Indian traders want shipping lines to do away with surcharges

Indian traders want shipping lines to do away with surcharges
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First Published: Thu, Apr 03 2008. 01 25 AM IST

Updated: Thu, Apr 03 2008. 01 25 AM IST
Bangalore: India’s exporters and importers want container shipping firms to stop levying various surcharges after Denmark’s Maersk Line, the world’s biggest container carrier, launched a new formula for calculating bunker (ship fuel) surcharge, which rises or falls with actual bunker prices.
The Maersk formula is expected to be followed by others in the shipping industry.
“Shippers (exporters and importers) have always told container shipping firms that there should not be any surcharge relating to fuel and fluctuations in the currency. These are all part of ship operating costs. But because of stiff competition, shipping lines are not prepared to adjust these surcharges in the ocean freight rate,” said S.R.L Narasimhan, secretary, Western India Shippers’ Association, a body that represents exporters and importers in the western region.
India’s container cargo traffic scaled 7 million 20-foot equivalent units, or TEUs, in the year through March 2008.
A TEU is the standard size of a container and is a common measure of capacity in the container business.
“We are asking shipping lines to give us an all-inclusive quote on ocean freight instead of levying surcharges on fuel and to account for fluctuation in US dollars, so that we can negotiate the best possible rate,” said an executive with Godrej and Boyce Mfg Co. Ltd. He did not want to be named as he is not authorized to speak with the media.
Maersk Line says the floating bunker formula seeks a fairer allocation of bunker costs, which after tripling in the past three years are only one-half covered by surcharges.
Fuel surcharge, a common concept in transportation industries, is levied to reclaim costs in a volatile fuel market. Maersk says the existing practice of computing fuel surcharge lacked transparency. “Besides, historically, carriers have not been able to recover the rising fuel costs and it would be fair to share the burden down the supply chain,” Maersk said in a statement.
By applying the new formula on current prices, Maersk will levy a fuel surcharge of $215 (Rs8,600) for each 20-foot container and $430 for a 40-foot container on the India subcontinent-North America sector. For intra-Asia trade, the fuel surcharge will be $115 for a 20-foot container and $230 for a 40-foot container.
But, some big customers say they will not benefit from the new formula.
“We don’t see any advantage accruing to us from the new formula,” said an executive with Hindustan Unilever Ltd, which exports about 12,000 TEUs of personal care products and beverages a year. He did not want to be named.
Instead of revising the surcharge every quarter, it should be done only when crude oil prices rise to, say, $120 a barrel, he said.
Shippers are also questioning other elements of the new formula. “Why should distance travelled and the movement of empty containers that return to India from various foreign ports be included in the calculation at all,” asks Narasimhan of Western India Shippers’ Association. “They are trying to make the issue more complicated and confuse shippers. We would prefer an all-in-one freight rate rather than deal with surcharges,” he said.
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First Published: Thu, Apr 03 2008. 01 25 AM IST