Global container firms complain of poor service by Indian cos

Global container shipping clients are complaining that outsourcing services to low-wage countries such as India has led to a sharpdrop in quality of services, says a fresh international transport report.

However, shipping experts from India maintain that what global clients claim as a ‘drop in quality ofservices’ is a fall in thenumber of claims processed for the latter, which, the experts claim, is better for the global shipping firms as their payout on this account has dipped.

Liner shipping services are provided as a commercial service to shippers (customers whose goods are shipped)on fixed routes with regular schedules between ports, mostly through container ships. The container ships move manufactured goods, machinery, paper, textiles, beverages and tobacco, frozen food, fruit, and certain commodities such as cotton.

Merger of global shipping lines was expected to lead to further improvement in services and lower freight charges. The results are turning out to be different.

Quality hit?

It was expected that consolidation at a global level would lead to better services by the carriers.

“Yet, most clients of container lines were outright critical of the level of customer service of most carriers, in particular of those that outsourced their customer service to low-wage countries like India, as this deteriorated customer service to dramatic levels,” says International Transport Forum (ITF) in a study on the impact of alliances in container shipping.

Customer cribs notwithstanding, shipping sector experts in India count this as a strength from the shipping lines’ perspective.

“The outsourcing to service centres has led to a trained and focussed look at claims-handling and documentation.

“The efficiency generated leads to a closer examination of claims. It could be that as claims go through a closer scrutiny now, they are not paid easily as they used be in the pre-consolidation era,” Anil Devli, CEO, Indian National Shipping Association, told BusinessLine .

Surcharges soar

Consolidation in the segment was supposed to bring down freight rates (the cost of moving goods) as using large ships to carry huge volumes of cargo would effectively lower the cost of moving goods. While freight rates have dropped over the years, the effective rate paid by clients through so-called surcharges have soared. These surcharges are levied on services that were earlier considered usual shipping service, but are now categorised as value-added. The container shipping sector has become like the budget airlines industry, which now charge extra for food, aisle seats, a few kg of extra luggage, etc, notes the ITF study.

Anti-trust scanner

The latest round of mergers has led to the top eight shipping carriers gobbling up the largest chunk of cargo, effectively lowering customer choices. “Global alliances of the mid-1990s provided cooperation space between smaller carriers, while alliances are nowadays cooperation tools for the largest container lines. The three global alliances (2M, Ocean and THE Alliance) that are operational since April 2017 represent around 80 per cent of the overall container trade and operate around 95 per cent of the total ship capacity on East-West trade lanes, where major containerised flows occur,” adds ITF.

Devli terms this level of concentration of the three alliances a “frightening concept,” adding that “India, too, needs to wake up to this, since all our containerised trade is carried 100 per cent on foreign carriers.” He draws attention to the specific recommendation of the study that anti-trust exemptions to shipping liners be removed. Most countries now believe that container companies do not deserve exemptions, and are removing anti-trust exemptions granted to them earlier. For instance, last year, New Zealand did away with a set of antitrust exemptions given to shipping lines.

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