Mumbai: Shipping lines docking at Tuticorin container terminal that is run by PSA-SICAL Terminals Ltd have threatened to charge their customers more to recover the extra costs they are incurring as a result of delays in loading and unloading cargo. This will be through a surcharge.
The delays are partly a result of the terminal operator reducing capacity by almost a third from 15 July, in reaction to the tariff regulator’s refusal to allow it to raise charges for the services rendered.
“Following the confirmation that the capacity at the Tuticorin container terminal has been reduced, shipping lines using the terminal are already incurring additional costs. There is a strong likelihood that the lines may wish to apply a surcharge to recover this,” said Julian M. Bevis, area line & operations manager, South Asia at the world’s largest container shipping firm Maersk.
“Apart from a longer port stay, (shipping) lines are not able to fill the vessel to its full container capacity after PSA-SICAL Terminals stopped operating one quay crane. As a result, lines will be forced to hike freight rates to recover the revenue foregone on account of underutilization of capacity,” he said.
Bevis, who is also the chairman of the Container Shipping Lines Association, a body representing container shipping lines operating into and out of India, told Mint that the association has written to the Union shipping ministry and the Tuticorin Port Trust on the issue. The quantum and timing of the surcharge is yet to be decided, Bevis said.
The terminal operator’s decision to cut cargo handling capacity by a third to 300,000 twenty foot equivalent units (TEUs) a year, by operating with only two quayside cranes instead of the earlier three has impacted shipping lines calling at Tuticorin. The reduced capacity represents the minimum mandated one by the government as per the contract signed between the two parties. A TEU is the standard size of a container and is a common measure of capacity in the container business. Tuticorin is India’s third biggest container port. PSA-SICAL Terminals Ltd is a joint venture between the world’s second biggest container port operator PSA Corp. and local firm SICAL Logistics Ltd.
Last year, PSA-SICAL approached the Tariff Authority for Major Ports (TAMP), that sets prices for cargo handling in the 12 centrally owned ports in the country seeking an increase of around 30% on the Rs2,100 it was charging per TEU for its services. But TAMP reduced the tariffs by around 54%. PSA-SICAL challenged this decision in the Chennai high court and obtained a stay against the TAMP order. The case is before the court.
PSA said that the decision of the tariff regulator has made it commercially unviable. “The much reduced revenue per TEU is not able to cover the cash operating expense and the royalty payment to the government,” PSA had said in an earlier statement.
According to the terms of the agreement, PSA-SICAL started paying a higher royalty of Rs1,010 per TEU from 15 July, up from the earlier Rs780 per TEU. PSA then decided to down-size its operations below the 377,000 TEUs it handled in the 12 months to March 2007.