The ministry of shipping (MoS) and container and bulk terminal operators at government-run ports could be in for a showdown, if the government decides to replace the Tariff Authority for Major Ports (TAMP) with a deregulated tariff regime via re-bidding of existing terminals.
While the government is yet to take a call on whether it would like to transform TAMP or remove it completely, initial steps taken towards the proposed change do not seem to have gone down well with the terminal operators.
Global consultancy firm Deloitte Touche Tohmatsu India Private has proposed four options for possible migration to a deregulated tariff environment. However, the one it is particularly recommending is where it suggests that the government can use open bidding for the market to determine revenue share.
“To address the aspect of investor sentiment, an option can be given to the existing concessionaire to migrate to deregulated environment. Furthermore, the existing concessionaire may also be given a Right of First Refusal in the bidding process,” says the Deloitte report made public by the MoS asking for suggestions and objections.
Deloitte has also said that if, for certain reasons, some existing concessionaires would not like to migrate to a deregulated environment, in such a case, through policy directive, the “government would need to appoint a competent authority, as per the provisions of respective concession agreements, to determine tariff”.
However, Indian Private Ports and Terminals Association (IPPTA ), which represents private ports and container and bulk terminal operators, has raised strong objections to the options recommended by Deloitte. The study was commissioned by Indian Ports Association (IPA) on direction from the MoS to review the role and relevance of TAMP in the context of the port sector in India and provide a way forward.
Many analysts have long argued for ending the current bidding model for award of port projects where revenue share is the variable. It is felt that if revenue share was a fixed component and tariffs are made the variable for bidding, operations at major ports would have been able to cut costs and become more efficient. Currently, TAMP fixes the upper limit of tariffs for port services in consultation with potential bidders and then bidding is carried out with revenue share as the criterion. To grab projects, bidders agree to shell out unreasonably high amounts as revenue share – even 40-50% – and lose their ability to bring down tariffs and compete with private sector ports.
R Kishore, IPPTA’s president, in a letter dated July 24 sent to the MoS, has opposed the Deloitte suggestion saying that the existing concession agreements do not provide for rebidding, however, there is room for contemplation of flexible tariff-fixing approach. “There is precedence of change in tariff regime without re-tendering of going concerns through prior conduct of TAMP and the ministry,” he said. The letter was seen by FE.
A spokesman for IPPTA told FE that it was a matter of great concern for the industry, for trade and for India as a place to invest and do business in. “Recent suggestions that businesses be re-tendered is unfortunate and likely to be seen as detrimental. The association has long been engaged with the government to find a mutually acceptable solution, but thus far has been unable to reach a conclusion. An alternative solution needs to be found urgently and IPPTA will continue to try and develop this in partnership with the government,” the spokesperson said.
Jawahar Lal Nehru Port Container Terminal, Nhava Sheva International Container Terminal Pvt or NSICT (DP World Mumbai), APM Terminals or Gateway Terminals India (a JV between APM Terminals and CONCOR), Singapore’s PSA International and JNPT’s Bharat Mumbai Container Terminals Pvt will be some of the terminals impacted by the decision.
Even as the industry is anxious about the final decision of the government, the MoS is yet to decide on the matter. CB Singh, adviser to the MoS, said, “We are holding inter ministerial consultations but nothing has been decided so far. Deloitte has just made a study with some suggestions, the government has not taken a decision on that.” Singh did not give a timeline for the final decision.