Major ports en route to raising tariffs

The shipping ministry has proposed to allow major ports set their own tariffs to make them compete against private counterparts.
But competitive tariffs will be a challenge for the major ports owned by the government because of their employee cost and equipment-related issues.

At present, Tariff Authority for Major Ports (TAMP) is the regulator which sets the upper ceiling of rates that can be charged by all major ports in India.

But a policy change has meant TAMP will soon cease to exist and ports will be free to set their own tariffs.

The refrain among more than half a dozen port officials that DNA Money spoke to was tariffs will have to rise in the short term.
“Expenses and staff costs are extremely high for these ports. Provident fund, gratuity and medical expenses for retired employees form a chunk of their expenditure.

So they are constrained from having competitive tariffs,” said a top official from a private port who formerly handled some of India’s major ports.

“Under TAMP we could not increase tariffs, whereas all other costs have risen in the last few years. Fuel prices, an important component in port operations, are up significantly, as are employee costs. Tariffs need to be increased accordingly,” said
a senior official with the Jawaharlal Nehru Port Trust, who did not wish to be named.

An official from Vishakapatnam port concurred, saying “there’s no question of a reduction in tariffs to be competitive”.

A Mumbai Port Trust official pointed out that the last tariff revision happened in 2006. “So an increase in tariffs is an imperative, irrespective of the new policy. Even if TAMP continues, a wage revision makes sense to factor in inflation and other factors for the last five years,” the official said.

“But the flipside to that is raising tariffs may mean losing volumes to private ports. India’s major ports are already lagging in efficiency and equipment. Competitive tariffs are the only way out to attract customers,” he said.