The government plans to allow major ports to fix tariff on their own in order to give them a level-playing field with minor ports. Currently, the Tariff Authority for Major Ports (TAMP) fixes the upper limits of tariffs for 11 major ports but minor ports, which account for 35% of the port traffic, are free to decide their tariffs.
The policy option to free port tariffs is being considered as an alternative to the earlier idea of bringing minor ports also under the supervision of TAMP. It is reckoned that once adequate port capacities are created, competition would ensure tariffs remain at reasonable levels.
Currently, tariffs for major ports are fixed upfront on a normative basis for a fixed period of time and then the service provider is selected through comeptitive bidding. According to sources, with massive private investments in new port projects, the problem of insufficient capacities in the sector would be overcome sooner than expected. This would obviate controls on tariffs. Once tariffs are freed, the major ports will become more competitive, they said.
The shipping ministry wants to reduce the responsibilities of TAMP gradually before it is replaced by a new body called Major Ports Regulatory Authority. The draft Major Ports Regulatory Authority Bill (MPRAB) to establish the new authority is being finalised.
MPRAB has been drafted after consultation with end-users of ports and the 11 port trusts last year.
The freedom to fix the tariff has given 187 minor and intermediate ports an advantage over major ports as they can attract better private investments and higher cargo traffic. Aided by such autonomy, a minor port like Gujarat’s Sikka has become the second largest in volumes, after the Visakhapatnam, which is a major port.
Industry estimates show the port sector handles 733 million tonne (mt) cargo traffic a year and minor ports account for 35% of this. Mundra Port, termed as a minor port, handled 35.72 mt traffic last year against 8.52 mt by Ennore Port.
Due to binding tariff, major ports have not been able to attract private investments. Recognising this, the Planning Commission recently revised the estimated private investment in major ports under the National Maritime Development Programme from Rs 36,868 crore to Rs 21,965 crore.