Competition watchdog issues order against Chennai trailer owners

Representative image (Reuters)

The Competition Commission of India has directed trailer owner associations in Chennai to stop demanding unsustainable tariffs and setting limits on the number of trailers that container freight stations can operate, saying such decisions amounted to anti-competitive conduct.

The order of July 20 followed a submission by the Chennai chapter of the National Association of Container Freight Stations against the decisions taken by the trailer owners.

The trailer owners had set a cap of 20 trailers that each container freight station (CFS) could own and operate. They also forced unsustainable freight rates on the CFSs, which are an important constituent of an elaborate logistics supply chain in a manufacturing process.

According to Avnash Iyer, chairman, southern region, National Association of Container Freight Stations, the CCI order vindicated their position and the onus is now on the authorities to implement it on the ground.

“Free pricing is the right of an importer and exporter,” Iyer said. “A free market must be allowed to determine the freight rate.”

The Chennai chapter of NACFS has 32 members.

A couple of trailer owners said they weren't aware of the CCI order. When briefed about the content of the order, they said they would wait for their lawyers to advise them on the course to follow.

Reducing costs

However, experts said they aren’t quite sure of the kind of immediate impact the CCI order will have on the operating ecosystem. While investing is not a challenge for any CFS, the ecosystem around the logistics business in Chennai hasn’t matured, industry executives said.

Iyer said there was a time when Chennai Port was riddled with infrastructure problems and turnaround times were longer and, as a consequence, freight rates were higher. However, the infrastructure in Chennai Port has since improved and additional ports – one at Ennore and the other at Kattupalli – have come up nearby.

According to Iyer, the trailer freight rates in Chennai are much higher than those in the Nhava Sheva and Mundra ports.

“We are talking about reducing logistics costs. Every rupee pinches a manufacturer/exporter,” Iyer said.

In the evolving market dynamics, Iyer said a logistics player has a serious responsibility to ensure that there are no windfall gains.

The trailer owners had increased rates for both 20-foot and 40-foot containers.

“There is no rhyme or rationale for their action,” an industry official said, declining to be identified.

“If the state government is serious about its investor-friendly claim, it should really do something to enforce the CCI order strictly,” a ranking official of a CFS here said.

“It is for the first time that somebody has stood by us against the irrational practice,” Iyer said, referring to the CCI.

The Director-General (DG), in its report to the CCI, said it had found that the increase in price was forced upon CFSs on the threat of strikes and actual strikes.

“The DG also observed that the hike in the price had no correlation to the rise in price of fuel, insurance, spare, tyres, repair and maintenance, driver salary, etc,” the CCI said in its order. “The different CFSs are located at different locations, some within 10 kms from the port and the others beyond 50 kms from the port and in this scenario, to have a common increase without taking into consideration the most important factor in consideration, i.e. the distance, clearly brings to light that there is no rationale in the common increase in price.”

The trailer owners were given four hikes between 2014 and 2019. In 2018, there was another instance of a strike and the NACFS, Chennai, decided to approach the CCI to help maintain market pricing for services rendered by trailer operators.