The Eastern India Shippers’ Association (EISA) has strongly denounced the increase in freight rates between India and Europe by $300 per TEU and Rs 600 per FEU, with effect from September 1, 2000. This will make freight rates almost double from the earlier year’s levels, leading to an adverse impact on the export of major commodities like tea, jute, chemicals and engineering goods. The pinch would be felt more so where exporters had entered into contracts in advance, besides severely undermining competitiveness of the exports of these items affecting future business.

The move to increase rates has been decided by member lines of IPBC/UK/Continent Conference which serves the trade to the UK and the European Community. According to EISA President D J Bapooji, this trend is extremely worrisome as the increase, termed as the Rate Restoration Increase (RRI) is the third in a row. RRI was given effect from October 1, 1999, which entailed an increase of $300 per TEU and $600 per TEU followed by another RRI from April 1, 2000 ($150 per TEU and $300 per TEU).

Elaborating further, the EISA president stated that for low-value products like jute goods, on an average, the new freight would work out to 20-25 per cent of the value of the goods, which would have disastrous consequences for exports of jute goods. The commodity was already facing a serious threat from its substitutes, which were not only locally available in the jute-user countries but also at lower prices. Engineering exports too which were mostly of low-value would similarly suffer a major setback. Tea exporters were also in the mid-season and the proposed increase would completely upset the rhythm of exports in the second half of the year.

Bapooji further pointed out that at a recent interaction between the Union Ministry of Commerce and the Tea Board towards evolving a joint plan of action to promote tea exports, it had been noted that Indian exporters already suffered from severe freight disabilities. This was mainly vis-a-vis competing countries like Kenya and Sri Lanka. The proposed hike would further aggravate the disability factor. This would also be completely against the interests of efforts currently being directed to boost export of tea from India, he said.

He also said that the hike has been proposed without any discussion or consultation with user-interests and was hence unreasonable. It had, added, no justification in the present circumstances and was therefore against national interests. The inevitable outcome of this rate increase would be an unnecessary outflow of foreign exchange, considering the cumulative impact of the three RRIs and the weak position of the Indian currency.