Ship service regulator likely

NEW DELHI: The government is considering establishing a regulator for the shipping industry to check the arbitrariness in shipping charges. The proposal, mooted by the commerce department, has been ‘well-received’ by the shipping ministry, which has promised to examine the possibility.

Speaking to ET, officials in the commerce department said shipping companies had been increasing charges arbitrarily by imposing various cesses and surcharges without any provocation. “The cess for war insurance imposed during the Iraq War continues till date though the war was over years ago,” the official pointed out.

In the absence of any authority to keep a check, shipping companies are imposing any levy at will, officials said. The proposal for setting up a regulator for shipping charges was floated by the commerce department in a recent meeting on the high transaction costs and overcharging by shipping lines.

Representatives from the commerce ministry pointed out that it was not clear why new charges were being imposed by shipping companies and sought an explanation. The department asked shipping companies to refrain from over-charging and put up all their charges on their web sites to increase transparency.

According to Delhi Exporters Association (DEA) president SP Agarwal, who attended the meeting, exporters were being made to pay service tax on the full freight tariff. The government has said service tax is applicable on only 30% of the tariff but shipping companies are not paying any heed, he added.

The association has complained shippers are forcing exporters to fork out additional tariffs in the name of documentation and nomination charges, and handling costs. Freight charges having been rising of late due to growing global trade and increasing demand for shipping services. In line with commodity prices, freight costs have also been increasing.

“DEA took up the issue with the commerce secretary since the freight burden was becoming a major hurdle. We are hopeful the government will settle all outstanding issues and prevent overcharging,” Mr Agarwal added.

The DEA president said exporters were being ‘looted’ in the case of smaller consignments. For less-than-a-container (LCL) consignments, shippers are demanding around Rs 1,250 per CBM, which is several times higher than the tariff for full container load (FCL). In addition, exporters are also being asked to pay around Rs 1,000 per bill of loading in the case of LCL consignments, he added.

According to commerce department officials, the shipping ministry had taken cognisance of the problem and had promised to consider the proposal to put in place a regulator. “The shipping ministry was very positive. It was decided that a follow-up meeting should take place soon to take the proposal further,” the official said.