Shipping firms seek exemption from competition rules

Shipping liner conferences have requested the Ministry of Shipping, Road Transport and Highways to exempt them from the purview of the competition laws which are in the process of being notified.

These liner conferences are an association of cargo ship-owners who operate scheduled services. The key function of such an association is to fix the freight rates for various commodities among themselves on the specified routes.

There are over 50 liner conferences operating among different ports around the world. Those which operate on Indian routes connecting other counters include the Informal South Asian Agreement, whose members include Maersk Line, Shipping Corporation of India, Evergreen and Hyundai. Others include Far East South Asia Middle East Conference, Chennai Feeder Operators and Asian Feeder Discussion Group.

Globally, all liner conferences enjoy exemption from competition laws in their countries. However, the European Union has now decided to clamp down on the price fixing among shipping liners by withdrawing the exemption made available to liner conferences October 2008.

As a result, the London-based India, Pakistan, Bangladesh and Ceylon conference consisting of nearly 15 members from different countries had decided to disband itself from October 17.

Shipping Corporation of India(SCI), which is currently a member of this conference, has now decided to seek membership with another liner conference called European Liner Affairs Association, which apart from Europe also operates on other non-European routes.

The conferences, however, are likely to come under the scanner of the competition laws.

Amitabh Kumar, director general, Competition Commission of India, said, “Any kind of price fixing and market sharing amounts to cartelisation that will attract penalty. If the competition laws get notified and enforced, the penalty that the players will be liable to pay is three times of their net profit or 10 per cent of their total turnover whichever is higher.”

However, ship-owners in India hope that since countries like the US, Singapore and Japan have decided to continue with the exemption given to liner conferences, they too could get a favourable response from the Indian government.

A senior government official in the shipping ministry, however, said that it has not taken any decision on the matter till now and discussions are on.

Justifying the formation of such associations, S Hajara, chairman and managing director, SCI, said, “Shipping is a highly capital investment business. Unless and until there is stability in income and freight rates, no player will come forward and make investment. So some sort of co-ordination among the liner conference would ensure a steady growth for the individual shipping companies.”