Madras HC rules against tariff cuts at Tuticorin port

Madras HC rules against tariff cuts at Tuticorin port

Mumbai: PSA-Sical Terminals Ltd, which runs India’s third biggest container terminal at the government-owned Tuticorin port, appears to have won a court battle against a regulator, which had recently asked for tariffs to be cut by more than half.

As of Wednesday, Mint couldn’t independently verify the court’s order, which usually takes a couple of days to reach various parties.

According to one person present at the hearing of the Madras high court on Wednesday on a writ petition filed by PSA-Sical, the court set aside an order passed by the tariff regulator in September to cut the tariffs of Tuticorin container terminal by about 54%.

It was also unclear if the court order has other riders, but this person said PSA-Sical has been asked to file a fresh proposal for a tariff increase before the regulator within six weeks. “This is what we wanted," said an official at PSA-Sical who did not want to be named. “We are operating with the existing tariff for many years, but the royalty that we are required to pay to the government-owned port increases every year as per the 30-year contract."

Before it was asked to cut the tariff by the regulator, PSA-Sical had approached the Tariff Authority for Major Ports (TAMP) last year, actually asking for an increase of around 30% on the Rs2,100 per twenty-foot equivalent unit (teu) that it was charging users.

PSA-Sical managing director S.R. Ramakrishnan declined to comment beyond saying: “The court hearing is over and there is an order. I can only comment after going through a copy of the court order." He added that a copy will be available to the company within two days.

A spokesperson for the regulator said the authourity has not seen a copy of the order and was unable to confirm assertions that the court has set aside its order.

Once the court order is verified, it has the potential to set the tone for other contentious port tariffs set by the regulator, which sets prices for the 12 government-owned Indian ports.

According to the terms of the contract signed with the government in 1999, PSA-Sical started paying a higher royalty of Rs1,010 per teu to the government from 15 July, up from the earlier Rs780 per teu. A teu is the standard size of a container and is a common measure of capacity in the container business.

The company had maintained that the decision of the tariff regulator to cut revenues by 54% has made its operations commercially unviable.

“The much-reduced revenue per teu is not able to cover the cash operating expense and the royalty payment to the government," the operator had said in an earlier statement, while announcing rationalization of services at the terminal from 15 July. The Tuticorin container terminal handled 377,000 teu’s in the 12 months through March.

Singapore government-owned PSA Corp., the world’s second biggest container port operator, owns a 57.5% stake in PSA-Sical, while local firm Sical Logistics Ltd holds 37.5% stake.

In response to a separate writ, the court also directed the Tuticorin Port Trust to look into the issue of allowing the royalty paid?by?the?terminal operator to the port as a charge it can pass on to its customers.