For port projects that are awarded next fiscal, project developers may be able to fix market-linked tariffs. The tariffs can be higher than the recommended charges by the ports tariff regulator Tariff Authority of Major Ports (TAMP).
This is a step towards partial deregulation of tariff setting of major ports, or ports that are under the aegis of Central Government.
Present norms define the tariff ceiling for port developers, which means they can charge lower tariffs but not higher tariffs than what TAMP has recommended.
The move is expected to be good for companies looking to develop and operate Indian ports such as DPW, PSA and APM.
This is according to the Shipping Ministry’s new draft guidelines for tariff setting for major ports, and will be applicable to projects whose financial bids are invited next fiscal.
STATE VERSUS CENTRE
Citing the tariff regulations for major ports, investors in ports governed by Centre have maintained that they are at a disadvantageous position compared to investors in State Government owned ports.
Investors in State Government owned ports such as Dhamra, Mundra and Hazira are not subjected to tariff regulations.
The Shipping Ministry has proposed that the port operator will be allowed to fix a market linked tariff – in variation with TAMP’s tariff recommendation -- only once a year.
REVENUE SHARE
The Ministry has also proposed that in case the port operator garners higher revenues by charging higher than stipulated tariffs, the developer will have to share a part of the incremental revenue with the port trust.
But in case the terminal operator decides to lower the tariff, he would not be allowed to pay a lower revenue share compared to what was proposed in the bid. This clause is likely to be opposed by the investors.
FORMULA
“Upon commencement of commercial operation, the public-private partnership operator would be free to fix the market linked tariff…which may be higher or lower than the reference tariff (proposed by TAMP),” stated the Ministry.
The formula to fix the reference tariff is largely in line with the 2008 tariff guidelines, which is currently applicable for port projects. The reference tariff will move in sync with inflation every year.
The Shipping Ministry has proposed to take on the role of dispute resolution by stipulating that tariff related disputes can be referred to the Ministry. It has also set time limits for taking decisions.
Additionally, it has proposed mandatory disclosure by port operators on their physical and financial performance.