Shipping Corp bribes customs to clear ships

Shipping Corp bribes customs to clear ships

New Delhi: The Shipping Corp. of India Ltd (SCI), a public sector undertaking (PSU) controlled by the Union government, has admitted it is forced to pay bribes to government customs and excise officers in ports across the country in order to get its shipments cleared in a timely manner.

The odd situation in which a government undertaking is openly acknowledging—and funding—graft in another government department, was exposed when a Central Vigilance Commission (CVC) team conducted a review of an internal audit conducted by SCI in December.

In that internal audit, SCI officers had acknowledged that they were forced to pay what is known as “speed money" at ports, using private shipping agents as the conduit.

“Speed money" is one of the worst-kept secrets of the shipping industry, says former director general of shipping J.S. Gill. “Unless you weed out corruption at the ports, our logistics cost will never be under control. If you allow the bribe takers to dictate terms, then they can hold any vessel to ransom," Gill adds.

In an ironical twist, the CVC has noted that the shipping agents are also inflating the amount of such bribes paid on behalf of SCI in order to claim larger reimbursements.

After its review, the CVC objected to the payments, which are said to average about Rs25 crore every year, noting that the “prospect of a PSU reimbursing such payments to government servants is not a palatable one."

A high-ranking official of SCI, who said he didn’t want to be identified because “speed money was a rather touchy issue in the government", told Mint that officers were indeed forced to pay bribes at ports.

“If we don’t pay the bribe, then our ships would be held up for days together," he said. “Then we will have losses in crores for not making these payments."

The official added that SCI could lose up to Rs20 lakh on a Panamax vessel if it were to be held up for a day, whereas the “speed money" paid per day for a ship would be, at the most, around Rs50,000, making for a compelling business rationale to pay the bribe.

Ships classified as Panamax are of the maximum dimension that will fit through the locks of the Panama Canal, a significant factor in the design of cargo vessels.

SCI manages around 32.8% of the tonnage handled by Indian vessels. Its tonnage stood at around 2.7 million gross register tonnes in 2006. Gross register tonnage, or GRT, represents the total internal volume of a vessel; typically one gross register tonne is equal to a volume of 100 cubic feet.

There is no independent or accurate way, based on the SCI figures, to ascertain the total quantum of bribes that private shippers have to pay customs officials for timely clearances.

The “speed" payments for SCI ships are made by the PSU’s shipping agents who are normally contracted to arrange for pilotage and towage, and to take care of customs formalities.

Mint tried to contact the largest SCI shipping agent in India, JM Baxi & Co., but its calls were refused. The company is not named in any CVC minutes that Mint is aware of.

In its minutes, CVC also said it had little doubt that the shipping agents themselves were using this opportunity to significantly inflate these bribe payments while claiming them from SCI as reimbursements.

Many of these agents have come under the scanner for inflating bills, though it is unclear how the government can figure out the exact amount of bribes solicited or paid.

“Most of these agencies have recently retired officers of the SCI in their top management," said a high-ranking CVC officer, who didn’t want to be named.

“And, so, there is also an element of a cosy relationship between the management and these shipping agencies," he added.

The minutes of the CVC review meeting also noted that this trend is disturbing. “...there were several cases of retiring officers immediately taking up jobs with agents and suppliers..," they said.

The review team said it felt that “there was a moral issue involved as it exposed retiring employees to a conflict of interest in the final years of their service".