Raising objections to the study, MoST has argued that it is without any basis since there is no such policy of importing only through Indian vessels.The study, which was commissioned by the ministry of commerce, was submitted few months back. The commerce ministry recently circulated the report among other ministries for their comments. The commerce ministry is reportedly preparing a Cabinet note pitching for a change in policy of shipping government cargo on the basis of the IIFT study and is likely to lobby for cost and freight (c&f) imports.

According to sources, the IIFT study pointed out that the PSUs should not be forced to import on free-on-board (FoB) basis since it leaves them at a disadvantageous position compared to private sector companies. "The whole ground of such a contention is wrong since most ofthe private sector companies are also importing on FoB," an official claimed.

The transport ministry also pointed out to the discrepancy on what was suggested by the committee of secretaries in a meeting way back in March 1997 and the follow-up action in the form of IIFT study.

The meeting of secretaries was held to discuss whether government cargo, especially urea, should be insured. Sources said at the meeting, it was decided to conduct two studies-a study by Planning Commission for ascertaining efficacy of current policy of import through Indian vessels and a study to conduct cost-benefit analysis of insurance of imports on government accounts.

Sources said that while the latter study ruled in favour of insuring government cargo, the former was never carried out. It was felt that since there was no such policy of importing only through Indian vessels, there was no need for a study.

The transport ministry is peeved with the commerce ministry for going ahead with its own study and commissioning IIFTfor the purpose. In his remarks on the report, secretary, ministry of surface transport, pointed out that his ministry was not a participant in the March 1997 meeting.

With this latest twist in the fight of FoB and C&F imports, the ministries of surface transport and commerce have taken diametrically opposite viewpoints.

Officials point out that as per the present policy of the government, all imports should be on FoB and exports on C&F basis. Transchart, the chartering wing of transport ministry which makes shipping arrangements for government cargo, hires both Indian and foreign flag ships for imports. Foreign ships are usually hired when Indian vessels are not available.

Sources said that the need to have such a policy even after liberalisation was because the Indian government, unlike most other liberalised countries, imports through its various agencies. Besides, public sector companies do not have expertise in chartering and have to take the services of Transchart.

They also point out to thefact that iron ore exports from the country are made on fob and not c&f mainly because importing countries, primarily Japan, insist on it. "In their case, it is not the government agencies which import. They are big private sector companies who opt for fob since it is considered more cost-effective," said a source.

When a purchase is made on fob basis, the seller pays the cost and bears the responsibility of putting goods free on board and upon doing so delivery is complete and further risks are transferred to the buyer. In case purchase is made on c&f basis, the seller is responsible for shipment of goods and hence hires vessels on his own.