Goods transportation cost via lighter vessels feared to rise with new policy

Highlights:

• New cell coordinated by 3 vessel owners assocs was formed on 15 Oct
• Previously, freight rates were negotiated directly between importers and vessel owners
• Costs were reduced by 20% after abolishing the serial system in 2023
• Now the new cell eliminates this opportunity, increasing transportation costs, market prices
• Goods are unloaded at Chattogram Port into 2,500 lighter vessels
• Of these, nearly 1,300 vessels were under the control of the cell

The cost of goods transportation via lighter vessels is set to increase as the Department of Shipping has reintroduced a controlling structure that many fear will lead to syndicate dominance. 

Following the abolition of the serial system in 2023, which had reduced transportation costs for imported goods by at least 20% across 34 waterways, a new policy implemented on 15 October 2024 threatens to reverse these gains.

According to ship owners, importers, and a ship owner organisation based in Chattogram, freight rates were previously determined through negotiations between importers and vessel owners. 

The establishment of this new cell has eliminated that opportunity, resulting in increased transportation costs and, consequently, higher prices for goods in the market, they said.

According to the new policy, the lighter vessel owners will now operate under the "Bangladesh Water Transport Coordination Cell" (BWTCC), which will be coordinated by three associations of lighter vessel owners. 

WTCC will act as a coordinator with all stakeholders involved, including lighter vessel owners, importers, product agents, and local agents, for the allocation of lighter vessels.

A 10-member supervisory committee has been formed to monitor the activities of the cell. 

The committee will be chaired by the director general of the Department of Shipping or its representative, with the secretary being the chief engineer and surveyor of the department.

Sheikh Mohammad Jahangir Alam, managing partner of ANJ Trading, a lighter vessel owning firm in Chattogram, told TBS that although the goods transportation policy has been put in force, the freight rate has not been set. It should be determined by representatives of importers.

He noted that when the Water Transport Coordination Cell was operational, the freight charge per tonne for wheat-laden goods from Chattogram Port to Dhaka was Tk662. Following dissolution of the cell, freight rates are now being determined based on the preferences and negotiations between importers and vessel owners. 

"The freight per tonne has decreased by around Tk150, which has pleased importers and general vessel owners. The new cell seems to be an attempt to return the goods transportation sector to the same syndicate," he added.

Previously, in 2013, a policy regarding the transportation of goods via registered lighter vessels was formulated by the Department of Shipping. Under that policy, the cell was formed with three lighter vessel owner organisations – Bangladesh Cargo Vessel Owners' Association, Coastal Vessel Owners Association, and Inland Vessel Owners Association of Chittagong (IVOAC).

Various industrial groups and lighter vessel owners challenged the legality of that policy by filing a writ petition with the High Court in 2022. 

On 20 June 2022, Justices JBH Hasan and Fatema Najib declared the 2013 policy illegal in a similar writ petition, resulting in a court injunction against all activities of the cell.

Goods are unloaded at the outer anchorage of Chattogram Port onto lighter vessels, which transport these goods using approximately 2,500 lighter vessels on the country's 34 waterways. 

Of these, nearly 1,300 vessels were under the control of WTCC. Additionally, 400 vessels owned by major industrial corporations were engaged in transporting goods from the port.

Parvez Ahmed, a spokesperson for IVOAC, told TBS that previously importers had a scope for choosing with which lighter vessels they would transport their goods and they could bargain. 

"The new policy requires industrial owners to have vessels registered in their own names, but most companies have purchased vessels under various associated names," he said. 

"Additionally, foreign-owned companies charter vessels for imports, and under the new policy, goods must be transported via privately-owned vessels according to the new cell's serial. This will raise transportation costs and delay deliveries, creating chaos," he said.

Businessmen say the WTCC was meant to coordinate goods transportation from the port's outer anchorage but ended up controlling the entire operation. It charged Tk20 per tonne and allocated vessels at its discretion, imposing double charges for delays, which doubled transportation costs. 

They stress the need to keep the goods transportation sector free from cell or syndicate control.

Mohammed Amirul Haque, chairman of the Seacom Group, a large importer of cement and various consumer goods, said that a business syndicate based in Dhaka controlled the operation of lighter vessels under the syndicate [WTCC]. 

Haque noted that without any cell, transportation costs have decreased by at least 20%, questioning who benefits from the establishment of a new cell that aims to raise these costs.

Engineer Mehboob Kabir, chairman of the Coastal Ship Owners Association of Bangladesh and general secretary of the Bangladesh Cargo Vessel Owners Association, told TBS that operating vessels without a serial has significantly lowered freight charges, resulting in losses for vessel owners. 

"Already, around 450 lighter vessels have been scrapped due to not being able to earn sufficient freight. In this situation, he sees no alternative but to transport goods at the previously established rates set by WTCC."

In response to the question of the justification for forcing product owners to transport goods at fixed prices, he said that operational costs for vessels have increased, as have salaries for sailors. Under these circumstances, if vessels transport goods at lower rates, vessel owners will go bankrupt.

Speaking to TBS, Commodore Mohammad Maksud Alam, director general of the Department of Shipping, said, "Those who previously controlled the operation of lighter vessels are no longer present. This policy has been formulated after meetings with leaders of three ship owners' organisations." 

He claimed that the accusation of forming a similar cell to benefit any specific individual or syndicate is not true. 

BWTCC to hold a meeting today

The coordination cell will hold a meeting today at 2pm to discuss the orderly transportation of goods. Commodore Mohammad Maksud Alam, chief of the coordination committee, will preside over the meeting.