Bangalore: Ships calling at new cargo handling terminals in state-owned ports can now pay berth hire and container-related charges directly in rupees without converting from dollars, a move that could soften the impact of currency fluctuations on both terminal operators and shipping lines.
The Tariff Authority for Major Ports (TAMP), the tariff regulator for 11 of the 12 Union government-owned ports, has decided to denominate and collect these charges in rupees. The new policy applies to new cargo handling terminals built by private firms at government-owned ports, where tariffs are set ahead of inviting price quotations from short-listed bidders. Such tariffs are valid for the entire duration of the contract, typically 30 years.
The rates, though, would increase automatically every year, to account for rising prices because they are indexed to the Wholesale Price Index (WPI), a measure of costs, to the extent of 60%.
“Firstly, applying a WPI-based escalation on a foreign currency is not correct. Secondly, the foreign exchange variation over the next 30 years cannot be predicted. In case of any abnormal variations, either the terminal users or the terminal operators will have to bear the incidence, depending on which side the appreciation takes place,” TAMP said in a recent tariff order.
“It is a good move,” said Deepak Tewari, chairman, Container Shipping Lines Association, a body representing global container shipping lines operating from India. “Prescribing berth hire in rupee terms will remove the problems associated with the fluctuations in the dollar-rupee exchange rates.”
Denominating berth hire in rupees terms will provide substantial relief to shipping lines calling at Indian ports, he added. Until 1991, berth-hire charges were prescribed in rupee terms. When the rupee underwent a major devaluation that year, India decided to denominate berth hire charges at its ports in dollars, but collected in rupees.
The principle behind this was that Indian ports could benefit by billing in dollars and converting to rupees at prevailing market rates, but the currencies have seen significant fluctuations in recent times.