The Hindu Business Line : Rules on cover for goods in road transit

There are no clear guidelines defining the liabilities of each party in the event of any loss or damage of cargo handled by road transporters. But a set of draft rules is leading to friction among transporters, insurers and consignors.

Mamuni Das

A proposed amendment by the Centre to rules fixing liabilities in the case of damage or loss of goods during transit is leading to friction between transporters, insurers and consignors. All the three stakeholders in the business are lobbying hard with the Ministry of Road Transport and Highways to put their points across regarding the rules being drafted under the Carriage by Road Act.

Currently, there are no clearly laid rules that define the liabilities of each party in the event of any loss or damage of cargo handled by road transporters.

The disputes that arise are mostly settled out of court by the insurers and transporters. The Ministry, having recently constituted a Committee to draft the rules, has sought the views of both the insurers as well as transporters.

The former has sought to link the liability of transporters to the total value of the cargo being moved. On the other hand, the transporters say they are unwilling to take on liabilities beyond Re 1 per kilogram, which translates into Rs 10,000 for a typical ten-tonne truck.

No representation

Caught between these two extremes are the goods consignors, whose primary grouse is that they have not found representation in the committee. The Committee is headed by Mr S.K. Dash, Joint Secretary, Road Transport Ministry and has representation from transporters, Finance Ministry, Railways and Law Ministry.

The transporters are not inclined to take on liabilities of the total cargo value. According to Mr T.S. Narasimhan, Executive Director, Delhi Assam Roadways Corporation Ltd, “The liability should be linked to the freight value of the cargo that common carriers pay and not the cargo value.”

“At times we move a truck load of copper, valued at Rs 50 lakh. The freight charges hover around Rs 25,000 for 1,000 km. Now if there is theft and we lose the cargo, how do you expect us to be accountable for the entire value,” he asks, pointing out that the Government should also have some responsibility since both roads and security on roads are the responsibility of the Government.

According to Mr K.N. Bhandari, Secretary General, General Insurance Council, “Fixing liability at Re 1 per kg absolves transporters of their liabilities. We would not underwrite any transit cargo if this were the case.” Even Indian Railways, a Government monopoly, limits the liability at Rs 50 per kg, points out Mr Bhandari.

Moral hazard

Such a move creates opportunities for moral hazard, he says adding that they have written to the Ministry.

“If there has to be an absolute limit on liability, we have called for Rs 500 per kg of cargo,” says Mr Bhandari.

The Confederation of All India Traders (CAIT), a body of wholesalers, retailers and distributors, has written to the Ministry seeking inclusion in the committee. The Indian Foundation of Transport Research and Training (IFTRT), a transport research body, has also called for “equitable representation” from all the stakeholders including consignors (from FICCI, CII and CAIT) in the Committee.

The IFTRT feels that the Government should let the common carrier and consignor decide the liability in each contract (instead of specifying any absolute value) while limiting liability at total cargo value.

A decision on the issue has to be firmed up as a part of rules being drafted of the Carriage by Road Act by the Department of Road Transport and Highways.

The Carriage by Road Act proposes to bring about widespread reforms in the highly fragmented commercial transport sector.

It proposes mandatory, single registration by all transporters and other firms that form a part of supply chain, among others.