In a significant shift that could have a major impact on prices charged by private firms for India’s cargo handling terminals at 12 key ports in India, the government is looking to link rate hikes to the wholesale price index (WPI).

"Our plan is to see that the port tariffs are revised automatically every year without the need for the operators to take clearance from the tariff regulator for such revisions," Union shipping secretary A.K. Mohapatra said.

Tariffs for the 12 Union government-run ports are currently set by the Tariff Authority for Major Ports (TAMP), which has been known to actually cut rates when approached by private operators to raise tariffs. Currently, operators have to approach the tariff regulator for revising tariffs for their services every two years.

The 12 ports handled 464 million tonnes (mt) of cargo in the year through March, accounting for 70% of the 649mt of cargo handled by all Indian ports. The rest was handled by ports owned by state governments that have been given to private firms for development and operation.

A shipping ministry official explained that the total increase in WPI would not be allowed as a pass-through during annual tariff revisions, with a certain percentage of WPI being linked to the tariffs.

This is similar to certain roads where tolls rise by 3% every year. With roads, the model concession agreement used by the government provides for linking up to 40% of the toll to WPI.

A similar approach will be followed in ports also, said the official who didn't want to be named.

In related moves, the government is also planning to change the way it seeks future private partnerships to run cargo handling terminals at major state-run ports.

Under the new plan, tariffs will be fixed initially by TAMP based on various criteria and operational assumptions rather than fixing them based on a cost-plus model, after winning bids are chosen.

Winning bids, under the new plan, will be selected according to those willing to share the highest percentage of annual gross revenues with the port.

Current tariffs are fixed by adding 15% to the actual costs for a two-year period. During the initial years of the port privatization programme, the revenues paid by private operators to government-owned ports was also included as a cost item in computing tariffs. That practice ended in July 2003, leading private operators to claim that their revenues were being impacted.

Mr. Neeraj Sharma

Neeraj Electronics

CEO, Neeraj Electronics
Jorhat, India

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