The coronavirus outbreak has sparked a confrontation between the government and the global container shipping lines over waiver of various charges due to delay in clearing containers with the Shipping Minister Mansukh Mandaviya taking a belligerent stand on the issue.
“Today, this situation has arrived, at this time if the shipping lines don’t support us, I will quarantine them. If they don’t follow the advisory of the government, be warned that the ships have to come to Indian ports, to my territory where my rules and regulations are applicable; I will quarantine them for 14 days. It is a force majeure situation, in such a situation, everybody has to co-operate. In this situation, we are taking all the necessary steps because it is the government’s responsibility not to let industries die and to support them, so we are doing it,” Mandaviya said.
Mandaviya’s outburst came in the wake of complaints from the export-import (EXIM) trade that some of the stakeholders in the maritime logistics chain were not complying with an April 21 direction of the Shipping Ministry to waive off a long list of charges collected by them.
Despite their disagreements to the plan, all the major ports and private cargo terminals operating therein have come out with matching advisories to comply with the Ministry’s orders, some of them even under protest.
The director-general of shipping (DGS) also asked shipping lines to pass on the benefits extended by the major ports to the EXIM trade which is suffering because of the closure of factories, lack of truck/drivers and other bottlenecks created by the lockdown.
But, container carriers have declined to toe the Ministry diktat, mainly because they operate in a free market set-up where rate regulations do not apply as in the case of major ports and private terminals operating there.
The standoff forced the DGS Amitabh Kumar to issue a stern letter to the Container Shipping Lines Association (CSLA), a lobby group representing global carriers operating from India.
“Even after the issue of above orders, this Directorate is receiving a large number of complaints from the stakeholders stating that the benefits mentioned in the above advisory are not being extended to them by the shipping lines. In this regard, it is requested to compile a data of your member shipping lines, who are complying with the DGS order,” Kumar wrote in the April 27 letter, asking CSLA to submit the details by Tuesday afternoon.
To be sure, the government started targeting container carriers before the virus hit India.
In January, the Customs Department allowed exporters and importers to pay terminal handling charges (THC) directly to the terminals bypassing carriers. This altered an industry practice on the collection of THC. Courts have since stayed the decision in some of the States.
The carriers are of the view that unlimited free storage and waiver of charges were counter-productive to de-clogging the ports. There is no guarantee that importers will clear their containers if storage charges or ground rent are waived, a shipping line executive said.
“It is a high-risk strategy adopted by the Shipping Ministry,” said an industry source.
The downside of such a strategy will be a shortage of storage space inside the terminals, crippling operations. “The cascading effect would force terminals to shutter, sending the entire supply chain into a tizzy, hurting exports and those who were supposed to benefit from the free storage and waivers,” he added.
“Ask a carrier on the impact of getting a container stuck in a container freight station (CFS) for several weeks and not been allowed to charge for its use. Container shipping is so competitive these days; they are all pretty much losing money. So, it’s not as if they are profiteering from this. With this direct attack on them, not sure how the lines will react,” he added.
Source: Hindu Business Line