Upfront tariff system for ports coming

The tariff norms and bidding parameters for ports are set to change. A task force under the chairmanship of Planning Commission member Anwarul Hoda has submitted its recommendations, which suggest an upfront tariff system and incorporation of productivity and efficiency standards in the bidding process.

The draft has been sent to the shipping ministry and the Department of Economic Affairs in the finance ministry for their comments.

It will be submitted to the empowered sub-committee of the Committee on Infrastructure headed by Prime Minister Manmohan Singh in the meeting scheduled for June 11.

Under the current system, the licence is granted to the bidder sharing the highest revenue with the port authority. The successful bidder is also assured a 15 per cent return on capital employed while deciding the tariff.

Usually, the bidders quote higher revenue sharing by jacking up the cost of the project and tariff, thus making the ports incompetitive.

However, in the proposed upfront tariff system, the ceiling of the tariff will be fixed first, after which the bidding will be carried out on a revenue-share basis.

"If the tariff set is on the higher side, the bidders can bid for higher share of revenue with the port authority and vice versa. So, it will be self-corrective," said a Planning Commission official involved in the draft formulation process.

The tariff cap will also be revised every three years taking into account the wholesale price index.

As other factors like technological advances also impact productivity, and ultimately the tariff structure, hence, the tariff cap would also be revised periodically taking such parameters into account, a finance ministry official said.

The new revised tariff norm will be applicable on all upcoming terminals under the Tariff Authority for Major Ports (TAMP).

However, there is no clarity whether the norms will be applicable to already existing terminals or not.