Mumbai: The Dubai-government owned marine terminal operator, DP World, wants “market forces” to determine tariffs for private terminals at the Union government-owned major ports in the country, rather than have it set by a tariff regulator.
“Tariff-setting should be left for the market forces to decide,” Anil Wats, executive vice-president and chief operating officer, DP World, told Mint during a visit to Mumbai on Friday.
The demand comes after the Tariff Authority for Major Ports (TAMP), suo moto made a 12 % cut recently in the tariffs of the DP World-run container terminal at Nhava Sheva in India’s busiest container port, Jawaharlal Nehru Port .
Together with the 16% cut affected earlier, the tariff regulator has slashed the tariffs at the Nhava Sheva International Container Terminal (NSICT) by as much as 28%, leaving the terminal operator fuming.
The tariff reduction will benefit the trade significantly in terms of lower transaction costs for export-import trade. But Wats disagrees with this view. “Tariffs at the cargo-handling terminals do not determine whether India is more competitive or less competitive in global trade,” he said.
Ganesh Raj, senior vice-president and managing director, sub-continent, DP World, said that the tariff reduction will hit “service levels” at the terminal. NSICT was the first terminal to be run by a private entity (P&O Ports) after the government opened up the major ports sector for private investments in the late 1990s. Currently, the tariffs levied by the operators are fixed with the prior approval of TAMP.
NSICT as well as container terminals at Chennai, Vizag and Mundra ports (a Gujarat government-owned port) came into the fold of DP World following its global takeover of P&O Ports in March 2006.
Initially, when it started operations, the tariffs of NSICT were 16% higher than the tariffs of the adjacent container terminal run by the government at JN Port.
A few years later, the tariffs at NSICT were brought on par with the government-run terminal. This has now been cut by another 12 %.
The government, however, feels that the time has not yet come for leaving tariff fixation to market forces.
“We may look at a market-driven tariff mechanism after 10 years,” said R.K. Jain, managing director, Indian Ports Association (IPA), the umbrella body representing all the 11 major ports in the country.
TAMP chairman A.L. Bongirwar agrees with this view. “The policy of regulation has come to stay in the country,” he says.
Tariff regulation will have to stay until competition comes. Competition does not mean two-three different operators. Competition means creating 30-40% excess capacity than needed,” Bongirwar told Mint.