All of India?s 187 non-major ports–including a clutch of them with capacities larger than some of the 12 notified major ports?could soon be brought under the jurisdiction of Tariff Authority for Major Ports (Tamp).
The move would reduce the ability of a number of these smaller ports to attract cargo from major ports, as Tamp regulation would divest them of the freedom to fix competitive tariffs. Currently, Tamp regulates tariffs of only major ports. States like Gujarat, which have built sizeable port capacities and privatised operations to a large extent, would be hit by the move.
?We are in the process of regulating the tariff of all those non-major ports that are engaged in export and import activities, in the first phase. There are 43 such cases. Gradually, we will regulate the tariff of other non-major ports, too. Their regulation will be done through Tamp. We have had internal meetings on the subject and have covered quite a distance,? a senior shipping ministry official told FE.
Under the Constitution, only the central government can build and administer major ports, but nowhere does it define the size of a major or minor port. State governments govern their intermediate and minor ports.
Gujarat had taken advantage of this policy loophole and set up several ports, both in the public and private sectors. Many of them have grown bigger than the so-called major ports administered by the Centre in terms of volumes handled. Mundra Port & Special Economic Zone, Gujarat Pipavav Port Ltd, Porbandar and Sikka are among the largest ports in the non-major category.
According to industry estimates, the port sector presently handles 733 million tonne (mt) of cargo traffic a year and minor ports account for 35%. Mundra, dubbed a minor port, handled 35.72 mt in traffic last year, against 8.52 mt of cargo handled by Ennore, which is a major port.
Gujarat’s Sikka was India?s top port in 2004-05 and currently occupies second position in terms of volumes after the Visakhapatnam major port. Gujarat has 40 intermediate and minor ports along its 1,600 km coastline.
The proposal to regulate the tariff of non-major ports was mooted by some major ports that were losing traffic due to their high tariffs to minor ports. ?Traffic at minor ports is expected to increase faster than that at major ports by 2020,? said Mundra Port & SEZ director Rajeeva Sinha.
By 2020, an additional capacity of 127.57 mt will be created at Sikka, 97.86 mt at Mundra, 45.23 mt at Pipavav, and 37.07 mt at Dahej. Against this, in 2008, Visakhapatnam port handled 48.59 mt of traffic.
?Major ports cannot match the low tariff charged by minor ports as they cannot go lower than the tariff set by Tamp. The tariff cannot be matched even though Tamp allows ports to give rebates. This is because the ports have to share the revenue based on Tamp?s tariff,? another official in the ministry said.
At a meeting of the Maritime State Development Council two years ago, the Union government had raised concerns over the minor ports? freedom to fix tariffs. ?At that time, we had told them that we have our own regulatory mechanism and they were convinced. Other states like Maharashtra also have a similar mechanism and doesn?t need the Centre?s control over its ports. If there is such interference by the Centre, how would the ports recover the huge investments they have made?? asked Gujarat Maritime Board chief nautical officer SC Mathur.
Tamp feels that regulating the tariff of non-major ports may be a long-drawn process as states are unlikely to give their consent. ?It may also end up like the situation in power, where Central Electricity Regulatory Commission regulates the sector at the Centre, even as states have their own regulators,? said Tamp member Arvind Kumar.
However, Kumar added that the Centre?s move might not be all that detrimental to minor ports. ?Oil traffic accounts for almost half of all the cargo handled at ports. And the demand for oil is only going up. So, even if a port charges lower tariffs, it would still earn higher profits due to higher volumes,? he said.
A few months ago, the regulator changed the tariff policy by fixing tariffs first and then calling for competitive bidding. The Centre has also changed the competitive-bidding norms for the selection of new builder-operators for major ports to promote efficiency.
