MUMBAI: The Union shipping ministry is set to deregulate tariff at major ports in the coming month as the ministry looks to boost investment in the port sector.
Currently, port projects set up after April 1 this year are allowed to set market regulated tariff while the Tariff Authority for Major Ports or TAMP decides the tariff to be charged across major ports in the country for projects awarded prior to April this year.
The move assumes significance as private operators will be allowed to fix market regulated tariff unlike the earlier regime when the Tariff authority fixed rates. TAMP often cut rates across facilities operated by port operators affecting their revenue.
"A move to deregulate tariff will always help bring in investments. Private sector investments in the sector has been affected as port operators believe that their investments will be stuck and their earnings affected. This will send out a strong signal," said an analyst at a leading consultancy firm.
The move to deregulate tariff for all port projects in the country comes at a time when the port sector has been grappling to attract investment from private sector companies and has seen very little investments in the past few years. "We have realised that the tariff regime is one of the most important reasons for the slowdown in investment.
The ministry will now come out with a new regulation regarding tariff regime and we have consulted with all the private port operators," Union Shipping Minister GK Vasan said. The Tariff authority currently fix the tariff to be charged by port operators across the major ports and port operators have been at loggerheads with TAMP over the rates.
Private port operators including DP world and APM Terminals have also challenged the decision by TAMP to cut rates at their facilities in the past. According to the PPP model, private port operators have to share a certain percentage of their revenue with the port operators.
The government had, in March, this year amended a policy regarding new port projects in the country when it deregulated tariff for projects set up after April 1. New projects including a container terminal to be set up at Jawaharlal Nehru Port Trust will fall under this category.
The ministry has already held discussions with all the private port operators in the country including APM Terminals and Dubai based DP world to decide on the tariff deregulations, Vasan added.
Meanwhile, the deregulation of the tariff for new projects has also helped Jawaharlal Nehru Port Trust attract interest from private port operators as the port has seen bids from as many as 8 operators for the construction of a mega container terminal worth more than 8,000 crore.
Companies including Adani, DP world and Port of Singapore Authority have so far bid for the project. Vasan also added that his ministry is now looking at implementing many of the port projects which has been delayed due to various reasons and has said that the deregulation will be a game-changer for the industry.
Meanwhile, commenting on the health of the Union government-controlled Shipping Corporation of India, the minister added that a decision regarding a chairman for the company will be taken soon and the ministry is seriously looking into a health of the company.
"We believe Shipping Corporation of India is doing fine. I am personally looking into the company and we will do everything to help the company revive and we are certain that SCI will make profits this year," Vasan added.
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2 Comments on this Story
Annie John2705 days ago
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Raj2705 days ago
Freeing up the setting of tariff at the nations port to the port operators will lead to a sharp rise in costs for the trade. Since ports in a given location are not many, there is a lack of competition which willl lead to monopolistic pricing. AS the option would be to transport the goods to the next closest port, which would generally be several hundreds of km away, the would be no viable alternative which will leave the trade to the vargaries of port operators. Private ports are already very high in cost and public ports are notorious for inefficiency. Govt needs to find a solution for moderate costs and high efficiency. This can be by way of a standard charging system and a tariff cap which leaves sufficient margin for an efficient port operator. Allowing port operators to raise tariffs exhorbitantly without commensurate improvement in efficiency is not a good solution at all and is worse than the problem of low tariffs set by TAMP which hampers investment.