Tariff structure may force cut in port container traffic

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Aug 4 2011, 07:31am hrs
Private container-handling operators are planning to reduce throughput at their respective terminals, thanks to a tariff structure which reduces the tariffs when traffic goes up.

Under the existing tariff structure for 12 major ports in India, which is reviewed by the Tariff Authority of Major Ports (Tamp) every three years, the more containers private operators handle, the more loss they incur in terms of their tariffs being cut at every Tamp review.

We get penalised by a reduction in tariff if we handle more volumes and try to be efficient, said one of the private container operators at JNPT.

In April-June this year, Jawaharlal Nehru Port Trust (JNPT), Haldia Dock Complex, Cochin and Mumbai Port handled 1085, 36, 82 and 14 million TEUs, compared to 1091, 37, 85 and 18 million TEUs, respectively, in the same period last year. JNPT handles about 60% of the container trade in India.

According to private operators, Tamps 2005 guidelines does not incentivise the ports on their efficiency but instead have to face a tariff decline if they handle more volumes.

We have made several representations to the government on this issue, but there has been no solution. There should not be a regulation for ports tariffs. The new tariff structure is being worked on by The Energy and Resources Institute (Teri) and is expected in by the end of this year, said SS Kulkarni, secretary general, Indian Private Ports and Terminals Association (IPPTA).

The Tamp formula for calculating tariffs allows for 16% return on capital employed and on such return they expect us to take care of royalty payout, bear interest and tax burden, dividend payout and generate profits too. This way the return on the shareholders investment boils down to a small sum and will keep on decreasing every year unless he invests more. With such returns, no investors would invest in upcoming PPP port projects, thus jeopardising new capacity addition, said another private container operator at a major port on condition of anonymity.

During their tariff review this year, DP World (Chennai Port) and TML (Haldia port) have seen more than 30% reduction in their tariffs. VSPL, the terminal operator at Vizag port, has been postponing its review fearing tariff reduction.

Container trade for 2010-11 was 20% (14.4 million tonne) of Indias overall trade (56.99 million tonne). Currently, the capacity at Indias ports is about one billion tonne.