing and destination markets where the numbers allow it. Where air, rail, or alternate port routing narrows the cost gap enough to matter, it’s worth running the comparison rather than defaulting to the same ocean route out of habit. Rail options from parts of Asia to Europe, for instance, require cargo booked two to three weeks ahead and come with their own restrictions, but for the right product they can shave real cost off a Cape-route quote.
Conclusion
Shipping costs are rising for reasons that are unlikely to resolve quickly: a Red Sea crisis that’s become semi-permanent rather than temporary, a fragile Gulf security situation, and a container fleet expansion that hasn’t been enough to offset the capacity absorbed by longer routes. For Indian exporters, especially in thin-margin sectors like textiles and leather, that combination is a direct threat to competitiveness against countries with more stable freight and incentive environments. The exporters who come out of 2026 in reasonable shape won’t be the ones who got lucky on timing. They’ll be the ones who treated freight as something to actively manage, built buffers into their pricing, claimed every rupee of RoDTEP they were entitled to, took out the insurance cover that was actually available to them, and stayed close enough to the data to reprice before a shock hit, not after.
