Centre to link cargo handling fee to WPI

Centre to link cargo handling fee to WPI

Mumbai: In a significant shift that could have a major impact on prices charged by private?firms?for?India’s?cargo?handling terminals at 12 key ports in India, the government is looking to link rate hikes to the wholesale ?price index (WPI).

“Our plan is to see that the port tariffs are revised automatically every year without the need for the operators to take clearance from the tariff regulator for such revisions," Union shipping secretary A.K. Mohapatra said.

Tariffs for the 12 Union government-run ports are currently set by the Tariff Authority for Major Ports (TAMP), which has been known to actually cut rates when approached by private operators to raise tariffs. Currently, operators have to approach the tariff regulator for revising tariffs for their services every two years.

The 12 ports handled 464 million tonnes (mt) of cargo in the year through March, accounting for 70% of the 649mt of cargo handled by all Indian ports. The rest was handled by ports owned by state governments that have been given to private firms for development and operation.

A shipping ministry official explained that the total increase in WPI would not be allowed as a pass-through during annual tariff revisions, with a certain percentage of WPI being linked to the tariffs.

This is similar to certain roads where tolls rise by 3% every year. With roads, the model concession agreement used by the government provides for linking up to 40% of the toll to WPI.

A similar approach will be followed in ports also, said the official who didn’t want to be named.

“The automatic revision of tariffs by indexing it to the WPI would remove the uncertainties involved in revising tariffs. It would also eliminate the possibility of the regulator’s decision being questioned by operators in court, particularly in a scenario whe-re the regulator has cut tariffs when operators had sought a raise," said Mohapatra.

Such decisions by TAMP have ended up in court cases that are still pending, as is the case of DP World, which runs the Nhava Sheva International Container Terminal Pvt. Ltd near Mumbai and the Tuticorin Container Terminal operated by PSA-SICAL Terminals Ltd.

In related moves, the government is also planning to change the way it seeks future private partnerships to run cargo handling terminals at major state-run ports.

Under the new plan, tariffs will be fixed initially by TAMP based on various criteria and operational assumptions rather than fixing them based on a cost-plus model, after winning bids are chosen.

Winning?bids,?under?the?new plan,?will be selected?accordi-ng?to those willing to share the highest percentage of annual gross revenues with the port.

Current tariffs are fixed by adding 15% to the actual costs for a two-year period. During the initial years of the port privatization programme, the revenues paid by private operators to government-owned ports was also included as a cost item in computing tariffs. That practice ended in July 2003, leading private operators to claim that their revenues were being impacted.

The new bidding criteria and the system of fixing tariffs will form part of the revised model concession agreement for major port projects. The revised agreement will be announced shortly, Mohapatra said. The changed policy would also be made applicable to existing port terminal operators through a suitable mechanism.

The government plans to modernize and upgrade cargo handling terminals at the 12 major ports with an investment of Rs50,000 crore through private investments over the next five years.