India Port Workers Agree to New Deal, Ending Strike Threat
Indian ports have averted a strike as dockworkers agreed to a new five-year contract Tuesday.
The strike, initially planned for Wednesday morning, was called off after the All India Port Workers’ Federation reached a memorandum of understanding with the Indian Ports Association (IPA) and the country’s Bipartite Wage Negotiation Committee.
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Under the newly agreed terms, the unions accepted an 8.5 percent wage increase over five years, backdated to Jan. 1, 2022. Additionally, workers will get 30 percent variable dearness allowance, which is a cost-of-living adjustment to employees as a fixed percentage of their basic salary to mitigate impacts of inflation. The contract will expire Dec. 31, 2026.
Additionally, a special allowance of 500 rupees ($5.95) per month will be provided to working employees during the contract’s duration.
“This agreement marks a significant step forward in ensuring fair and equitable treatment for our port workers, who are the backbone of the Indian maritime sector,” said Shri Sarbananda Sonowal, India’s Minister of Ports, Shipping and Waterways, in a statement. “The timely resolution of these issues reflects the ministry’s commitment to foster a harmonious and productive working environment across all Indian ports.”
Sonowal is said to have intervened in the talks to ensure the agreement occurred before a strike took place.
According to the ministry, the contract will officially be prepared within the next 10 days, and the final settlement is expected to be reached within 15 days.
The new deal prevents a work stoppage that could have involved 18,000 workers and brought widespread disruption to cargo operations at 12 major state-run ports. All port operations across major Indian ports, including those in Mumbai, Kolkata and Chennai, will continue without disruption.
According to Indian publication The Hindu Business Line, a port strike would have led to loss of 125 crore rupees ($14.9 million) for exporters daily.
The All India Port Workers’ Federation, which includes the national coordination committees of six major port workers’ unions and federations throughout India, had been in negotiations with the government for nearly three years to try and increase worker pay, as well as other areas like pension, benefits and overtime.
The prior contract expired on Dec. 31, 2021. The wage negotiation committee that was initially set up by the ministry met seven times in the time after, but failed to meet the port workers’ demands until Tuesday.
A Reuters report said that the 8.5 percent raise falls short of the 10.6 percent wage hike desired by the labor federations, but higher than the 6 percent initially sought by the Indian government.
Spot container freight rates in the region saw minimal impact in anticipation of the strike, according to S&P Global. Despite the capacity concerns that had pushed India-to-U.S. East Coast freight rates up since mid-June, it appears space is becoming less of an issue for shippers as stand-alone service lines from Hapag-Lloyd and Ocean Network Express (ONE) find their footing. Both had withdrawn from a shared service with CMA CGM in May, which temporarily resulted in less cargo capacity for exporters.
As of Monday, rates on the India-to-U.S. East Coast trade lane have declined 31 percent to $7,500 per 40-foot container from a 2024 peak of $10,920 on Aug. 2.
Apparel companies that source from India are breathing a sigh of relief as the strike is avoided and capacity opens up. In total, India exported $15.4 billion in apparel in 2023, representing 3 percent of the world’s clothing.
India is the fifth-largest apparel exporter in the world, after China, Bangladesh, Vietnam and Turkey, according to data from the World Trade Organization (WTO).
The major 12 ports handled 818 million tons of cargo in the year through March, a 4.4 percent increase over the prior year, according to the shipping ministry. Inbound and outbound cargo makes up 77.1 percent of total containers at the port.
Beyond avoiding a potential bottleneck of goods exported out of India, the new contract helps avoid more global congestion at major ports, particularly in Southeast Asia. A strike would have resulted in more blank sailings at Indian ports, forcing shippers to divert goods elsewhere at already clogged hubs. Additionally, ships that would have idled around the Indian ports would inevitably end up arriving off-schedule when they reached other ports, ultimately causing more delays.