Govt scraps auction route for selling stevedore permits

The highest revenue share price determined through auction will have to be matched by all other eligible stevedores/shore-handling agents

More than 90% of shore-handling agents also undertake stevedoring. Photo: Bloomberg
More than 90% of shore-handling agents also undertake stevedoring. Photo: Bloomberg

Bengaluru: The shipping ministry has decided to scrap the auction route for selling permits to so-called stevedores and shore-handling agents involved in loading and unloading cargo from non public-private-partnership (PPP) berths at Union government-owned ports in a new policy announced on Tuesday.

The scrapping of the auction route to sell stevedoring and shore-handling licences is the only change from a policy that was announced in August last year and took effect from 1 April this year.

Stevedores load and unload cargo to and from ships, while shore-handling agents undertake carting, storing and delivering of consignments to customers in the case of imports and receiving the cargo, storing, feeding and loading them onto a ship for exports.

In August 2015, the ministry announced that stevedoring and shore-handling agent permits would henceforth be sold on the basis of revenue share. The revenue share was to be discovered through auction from within the ceiling fixed by the Tariff Authority for Major Ports (TAMP), the rate regulator for Union government ports.

Consequently, the highest revenue share price determined through auction will have to be matched by all other eligible stevedores/shore-handling agents currently operating in these ports to be allowed to hold permits for work.

However, ports were sceptical about the auction method for selling permits, arguing that it would raise the cost of cargo-handling at a time when the government was looking to cut rates as part of an overall plan to reduce the logistics costs for manufacturers and industries, according to the chairman of a Union government port located on the western coast.

While dispensing with the auction route to determine the revenue share to be collected from stevedores and shore-handling agents, the new policy says that the port “shall charge a royalty as licence fee for stevedoring and shore-handling licences”.

“The port trust shall fix a per-metric-tonne royalty rate from all agents. No discrimination will be made among stevedoring and shore handling agents on the royalty licence fee,” adds the policy that will take effect from 31 July.

This implies the royalty reserve price will have to be set by the individual ports for different cargo or set of cargo based on the ceiling rate set by TAMP. And, this royalty reserve price will have to be paid uniformly by all those agents seeking to undertake stevedoring and shore-handling work at a port.

“But, how to fix the royalty reserve price will be an issue. Because, some ports may not like to charge any royalty at all over fears that it may raise the transaction costs, while some others may set 5% or 10%. Ultimately, the aim is to reduce handling costs and attract cargo to the port,” the port chairman mentioned earlier said.

“If you go for a tender, entities will quote more and cost of handling will increase. We were not in favour of that. So, the ministry scrapped the tender route and said the port can decide on the royalty. It is very arbitrary and vague now,” said the traffic manager of a port located on the eastern coast.

“The port trusts should be liberal in issuing licences to stevedoring and shore-handling agents. All eligible agents would be issued licences for stevedoring and shore-handling operations. As competition increases, the cost of transaction to the trade and the quality of services will also improve,” the ministry wrote in the new policy.

The August 2015 policy directed major ports (owned by the Union government) to go for an open and transparent auction system, based on TAMP-notified tariff, to give licences for stevedoring and shore handling on a revenue-sharing basis for a period of three years. All eligible applicants ready to match the highest revenue share determined in the auction were to be given licences. The stevedoring and shore-handling agents have to charge the rates from their principals (exporters and importers), not exceeding the ceiling tariffs notified by TAMP.

That policy was modelled on the scheme introduced by the Haldia Dock System of Kolkata Port Trust for onshore handling of dry bulk cargo from non-mechanized berths on a revenue-share basis for two years beginning 1 April 2015.

More than 90% of shore-handling agents also undertake stevedoring.

Prior to August 2015, stevedoring firms bought permits from port authorities for a three-year period after paying a fee which ranges from Rs.4,000 to Rs.1 lakh, depending on the port. On an average, there are at least 50-80 licensed stevedores operating at each of these ports.

After issuing licences, the port authorities have no role to play in their functioning because the stevedores are engaged directly by exporters and importers based on competitive rate quotations to load and unload cargo from non-mechanized berths.

They are paid by the exporters and importers who hire them but none of this money is shared with the port (that has invested money in constructing the berths and erecting cargo-handling gear) by way of royalty or revenue share as in PPP projects, triggering complaints that the ports were losing money because of the way licences are sold.

It also led to demands for selling permits on the basis of revenue share.

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