MSMEs Request Force Majeure Relief Amid Gulf War Supply Disruptions

Original: MSMEs seek force majeure relief amid Gulf war disruptions

The Economic Times•Apr 7, 20262 min

In a Nutshell

Small and medium enterprises (SMEs) in India are urging the government to invoke force majeure due to supply chain disruptions caused by the Gulf war. This provision would provide relief from penalties and extend contract timelines, similar to measures taken during the COVID-19 pandemic.

Key Points

01MSMEs are facing supply chain disruptions due to the Gulf war.
02They are requesting the government to invoke force majeure for relief.
03This provision would extend contract timelines and relieve penalties.
04The situation is reminiscent of the COVID-19 pandemic's impact on supply chains.
05India has introduced a ₹497 crore scheme to support exporters amid these challenges.

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Full Summary

In light of ongoing disruptions in raw material supplies due to the Gulf war, small and medium enterprises (SMEs) in India are calling on the government to invoke force majeure. This legal provision would allow companies to avoid penalties and extend timelines for fulfilling contracts. The request was made during a recent Service Improvement Group (SIG) meeting, where industry representatives noted that the current situation mirrors the challenges faced during the COVID-19 pandemic, when similar measures were implemented. A government official confirmed that the suggestions are under review and that extensions are being granted where possible. The disruptions have severely impacted global shipping routes, increasing freight and insurance costs. To assist exporters, the Indian government has launched a ₹497 crore (approximately $60 million USD) Resilience & Logistics Intervention for Export Facilitation (RELIEF) scheme, which offers enhanced insurance coverage. Additionally, the Reserve Bank of India (RBI) has extended the enhanced export credit period until June 30, and industry stakeholders are seeking further relief from shipping charges and retrospective war-risk surcharges.

Key Figures

₹497 crore

Total funding for the RELIEF scheme to support exporters

0.81%

Decline in goods exports year-on-year in February

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Why It Matters

If the government invokes force majeure, it will provide significant relief to SMEs facing penalties and allow them to stabilize their supply chains.

Who is affected

Small and medium enterprises (SMEs) with government contracts and exporters.

What to know

SMEs should prepare documentation to support their requests for force majeure relief.

FAQ

Force majeure is a legal provision that allows parties to a contract to be relieved from their obligations due to extraordinary events, such as war, that make fulfillment difficult.

The Gulf war has disrupted raw material supplies, increased shipping costs, and strained logistics networks, prompting SMEs to seek government intervention.

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