Centre may penalise shipping companies for spike in freight rates

Exporters are facing an almost 60% hike in freight cost since July.

With exponential rise in freight cost hurting Indian exports, the government is set to intervene and is considering penalising shipping companies indulging in unethical practices.

Commerce and industry minister Piyush Goyal is learnt to have asked the ministry of shipping to increase shipping lines into India to raise competition so that it benefits exporters.

Facing an almost 60 per cent hike in freight cost since July, exporters have been urging the government to intervene and regulate operations of shipping companies. Apex exporters’ body Federation of Indian Export Organisations (FIEO) has informed the government of an estimated $40 billion export loss in the current fiscal year. This was due to unavailability of containers, high freight cost and containers held up in Punjab due to farmers’ agitation.

With shipments delayed by close to 20 days, exporters are fearing order cancellations ahead of the holiday season.

“The shipping ministry is expected to take up the issue of freight cost with shipping companies and is mulling penalising those indulging in unfair trade practices. The issue is severely hurting Indian exports and is being taken up by the government on priority,” said a government official.

The freight rates for 20 ft container have shot up to over $1,200 per vessel up from just $400 a few months ago.

In a meeting with Goyal on Monday, the FIEO sought creation of a regulatory agency to monitor and regulate shipping companies. “There is an unholy increase of freight by shipping companies. They are extorting and increasing freight on a daily basis. We have sought creation of a regulatory body to oversee practices of shipping companies. We were told that the government will work in that direction, although it will take some time,” said FIEO president Sharad Kumar Saraf.

There is a shortage of containers due to fall in imports as shipping companies are unwilling to bring empty containers to India for export shipments.

Imports have fallen by 40 per cent in the April-September period, and exports are also down 26 per cent during this time. In September, India’s outbound shipments posted a growth after six months at 5.27 per cent, while imports were down 19.6 per cent compared to last year. “We also suggested that empty containers can also be brought into India as they are anyway paying storage charges and freight will be minimum,” he added.

In order to address container shortage, the railways ministry will likely work with Container Corporation of India (Concor) to move containers to inland container depots (ICDs), where they are needed.

“Since Concor knows where containers are available, it must be roped in to move them to the ICDs, where they are needed,” said Saraf.

The exporters’ body also sought the Centre’s intervention in releasing 4,000 containers held up in Punjab due to the farmers’ agitation. “We were told that the Punjab government isn’t cooperating on that. Hence, it will take time,” said Saraf.

Source: Business Standard