Thursday, August 1, 2013

New tariff guidelines strike a level playing field between all ports


It was widely felt that there was no level playing field between the Major Ports and the non-major ports due to dispensation of tariff only to Major Ports, and the new tariff guidelines set in motion would promote fair terms of business between major and non-major ports, said Union Minister for Shipping G. K. Vasan in Mumbai at the Media briefing on unveiling of new tariff guidelines. The new simplified guidelines are expected to pave way for increased investment flows into the port sector, he added.

Mr. Vasan added: “The new guidelines allow the competitive market forces to play a greater role in tariff determination and impart flexibility. This is a major step forward”. The Shipping Ministry has been contemplating on coming up with new tariff guidelines in response to feedback received from various stakeholders, who felt the existing tariff authority for Major Ports regulations is detrimental to the growth of the sector.
The Minister informed newsmen that an inter-ministerial task force, headed by Member, Planning Commission, B. K. Chaturvedi looked into the issue in a holistic manner and gave its recommendations.
He further stated: “The new guidelines are being issued after extensive consultations with all the stakeholders and I hope that they will encourage more private investment in port projects”.

The Shipping Ministry has set an ambitious target to award 30 port projects during 2013-14, which would add 288 million tons per annum, with an investment of approximately Rs. 25,000 crores. This includes a Rs. 8000-crore big ticket project of the fourth container terminal at the Jawaharlal Nehru Port, JNPT, in Navi Mumbai. 
During 2012-2013 the Ministry awarded 32 projects at an estimated cost of Rs. 6,765 crores, entailing a capacity addition of 136 MTPA.
The new guidelines for determination of tariff for projects and Major Ports would come into force with immediate effect. 
Besides providing for tariffs to be indexed to inflation, they also set out performance standards for port projects to improve accountability and ensure improved quality of service. The TAMP focus will now gradually shift to performance monitoring and redressing grievances.

Projects already awarded will not be covered under the new guidelines:

The highlights of the tariff revision includes barring of projects that are already awarded as tariff guidelines will have prospective effect. The 2005 and 2008 guidelines shall continue to apply to projects bid under them. TAMP will first set the reference tariff for particular commodity at a Major Port and such reference tariff will typically be the highest prevailing rate that was set on the basis of the guidelines framed in 2008 for handling a particular commodity in a port.
If the commodity is not handled at the port, the highest tariff in the nearest Major Port shall be taken as reference tariff. Reference tariff so set shall be applicable for 5 years. It will be indexed to inflation up to 60 of wholesale price index. TAMP will also notify performance standards of facilities and services offered at the port project.

Both the reference tariff and performance standards shall be mentioned in the bid document and the bids will be evaluated on the basis of reference tariff and indexed reference tariff would be ceiling tariff in the first year of operation.
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 a financial year. 
The proposal for increase in tariff should be sent to TAMP, stating achievements in performance standards in the previous year, to be certified by an independent engineer drawn from an approved panel.
If performance standards as per the concessionaire agreement are not achieved, TAMP shall not consider any hike in traffic. 
Revenue sharing will be as per the concession agreement and Major Port trusts shall draw performance standards for the new berths, comparable to similar PPP berths. TAMP will hold an inquiry and give its findings to the Major Port trust and the port trust will be bound to take action on the findings as per the concession agreement.

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