BackIndia looks to consolidate all port tariff related cases in apex court
Different verdicts by various high courts on a common issue could complicate matter, prompting the shipping ministry to consolidate the cases
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The shipping ministry is looking to consolidate in the Supreme Court all the long-standing tariff-related cases being heard by the various high courts filed by private firms running cargo terminals at Union government-owned ports.
Since the issue at the core of the seven litigations (the tariff regulator ordering rate cuts when they asked for a raise, triggering complaints that the tariff-setting guidelines had flaws) are common to all aggrieved operators, the ministry will seek a direction from the apex court to either nominate a single high court to hear all the seven cases or hear the petitions itself. The petitions pertain to five container terminals and two bulk terminals being heard in the Bombay, Madras, Delhi and Calcutta high courts.
Terminals operators such as PSA International Pte Ltd, DP World Ltd and APM Terminals Management BV have individually filed petitions, some of which date back to 2007, seeking to overturn the rate cuts ordered by the port tariff regulator—the Tariff Authority for Major Ports (TAMP)—for their respective terminals located in Chennai port, VO Chidambaranar port and Jawaharlal Nehru port, respectively.
While the courts in their respective jurisdictions have stayed the rate cuts, the cases are yet to be decided.
Bringing all these cases to a logical conclusion is also intrinsic to the ministry’s efforts to migrate these old cargo terminals to the new tariff regime announced in July 2013 for new projects. Different verdicts by different high courts on a common issue could complicate the matter, prompting the ministry to consolidate the cases.
The ministry has also sought the opinion of India’s attorney general on whether the migration to the new tariff regime sought by the old cargo terminals is legally and contractually tenable.
In their petitions seeking to stay the rate cuts, the terminal operators have even questioned the shipping ministry’s powers to issue tariff setting guidelines in 2005 under Section 111 of the Major Ports Trusts Act which are followed by regulator to work out the rates, citing a conflict of interest.
Under the 2005 guideline, tariffs were set by TAMP after the cargo facility was constructed, usually by adding 16% to the actual costs.
The validity of the cost-plus tariff-setting guideline framed in 2005 ended in 2010 after a five-year run but has been continually extended since then.
Cargo-handlers say there are several flaws in the 2005 guideline that penalizes them for efficiency (handling more than the projected volumes).
According to the new rate regime announced in July 2013, TAMP will first notify a port-wise reference or ceiling rate for various commodities.
Cargo-handlers will be allowed to charge a maximum 15% more (termed a performance-linked tariff) than the indexed reference or ceiling rate during each year of a 30-year contract.
This will, however, depend upon cargo-handlers complying with the performance standards prescribed by the regulator in the previous year.
The old cargo-handlers have proposed a three-point formula to re-calculate the surplus and facilitate migration. These include permission to retain up to 20% of the surplus earned from handling more than the projected cargo volumes during a tariff cycle of three years. The balance surplus of 80% can be dealt with in the same manner as is done now.
Currently, 50% of the surplus is allowed to be retained by the operator while the balance 50% is passed on to the users in the form of reduced cargo-handling rates.
The cargo-handlers also want the full contractually-mandated royalty paid by them to the landlord port every year as a pass-through while setting rates. According to the 2005 tariff guidelines, royalty is allowed as an item of cost but only to the extent quoted by the second highest bidder in the auction process.
Third, the old cargo-handlers want the surplus to be re-calculated based on the discounts given by them to the shipping lines and not on the rates set by the tariff regulator.
Each terminal operator has also submitted a letter to the shipping ministry giving an undertaking to withdraw the court cases if the surplus was re-calculated by adopting the formula.
The prolonged court cases have blocked a revision in rates of at least three terminals—two in JN port and one in Chennai port—that are due in February. Unless the operators request the courts that have stayed the earlier rate cuts to allow the regulator to proceed with the revision exercise, nothing can be done.
The terminal operators are not in a mood to make such a request, preferring instead a verdict by the courts at the earliest. This stems from fears that such a move would backfire in case the regulator were to cut rates again rather than grant a hike due to an expanded surplus kitty (more than the permissible limits) in view of non-implementation of the earlier rate cuts.
P. Manoj looks at trends in the shipping industry.
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