Govt moves to regulate shipping freight rates

The Central government has decided to regulate freight charges levied by shipping firms for export, import and local transportation in a move that is bound to run into opposition from the carriers.

The plan to regulate freight charges is one of the new provisions in the draft Merchant Shipping Bill, 2020 prepared by the Ministry of Ports, Shipping and Waterways that seeks to repeal and replace the Merchant Shipping Act, 1958 and the Coasting Vessels Act, 1838.

“Every service provider or agent, in respect of any Indian ship or other ship operating in coastal waters, in relation to import, export or domestic transportation, shall specify the all-inclusive freight in the bill of lading or any other transport document, in such mode and manner as may be notified,” according to the draft Bill circulated for public consultation.

Bill of lading

“No service provider or agent shall levy any freight charges other than the all-inclusive freight specified in the bill of lading or other transport document. The Central government may prescribe the terms and conditions for issuance of the Bill of Lading or any other transport document,” it said.

A government official said that shipping lines are not disclosing their freight to the customers; they quote a certain rate initially and later collect a different rate while invoicing.

This section will say that whatever you are charging you have to indicate in the document and then take. This will be largely for container shipping, he stated.

“To stop malpractices, regulation is required,” he said.

The move to regulate shipping lines comes at a time when the government has decided to de-regulate rates at the 12 state-owned major ports through the Major Port Authorities Bill, which is awaiting approval from the Rajya Sabha.

FIEO’s plea

In October, the Federation of Indian Export Organisations (FIEO) had urged the government to regulate the shipping industry to “protect the EXIM sector from sudden and abrupt changes in freight rates”.

The demand came after container carriers raised freight rates by as much as 40 per cent, depending on destinations, since July.

India’s trade which was dominated by imports witnessed a sudden surge in exports and a drastic reduction in imports from late June.

The recent reduction in India’s imports from China had a major impact on the availability of containers for exports. This created a major imbalance in the equipment (containers) situation.

“As a result, the shipping lines which until July 2020 used to ship out empty containers from India, had to start repositioning empty containers into the country and move them inland to demand locations at a huge cost. This distortion in demand and supply, with its resultant impact on costs and rates, has not happened just in the case of India but for the rest of the world too,” Sunil Vaswani, Executive Director, Container Shipping Lines Association (India), told BusinessLine in October.