Last week, an exporters’ association’s move to approach the Competition Commission of India (CCI) against ‘a clear case of cartelisation’ by shipping lines, has put both sides at loggerheads. According to the exporters, the freight rates have been rising, quadrupling in some cases, while the container availability has dropped by as much as 15%.
Elias Sait, secretary of Kochi-headquartered Seafood Exporters Association of India (SEAI), was quoted, by Business Standard, as saying, “There is a clear case of cartelisation, there should be some logic for the rise in freight rates, especially to the United States. We were told that the Federation of Indian Export Organisations (FIEO) is working on a report in this regard. We are gearing up to approach the CCI, following the outcome of this report.”
However, the shipping companies, which claim to have been suffering from financial losses since the global meltdown in 2008, have defended raising their rates. Shipping companies say the phenomenon of raising rates isn’t confined to India, it’s become a global phenomenon now.
According to Amitabh Kumar, director-general of shipping in India, as reported by the BS, this crisis is a global issue. If the cartelisation allegation is to be probed, it will have to be probed globally. Companies with 600-700 ships had to stop their operations following the 2008 crisis. Had it been a cartel, these lines would not have run into losses for 10 years, Kumar added.
According to the report, it was one year after the 2008 financial crisis that Maersk, the world’s largest shipping line, posted its first full-year loss ($1.31 billion) since the company’s founding in 1904. Several other large container operators, either shut shop (Hanjin Shipping) or were acquired by larger shipping companies (such as the acquisition of the shipping line CMA CGM by American President Lines) and merged with other companies to cut their losses (merger of China Shipping Container Lines with China Ocean Shipping Company). So much restructuring happened within this industry that from the 10 largest shipping companies controlling 12% of the market nearly two decades ago, they control over 80% of the market today.
Revenues of the earnings of the state-owned Shipping Corporation of India (SCI), also dropped by as much as 21% from Rs 4,564.5 crore in 2008-09 to Rs 3,617.5 crore in 2017-18, improving only marginally in 2020-21 at Rs 3,828.8 crore.
J S Gill, managing director of X-Press Feeders, one of the world’s largest independent common carriers, was quoted as saying, “There is pressure on shipping lines, too. For almost five years continuously they were making losses; then came the change in fuel policy shifting to very low-sulfur fuel oil that led to rise in fuel rates, and even during the first quarter of Covid-19, shipping companies were bleeding.”
However, the critics of the shipping companies such as Hitesh Gutka, president of the Indian Spices and Foodstuff Exporters’ Association, have pointed out that 10 major shipping companies (without any Indian company in the list) have increased their net profits by as much as 19754%, operating profits by as much as 66% and margins by nearly 27%, compared to 2020.
Download Money9 App for the latest updates on Personal Finance.