Government plans dynamic pricing for services at state-owned ports

The Centre is weighing a policy to introduce dynamic pricing of services at state-owned ports, broadly following a model adopted by other consumer-facing transport sectors such as airlines and the Railways.

“Like private ports, the major ports will also be able to offer tariffs to various trades depending upon the volumes, frequency, etc. The policy will be applicable only to services, both vessel- and cargo-related, provided by the 12 major ports run by the Centre,” a government official briefed on the plan said.

Private terminals operating at major ports will not be covered under the policy.

“Currently, port trusts offer volume discounts/rebates to customers for container cargo and concession in vessel related charges to container ships after taking approval from its board of trustees. Once the dynamic pricing policy is in place, the port trusts will be able to raise or lower the rates at their discretion without going to the board,” the official said.

The government will soon commission a study to work out the modalities and the mechanism for dynamic pricing of services, he said.

“The policy will allow port trusts to increase or decrease the rates based on circumstances and from customer to customer without being looked at with suspicion by the government’s oversight agencies,” he stated.

Port Authroties Bill

The move to adopt dynamic pricing comes as the Shipping Ministry gears to introduce the Major Port Authorities Bill in the Budget session of Parliament, seeking to convert each of the 11 port trusts into port authorities. The biggest structural reform of the state-owned ports has been in the works since the Narendra Modi-led National Democratic Alliance (NDA) government assumed office in 2014 and retained power in 2019.

Once the Major Port Authorities Bill is passed by Parliament and signed into law, each port authority would be free to fix tariff for its assets and services.

“Yet, the power to levy rates based on dynamic pricing will have to backed by a government policy,” the official said.

Currently, the rates for 11 of the 12 ports run by the Centre are set by the Tariff Authority for Major Ports (TAMP), the rate regulator for the ports that are run as trusts.

Kamarajar Port Ltd, the entity that runs the port located at Ennore near Chennai, is outside the purview of TAMP because it was formed as a company under the Companies Act when it was started in 2001.

The 12 ports together account for some 53 per cent of India’s external trade shipped by sea. In the year to March 2019, these ports together loaded 699.05 million tonnes of cargo, translating into capacity utilisation of 46.17 per cent.

The 12 ports have a combined capacity of 1,514.09 mt.

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