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New guidelines for Tariff at Major ports notified

Posted to New guidelines for Tariff at Major ports notified (by on July 31, 2013

The Indian government’s new guidelines for determining the tariff at major ports focuses on performance standard

As the role of Tariff Authority for Major Ports (TAMP) - the port regulator - had been under severe criticism, the Indian government this evening announced a new set of guidelines for the determination of Tariff at Major Ports that come under the federal government. These guidelines focus on allowing competitive forces to play a greater role in determination of tariff and help pave the way for increased investment flows into the port sector.

The guidelines have been brought into force particularly because the Ministry of Shipping has set an ambitious target to award 30 port project during 2013-14 which would add 288 million tons per annum (MTPA) capacity which is likely to bring in investment of approximately US $ 5 billion. These include the mega projects of the fourth container terminal at the Jawaharlal Nehru Port, Container terminal at Kandla, Diamond Harbor Container Terminal at Kolkatta port and bulk terminals in Paradip, Cochin and Mumbai ports. In the last fiscal because of the unfavorable tariff the Ministry could award only 32 port projects at an estimated cost of $ 1.3 billion that is slated to add 136 MTPA.    

Under the new guidelines the highest tariff for a commodity at a major port fixed under 2008 guidelines, indexed to 60% of WPI would become the Reference Tariff on which the bidding would take place. The private operator under the new guidelines has the freedom to charge any amount up to a ceiling of 15% over and above the applicable indexed Reference Tariff for that financial year provided the operator has achieved the minimum performance standards as committed by him in the Concession Agreement. With the issue of the guidelines the process of tariff fixation at major ports will be simplified and time bound.

The Minister of State for Shipping and Communications & IT, Milind Deora, informed that the linking of performance to tariff will improve the quality of service in major ports and will benefit the EXIM trade. It is expected that the new guidelines will encourage more investment from the private sector in port projects.

G. K. Vasan, Union Minister of Shipping stated, “In this guideline we have given focus on performance standards of the operator. Operator shall be free to propose tariff higher than indexed reference tariff from the second year subject to tariff cap of 15% over and above the indexed Reference Tariff. Upward revision will be allowed only once in the financial year. However, performance standards as per the Concessionaire Agreement are not achieved then the TAMP will not consider any hike. In the next phase of the guidelines we will allow the operators to migrate.

The trade welcomed the new guidelines and considered them as a positive move that is sure to attract investment. The representatives of Indian Private Port and Terminal Association cautioned the Ministry that the old and new operators cannot perform unless the infrastructural facilities were made available. The problems faced by the terminal and port operators was the result of limited draft, road and railway connectivity, equipment, storage area, land acquisition.