Has TAMP outlived its utility?

In April this year, the Tariff Authority for Major Ports completes 14 years of existence. Media reports suggest that the Ministry of Shipping has decided to wind up the TAMP and in its place to constitute a comprehensive regulatory body which will have control over the major and non-major ports. It would seem to be appropriate at this juncture to evaluate the performance of the TAMP and see whether it has been able to make any significant contribution to the mechanism of tariff fixation and revision and to what extent the stakeholders namely the shippers, ship owners, port investors and the respective Port Trusts stood to benefit or not by its role as a regulator.

Background

The Government took a policy decision in 1996 to develop the second container terminal at JNPT by the public-private partnership route. International container terminal operators were invited to participate in the tender and being the highest bidder, P&O (Ports) Australia was awarded the concession to develop the terminal alongside the one which was already functioning under the JNPT's own management. P&O (Ports) then represented to the Ministry of that the power to fix tariff should not be vested with the JNPT , a competitor or the Ministry as the JNPT is virtually an arm of the Ministry . The Government saw merit in its representation and decided to create an independent, quasi- judicial body to fix and revise the tariff and authorised the TAMP to formulate its own rules and regulations.

The TAMP started well under the chairmanship of Mr Sathyam, who should be credited with putting in place a set of rules, regulations and guidelines as to how the Tariff Authority should workand introduced the “Cost Plus Model” in fixing port tariff with a 15 per cent return for investors in the port sector.

In fairness, it must be stated that some of the reforms that are seen today in port tariff structure such as the reduction in the unit of berth hire from 24 hour basis to hourly basis, time limit of four hours for cessation of berth hire charges, concession to coastal cargo, container and coastal vessels to promote coastal shipping, imposition of time limit for levy of storage charges on abandoned containers, imposition of penal interest on delayed payment by users as well as delayed refund by port trusts, flexibility to ports to respond to market situation, standardised proforma for filing tariff proposals and well-reasoned tariff orders are some of the achievements of the Authority.

Changes in market

Yet another reason that prompted the Government to establish TAMP was the ‘partial monopoly' enjoyed by the major ports themselves. The services market of Indian major ports can be described as an “oligopoly”. The Government wanted an independent regulatory authority to fix and revise the tariff structure.

When the tariff authority was formed in 1997, the non-major ports collectively handled less than 10 per cent of port traffic. In 2009-2010 non-major ports handled 288 million tonnes and the share of their traffic went up to almost 36 per cent. Mundra Port in Gujarat has handled 40 million tonnes of traffic in 2009-2010 higher than what New Mangalore Port (35.5 million tonnes) and Tuticorin port (23.7 million tonnes) have handled.

Newly emerging non-major port Krishnapatnam in Andhra Pradesh is handling 16 million tonnes of traffic, higher than what the major port of Ennore (10.7 million tonnes) has handled. The number of development projects coming up in non-major ports suggests that the partial monopoly enjoyed by the major ports in India a decade ago is fast disappearing.

ContaINER TRAFFIC

In the field of container traffic the competition appears to be more intense. In the JN Port, three container terminals are now in operation and there is intense inter-port competition between the JN Port and the Mundra Port. There is already keen competition among the three terminals in the JNPT. In Chennai, D P World will have to compete with a new terminal coming up within the Chennai port limit in addition Ennore port.

The emerging trends in the services market in India suggest that keen competition exists among the major and non-major ports and this competitive environment is expected to deepen and broaden further when ongoing port development projects get completed.

In such a scenario subjecting the major ports to the regulatory control of the TAMP and allowing the non-major ports the freedom to fix and revise their tariff structure appear to be unfair.

The public-private partnership model is bound to create a highly competitive port services market where market forces themselves will play the role of an effective regulator.