The Hindu Business Line : EU asks IPBC to wind up by 2008

Way out
Resolution to repeal exemption from EC Treaty's ban on restrictive business practices for liner conferences on routes to and from EU adopted
Conferences will not be allowed to discuss or decide on common freight rates or restoration rates

Mumbai , Sept. 27

Shipping cartels are on their way out.

The 115-year-old India-Pakistan-Bangladesh Conference (IPBC), which is also the oldest shipping Conference in the world, has been told by the European Union to pack up by 2008.

Shipping conferences, formed by shipping lines operating on common routes, are regarded as "loose cartels", deciding on freight rates, terminal handling charges and other incidentals. There are some 15 different shipping conferences operating across the globe controlling almost 75 per cent of the liner shipping.

The EU will be the first to take the lead in doing away with these conferences in their present form to make way for free competition enabling shipping lines to quote their tariffs. Shipping industry analysts feel other countries could follow suit.

In a development that signals the beginning of the end of shipping cartels, the proposal to "repeal the exemption from EC Treaty's ban on restrictive business practices for liner conferences on routes to and from the EU" was unanimously adopted by the Competitiveness Council.

IPBC impact

It will have a direct bearing on IPBC of which Shipping Corporation of India is a member - in fact, currently Mr S. Ranganekar, SCI's director, is the chairman of the Conference. IPBC has 18 shipping lines as members from different countries, carrying annually 6,50,000 teus of export-import containers along the India, Pakistan, Bangladesh and Europe route.

The EU will be giving liner conferences on routes to and from the EU, including IPBC, two years "cooling time" till 2008. After that, the conferences could exist, but will not be allowed to discuss or decide on common freight rates or restoration rates. On some of the land-based charges, the conference could offer some indices, but not any "absolute figures" to be followed by its members.

In other words, the conferences would become debating societies discussing issues and problems like pooling and scheduling of vessels and other matters of common interest.

IBPC, like other conferences plying on routes to and from EU, is planning to phase out its meetings to discuss freight and decide on rate revisions in the next two years.

Industry sources believe that in the long run, freight and other shipping-related rates could dip. A multiple-rate regime will slowly evolve, in which different lines will quote separately on the basis of market conditions and their respective strengths.

Yet, the transition may see some confusion, as the trade will no more have a base or a benchmark rate. Further, the conferences offered a platform for interaction between Governments and shipping lines.