28 June 2018 12:01 am Views - 1655
Pic by Waruna Wanniarachchi
By Nishel Fernando
The Sri Lanka Association of NVOCC Agents (SLANA) this week urged the government to convert Ceylon Shipping Corporation (CSC) to a strong regional non-vessel operating common carrier (NVOCC) operator and remove excess regulations to revive the national carrier to become a sustainable operator.
Addressing the second annual general meeting of the SLANA last Tuesday, Chairman Capt. A.V. Rajendra said, “Ceylon Shipping Corporation, which introduced containerization to Sri Lanka in the early 1970s, due to various economic reasons, gradually ceased its container operations overtime.”
But CSC can easily be converted into a very strong regional NVOCC operator. It may be the only way to revive the national carrier,” he said.
But he questioned whether CSC can compete to become a sustainable operator with the laws currently in force, completely prohibiting shore-based cost recovery, including the terminal handling charge.
Being unable to compete with the competition following some liberalisation of the shipping industry in 1990s, the CSC operations ceased gradually. CSC currently owns two bulk ships while it doesn’t have a single container.
Speaking to Mirror Business, NVOCC Vice Chairman Prasad Jinadasa asserted, “Being an island nation, we need to have our own shipping line. If we can’t go to that level of owning ships, the first step is to become an NVO, that’s to have your own containers and serve the regional ports, which include the Indian sub-continent, Middle East and Southeast Asia.
In order to CSC to become an NVO and run the operations at a profitable level, you have to have the recovery of the shore-based cost, which includes the terminal handling charge.”
The NVOCC agents charge that the previous regime abruptly abolished the terminal handling charges and other surcharges levied by container lines in 2014, after the lobbying of influential apparel exporters at the time, without consulting the stakeholders.
They point out that only Bangladesh and recently Ghana had imposed similar regulations.
The SLANA officials said that the current Ports and Shipping Minister has declined to listen to the industry stakeholders on a possible reversal of the regulations.
However, they said the former Ports and Shipping Minister Arjuna Ranatunga was genuinely concerned about the issue and was on his way to open discussions with all stakeholders to revisit this issue, just before he was made a minister of another subject through a Cabinet reshuffle.
The NVOCC officials urged the government to listen to all parties and then make a decision on the issue.
Jinadasa said prior to the abolishment of recovery of shore-based charge in 2014, the NVOCCs contributed 14 percent of total throughput with 500-600 TEUs per annum, including transhipment, while the regional contribution was as high as 30 percent.
However, he pointed out that these figures have come down sharply following the abolishment of recovery of shore-based charges.
“Our contribution has reduced by at least 4 percent to 10 percent now. It will continue to slide, if nothing is done about it now.”
Jinadasa noted that most of the NVOCC operations have become unprofitable at the Port of Colombo and hence, the NVOCC principals based in Singapore and other countries look at Colombo in a negative way.
“For example, when you discharge a 20-foot container at the Port of Colombo, you incur a fee of US $ 300, which includes the port handling charge and discharge charge. In contrast, the freight rates (revenue) for the regional ports don’t exceed US $ 150. Hence, it’s a very straightforward loss for the NVOCCs.”
Jinadasa said that mostly the SME sector exporters are using the services of the NVOCCs for their exports to the Middle East, India and other regional countries.
Meanwhile, he pointed out that there is also a short-term foreign currency outflow.
“The importers earlier paid the terminal handling charge locally to the agents. However, they are supposed to add that amount to the freight now. If the shipper is paying the freight in India, China or any other country, he has to remit that money to the supplier. This causes an unwanted outflow of foreign exchange for a couple of months,” he said.
Capt. Rajendra reminded that during the imposition of the UN sanctions on Iran, only the NVOCCs were there to carry tea and other exports to Iran.
He noted that the imposition of the UN sanctions on certain countries cannot be ruled out in the near future and once again, the support of the NVOCCs may be called upon by the trade for its exports, with the possibility of shipping lines’ withdrawal from these countries.
There are about 65 NVOCCs operating in the country while 40-45 of them are the SLANA members.
Participating as the guest of honour at the occasion, National Chamber of Commerce President Sujeeve Samaraweera called the industry stakeholders such as shipping agents, freight forwarders, container operators and consolidators of cargo to form a united front and appeal to the government to safeguard the interests of all stakeholders.