The Hindu Business Line : Container terminal operations open up a box of troubles

Different countries having adopted different institutional arrangements for the running of container terminals, and controversies over several issues surface from time to time among regulators, governments, port authorities and the terminal operators.

Take India. A fewyears ago, the Tariff Authority for Major Ports (TAMP) ruled that the rates charged by private port operators must be in line with those charged by the state-operated facilities. The order created confusion: Did it mean that the private operators would not be able to charge higher rates? If that was so, what would happen to the customers who had already been charged more? Subsequently it was clarified that the private operators must not charge lower than what the State-operated facilities did.

The confusion arose because only in one port, JNPT both private operators and state-owned facilities exist side by side in matter of handling containers. In no other major port where a private operator runs a container terminal does this confusion arise.

For example, the container terminals at Visakhapatnam or Chennai port are operated by private operators with the respective state-owned port authorities not handling any containers.

The same is true of the Kochi port, where the container handling operation has been left entirely in private hands.

In the ports not covered by the Major Port Trust Act, the situation is different. For example, Mundra and Pipavav ports in Gujarat, both handle substantial volumes of containers. But these ports do not come under the purview of the TAMP, while VCTPL in Visakhapatnam port and CCTPL in Chennai, both being parts of the major ports covered by the provisions of the Major Port Trust Act, are accountable to TAMP for rates they choose to fix.

Some time ago, the Shipping Ministry formulated guidelines that would allow domestic companies to participate in tenders for container terminals suggesting that such companies would get a price preference of five per cent.

The guidelines also defined an Indian entity as a company in which Indian residents have a majority shareholding with the stipulation that the winning bidders retain the shareholding pattern for the duration of the contract. Meanwhile, two Chinese global operators were banned from bidding for a terminal for security reasons.

Security concerns

But, then, India was not an isolated case. For example, security concerns in the US forced Dubai-based DP World to transfer its US assets, gained by way of the acquisition of the operations of P&O Ports worldwide, to an American entity.

In Panama, the change in administration threw up controversies forcing an international terminal operator to agree to compensate the government for fixed rental payments not paid earlier owing to a controversial decree enacted by the previous administration.

In Israel, the national port authority was replaced by a company in-charge of port assets and their development. The company owns real-estate at Eilat, Haifa and Ashod where separate operating companies were established. In South Africa, the plans for attracting private companies to operate terminals in Durban and Coega were shelved.

In Bangladesh also, the government's bid to privatise container handling operation in Chittagong port has been abandoned following stiff resistance from the employees and workers.

The World Bank is critical of Pakistan's port management by navy officers. It believes that the dominance of the navy in port management is unusually high by international standards. Many of the top positions are occupied by naval officers on short-term assignments from which they return to the navy or retire. Such postings have two negative effects; first, the naval officers are generally less commercial minded that what is required for successful port operations; and, second, permanent port staff feel that such positings limit the prospects of their advancement in careers.

Excessive costs

In Western Europe, there is a widespread concern that delays and costs related to the planning and approval process for port development are excessive. The cost of the planning process, that is, the cost of public inquiries, official planning submissions and legal fees, for 12 projects in several west European countries amounted to $700 million, the bill for one UK-based port alone being $82 million.

In Germany, the port of Hamburg submitted a proposal that deadlines be set for legal proceedings to be filed by interested parties and that the number of authorities concerned with the approval process be reduced.

The mergers and acquisitions by the world's leading terminal operators, mostly based in developed countries, have thrown up new opportunities and challenges. These global operators are also entering into agreements concerning specific ports, which might also involve shipping lines. The agreements with shipping lines concerned stipulate the kind of services to be rendered to the vessels in the terminals. The time has come when the ports no longer compete only with other ports but with shipping lines as well.