Tariff regulators are created to safeguard consumers' interests by eliminating monopoly. They are also supposed to ensure that service providers or industry participants get a reasonable return on investments.
Tariff Authority for Major Ports (TAMP) was set up with the same objectives. Its mandate is to ensure a level playing field to all stakeholders at the government-owned Major Ports.
Unfortunately, TAMP has come to a situation where its orders on tariff revision are not implemented on time by port operators. This raises the question on whether such an authority can ensure fair play.
Let us look at the scene at the Jawaharlal Nehru Port (JNP), the country's largest container hub.
In February this year, TAMP had ordered Gateway Terminals India (GTI), one of the two private terminals at JNP, to reduce tariff by 44.28 per cent. In March, it had ordered the Nhava Sheva International Container Terminal (NSICT), the other terminal, to cut rates by 27.85 per cent. Both orders were issued after reviewing the performance of the terminals and the existing charges. Tariffs at these terminals are governed by the 2005 TAMP guidelines.
In fact, both terminals had asked for a raise in tariff in view of the increasing operating costs. GTI had asked for 8.72 per cent increase and NSICT 30 per cent.
The two terminals were top performers and handled cargo in excess of their mandated minimum throughput.
However, TAMP, taking into account the increase in volume and revenue, had ordered steep cut in rates in accordance with the guidelines.
The TAMP guidelines imply that if the terminals do well, they will have to bring down their rates. The idea is that if the terminals make more money, they will have to share it with their customers (port users).
GTI is operated by AP Moller Group of Denmark and NSICT by DP World Dubai. Both independently approached the Delhi High Court seeking a stay on the TAMP order, but were told go to a court in the port's jurisdiction (Mumbai). They went to Delhi because the association of private port terminals, of which they are members, had already moved Delhi High Court. The association sought a directive to TAMP, to maintain status quo on existing rates until the government revises the 2005 guidelines.
The government had appointed a private agency to draft a new set of guidelines over a year ago. The association's appeal was to restrict TAMP from increasing the rates till the new guidelines are introduced.
Old rates
According to TAMP guidelines, the terminals were required to implement its orders within 15 days after they were gazetted. Worried over the huge revenue loss from the rate cut, both terminals have continued to charge the old rates.
According to news reports, the terminals have entered in to an ad hoc arrangement with users to levy the old rates without billing them. Accounts are expected to be settled once the new rates are introduced or the court decides on the appeal.
The terminals can challenge the TAMP order in the Supreme Court, but have not done so fearing dismissal as the Delhi court is already hearing the association's appeal. Adding to their woes, the Delhi court is taking time to come out with its order.
Neither TAMP nor JNPT, the landlord port, seem to have the teeth to ensure implementation of TAMP's order. But JNPT has the power to seek an explanation from the private terminals, on why they are not implementing the tariff cut.
Losing revenues
Having said that, JNPT is not in a position to antagonise private terminals. The moment it asks the terminals to cut rates, they will bring down their volumes.
According to the rules, terminals need to ensure only a minimum throughput. If they carry the same volume at lower rates, their revenue will come down. If the terminals carry less cargo, this will result in congestion at the port. Besides, the port trust will also lose revenue as terminals share revenue with the landlord port.
This is JNPT's dilemma.
The general view in port circles is that TAMP has strictly followed the rule book, and that reduction in rates is too steep. Even port authorities agree with that view in private. But TAMP, it seems, took a stand that it should not be blamed in the future for not playing by the rules.
The fundamental flaw is with the 2005 guidelines, which, as even port users admit, penalise efficiency. The Delhi-based Energy Resources Institute, mandated by the government to prepare a new set of guidelines, has come out with a draft.
This again is something private port operators are not too happy about.
The seeming apathy of the Shipping Ministry is the most worrying aspect of these developments.
There was a proposal to set up new regulatory system for the port sector: one for the Major Ports and State-level regulators for ports under State Governments. According to a draft Bill prepared by the Ministry in 2011, a Major Ports Regulatory Authority will replace TAMP.
When this Bill becomes law is anybody's guess.