The Government is considering a proposal wherein ports may have to pay a penalty to traders in case their cargo gets delayed due to congestion at the ports, official sources told Business Line.

The Commerce Ministry has already sent this proposal to the Shipping Ministry, which is the nodal body for 12 major ports in the country. The Shipping Ministry is examining the issue.

This proposal was a part of several suggestions made by an inter-ministerial task force led by the Minister of State for Commerce and Industry, Mr Jyotiraditya Scindia, to suggest ways to reduce the transaction costs for traders.

Transaction costs include time and money spent by traders in complying with Government norms on foreign trade. Mr Scindia has already met the Shipping Minister, Mr G. K. Vasan, in this regard.

“Ports like JNPT and Chennai levy a congestion charge on shippers. The shippers, in turn, pass it on to the traders. In effect, the traders are bearing the cost of congestion at ports,” explained an official of the Federation of Indian Export Organisations (FIEO), the apex body of exporters.

TRANSACTION COSTS

Transaction costs in India are as high as 8-10 per cent of the total trade value, according to FIEO.

This means that out of total trade of around $455 billion in the last fiscal, transaction costs accounted for almost $45 billion. Indian exports become expensive due to high transaction costs hurting their competitiveness in international markets. Bringing the transaction costs down to around 3 per cent is expected to help India achieve global standards.

According to FIEO, in ports in Denmark, only three per cent of the total shipments are examined by the authorities as the trust factor there is high. On the other hand, in Indian ports, over 10 per cent of the total shipments is examined (for exports to free ports, it is as high as 50 per cent), leading to inordinate delays.

Advanced countries have fully automated, modernised ports and integrated tax regime, which gives them an advantage. Besides, some countries also have Inland Tax/Revenue Authorities that are far more efficient than India's Customs Department because they have a dynamic risk management system that in turn helps in expeditious clearance of consignments.

“The clearance could take place as quickly as within 10 minutes of the consignment entering the port. Therefore, there is no congestion at all,” said an industry source.

Source: The Hindu Business Line