Crisil to study cross-subsidy phase out in port services

By Our Special Correspondent

CHENNAI, AUG. 20. The Tariff Authority for Major Ports (TAMP) is not in favour of continuing cross-subsidisation of port services and has appointed Credit Rating and Information Services of India (Crisil) to suggest an approach for phasing out cross-subsidies, according to Mr. S. Sathyam, Chairman, of the authority.

Pending a phase-out, the authority is not at present allowing any increase in charges that are meant to act as a cross-subsidy, and permission had been refused in the case of Chennai port in one such instance, Mr. Sathyam said here on Friday.

Addressing a meeting organised by the Madras Chamber of Commerce and Industry (MCCI), Mr. Sathyam said the authority would soon ``begin actively regulating terminal handling charges'' which had not been covered by its regulations so far. The Mumbai Port Trust had come up with a ``reasoned, well-structured'' suggestion for fixing different ceilings for terminal handling charges, he said, and urged all interests concerned to come out with their proposals.

Though the authority had so far refrained from regulating port railway tariffs as being outside its purview, the Government (Ministry of Surface Transport) had recently ruled that the Tariff Authority would be the only body to decide port railways' operations. Hence the authority would take up port railway tariff issues too in the near future.

Though TAMP had been persuading port trusts to offer volume discounts, it was ``as of now'' opposed to premium rates for priority in berthing, Mr. Sathyam said. ``We have not approved premium berthing charges. There is a big gap (between demand and supply of berthing space) and there is endless scope for bargaining. We are not sure whether premium charges should be allowed without monitoring (the working of the scheme)'', the TAMP chairman said, adding, however, that this was not the authority's ``final view'' on the matter.

Volume discounts to shipping lines had become a reality in respect of liquid bulk cargo and would be applied to dry bulk cargoes too in some ports.

Mr. Sathyam suggested that the Indian Ports Association (IPA) should come out with a clear view on concessional rates for coastal traffic in respect of both cargo-related charges and vessel-related charges. At present different ports were taking conflicting views.

Referring to three volumes of compendium of important orders of TAMP brought out by it, Mr. Sathyam said port users and other interests should study and disseminate the orders, many of which dealt with basic principles and interpretations. For instance, the concept of coastal cargo had been elaborated in a case relating to Calcutta. A total of 165 orders had been passed by the authority since its inception in 1997. The authority had already reduced the validity of its orders to two years from three years, and would further reduce it to one year.

TAMP had impressed upon the government that ports should not be forced to resort to courts as the only avenue for challenging its orders, especially in view of the delays in the judicial system. The authority had suggested the setting up of an appellate mechanism within the TAMP system.

Several consultants had pointed out that the world over, authorities like TAMP also dealt with issues such as safety, environment and energy conservation. ``TAMP will not ask the government to assign it any particular role. If you have views in this matter, make them known to the government'', Mr. Sathyam told port users and the trade.

He said some people had raised the question whether the regulatory role of the authority would apply to ports which were corporatised or segments which had been privatised. But there was nothing to indicate that corporatisation/privatisation would make a difference to the jurisdiction of the authority.

Referring to the reduction of the unit of work to eight hours from 24 hours effected by the authority, he said even the eight- hour unit was co-terminous with a shift, and this diluted the effect of the change inasmuch as two shifts (of 16 hours) were sometimes involved in an eight-hour contract. The ultimate goal would be to reduce the unit to one hour.

Mr. Sathyam said the authority would insist on having a look at investments of ports, to the extent that capital charges were built into port user charges. For instance, in Tuticorin, a Rs. 250-crore scheme for dredging had not resulted in the expected increase in traffic, he said. Similarly, issues such as debt- equity ratio might be looked into and a ceiling fixed.

Ports should charge penal interest only at rates which they themselves were prepared to pay on delayed refunds by them, the TAMP chairman said. The authority had not yet taken a decision on the view expressed by many people that ad valorem-based tariffs should be abolished in tune with global trends, he added.

Capt. Suresh N. Amirapu, head of the expert committee on shipping of the MCCI, said ports should be prohibited from levying charges for services not actually rendered. Also, they should be encouraged to outsource non-core activities such as healthcare to bring down their cost of operations.

Mr. L. Sabaretnam, President, MCCI, thanked TAMP for its role in reducing the ro-ro handling charge (for passenger cars) at Chennai port, fixing the maximum at 0.3 per cent of the f.o.b. value of cars.

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