Increase in freight rates: shipping companies must be transparent about levies

The government on Thursday asked container shipping companies to be transparent in their collection of various fees and to accept free foreign currency payments, in light of a global container shortage and skyrocketing freight rates that hurt traders across the country.

Officials said the lack of transparency and the arbitrary levying of charges could attract the attention of India’s Competition Commission.

Representatives of the container shipping industry in turn briefed officials on measures already taken to deal with the shortage, including repositioning containers as well as ordering new containers and container ships.

The issues were discussed at a meeting called by the Ministry of Trade and Industry. Attended by Minister of Trade and Industry Piyush Goyal, Secretary of Maritime Transport Sanjeev Ranjan and Minister of Railways Ashwini Vaishnaw, in addition to heads of port trusts, shipping companies, container operators and industry lobbying organizations.

The Covid-19 pandemic had resulted in temporary closures of seaports across the world, leading to an overabundance of containers in some pockets and massive shortages in others. Global container tariffs have increased more than sevenfold since last year. Since May, they have increased by more than 60%.

According to an industry representative present at the meeting, shipping companies are offering a premium reservation to exporters instead of on a first come, first served basis, which creates problems for traders.

“The unavailability of containers is delaying exports and some countries like China are encouraging imports of empty containers by offering a premium,” said another industry representative who attended the meeting, adding that suggestions had been made. made on the regulation of empty containers similar to the port of Kolkata. Confidence did.

The port has imposed restrictions on the export of empty containers, allowing only 100 units for each vessel.

According to people familiar with the proceedings, the ministers called on shipping companies to be more transparent in adopting exchange rates for payment in rupees and to accept payment in free foreign currencies.

Exporters have also reported issues such as discounts offered by state-run ports on freight rates not passed to them by container shipping companies. Some global companies are skipping calls in India. Containers are also being shipped out of India, compounding the shortage.

“Container ship operators have been told they need to understand the long term benefits of doing business in India and that higher freight rates are hurting trade and trade relations. and the fullest support should be given to small and medium-scale exporters. Transshipment calls should be reduced and direct calls should be made, ”said an industry official who attended the meeting.

Operators such as the Danish major Maersk, the French company CMA-CGM and the South Korean HMM operate container ships to and from India.

Export promotion boards have suggested that containers held up with the depository or other agencies be released within a specified time frame and that shipping companies bring more empty containers into the country.

A long-term solution to improve container manufacturing in the country has also been offered, as China manufactures nearly 85% of the world’s shipping containers.

“The government understands that this is a global problem and that it is necessary to work together to find a solution,” said Sunil Vaswani, executive director of the Container Shipping Lines Association, a lobbying body.

Vaswani also said container shipping companies have already repositioned 1.7 million empty containers this year. In addition, 1.35 million containers have been ordered, in addition to more than 500 container ships which are expected to start deployment from the first quarter of 2022.

True, the number of shipyards around the world has declined over the past six years – from over 500 to 285 – which has slowed delivery rates.

The prices of container ships have also increased.

“The cost of a 16,000 TEU vessel, for example, has dropped from $ 65 million at the start of 2020 to $ 145 million today. Likewise, leasing a 6,500 TEU vessel for example has gone from $ 11,000 in 2020 to almost $ 80,000 today, ”says Vaswani.