Govt steps in to bust shipping cartels

Competition panel asks ministry to do away with 'Shipping Conferences', which decide freight rates.

In a move to break the monopoly of shipping lines, the Competition Commission of India (CCI) has asked the Ministry of Shipping to do away with "shipping conferences" and allow free competition by enabling the shipping lines to quote independent tariffs.

Shipping conferences, formed by companies operating on common routes, are termed as "loose cartels" which decide freight rates and terminal handling and allied charges. Freight charges are high as a result. A total of 15 shipping conferences across the globe control nearly 75 per cent of the shipping industry.

If implemented, the decision would affect the century-old India-Pakistan-Bangladesh Conference (IPBC), one of the oldest in the world. The IPBC has around 18 shipping lines as members, which annually carry more than 650,000 twenty-foot equivalent units of export-import containers on the India-Pakistan-Bangladesh-Europe route.

Industry sources said in the long run, freight and other rates could dip and imports and exports go up. They expect evolution of a multiple-rate regime in which different lines will quote on the basis of the market conditions and their own strengths.

"As part of our advocacy work, our advice to the shipping industry would be to examine the nature of the conferences in the light of the Competition Act and if necessary, bring about changes in conformity with the Act," CCI member Vinod Dhall said.

Dhall said the issue would be looked at after the enforcement sections were notified by the Central government. If the Shipping Conferences were found to be engaged in fixing rates and prices, they would be on the wrong side of the law.

Under the Act, if any cartel is found violating norms, the members face a penalty of up to 10 per cent of the turnover or three times the "illegitimate" profit earned.

The European Union will be the first to do away with the conferences, from 2008, making way for free competition by enabling shipping lines to quote own tariffs.