Home / Politics / Policy /  New plan to link port rates to market forces

Bangalore: A shipping ministry plan to deregulate tariffs at the dozen ports it controls is not reflected in the guidelines it has drafted to implement it. As a result, the Tariff Authority for Major Ports (TAMP), the rate regulator for these ports, and the shipping ministry will continue to wield powers over tariff-setting.

According to the draft norms that are designed to link rates to market forces, TAMP will first notify a port-wise reference rate for various commodities. Such a reference tariff will typically be the highest prevailing rate that was set on the basis of guidelines framed in 2008 for handling a particular commodity in a port.

The reference tariff so set will be applicable for five years and indexed to inflation to the extent of 60% of the variation in the Wholesale Price Index.

TAMP will also specify minimum efficiency standards for cargo terminals. Cargo handling projects will be bid out on the basis of the reference tariff.

But at the time of starting commercial operations of their cargo terminals, private firms and government-owned ports would be free to set tariffs for the services that may be higher or lower than the reference tariff, according to the draft guidelines put up on the shipping ministry website on Friday. Private firms and government-owned ports will have to inform TAMP about the actual tariff they plan to levy for a particular year.

If the actual tariff proposed to be levied is higher than the reference tariff, a proposal for notification of the tariff shall be forwarded to TAMP at least 90 days before the beginning of the financial year. The proposal shall also include the upgraded efficiency standards to be maintained by the private operator or government-owned port.

The proposed tariff, along with the proposed upgraded efficiency standards, shall be published by TAMP within two working days of its receipt on its website, inviting comments from various stakeholders for consideration by the authority, which can modify the proposal. TAMP will notify the tariff and specify efficiency standards within eight weeks of receiving the proposal.

Private firms and government-owned ports that run cargo terminals would be free to appeal to the shipping ministry against any modification of tariffs by TAMP. The new norms will only apply prospectively.

Hence, 16 private terminals that have been operating for several years will be governed by their respective guidelines framed in 2005. This has become a contentious issue between the government and the private terminal operators.

The validity of the 2005 norms ended in 2010 after a five-year run, but has been extended many times. The last extension ended in December and the ministry on Friday cleared a further extension of these norms till June. No solution is in sight for existing terminal operators.

Tariff setting by TAMP and the issues involved have become a sticky issue between government and port operators even as the ministry is struggling to attract investments into ports.

Tariff regulatory risks are perceived as a major impediment to investing in port terminals.

The shipping ministry is unable to dismantle TAMP without Parliament’s sanction. The ministry needs the approval of lawmakers to amend the Major Port Trusts Act, 1963, to do away with TAMP, which would benefit all operators, old as well as new. A market-driven tariff regime with riders may not enthuse investors.

“The new guidelines are no doubt progressive," said Rajieve Krishnan, chief operating officer of Gateway Terminals India Pvt. Ltd, the biggest of the three container terminals operating at Jawaharlal Nehru port near Mumbai. “But there is a long way to go before it becomes a fully market-driven rate regime," he said adding that the norms “may bring investors to the table to look at what it is".

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