The Hindu Business Line : Service efficiency may determine port tariffs

Framework
Port authorities to prepare report suggesting desired service levels, associated costs.
TAMP to decide tariffs initially; revision every 3 years.
New norms close to finalisation.

Mamuni Das

New Delhi, July 23 Tariffs charged at major ports could soon be linked to the efficiency of services provided by the terminal operators or port authorities.

Thus if a terminal operator wants to charge higher level of tariffs, then he has to improve the terminal’s service levels.

Port tariff-setting methodology has become a contentious issue, with terminal operators saying that the present norms do not reward those operators who bring in efficiency.

Currently, Tariff Authority for Major Ports (TAMP), the regulator, decides the tariff ceiling for each terminal by allowing for 15 per cent return on capital employed.

Under the broad guidelines of the new method — being finetuned by the Finance and Shipping Ministries along with the Planning Commission — each of the major port authorities would prepare a normative project report specifying the desired key performance indicators for port services and the costs normally associated with such parameters.

Based on these norms, TAMP would decide the tariff ceilings for terminals of a port.

These tariffs would be linked to inflation and reworked every three years.

This would ensure that the level of tariff ceilings depend on the performance efficiencies that a port or a terminal provides to its customers.

Bidding

With the tariff ceiling decided by TAMP at the initial stage, Government would select the terminal operator by inviting competitive bids from companies wanting to run the terminal.

In case the Government decides to build another similar goods-handling terminal in a port (a second container terminal for instance), then bids could be invited with higher tariff ceilings, which are in turn linked to relatively higher performance indicators.

In such a scenario, if the first/existing container terminal operator in the same port wants a higher level of tariff ceiling for its services, then it would also be required to achieve the improved level of performance parameters as fixed for the second terminal.

“An agreement is likely to be reached soon on the issue,” said official sources.

Current issues

Another problem that has emerged in the present tariff setting methodology relates to pre-2003 awards of container terminals.

Terminal operators claim to be hit by a Shipping Ministry order (July 2003) that disallowed treating revenue share (shelled out by the terminal operator to Government) as a ‘pass through’ cost while determining tariffs.

For post 2003 awards, this issue was specified in tenders itself.

The matter has also got into a legal tangle with PSA-SICAL Terminals, the Tuticorin Port’s container terminal operator since 1999, challenging the TAMP decision to reduce tariffs.

Claiming that it is making losses, PSA-SICAL has recently decided to operate at 20 per cent lower capacity levels this year against last fiscal.