TAMP drafts new guidelines for ports

SHIPPING/ Tariff authority proposals to get legal sanctity

The Tariff Authority for Major Ports (TAMP) has drafted a new set of guidelines which, if implemented, would usher in sweeping changes in the ports sector.

Further, the government is planning to notify the guidelines issued by TAMP which would give the authority much needed legal teeth.

"The present set of guidelines were issued in 1998 but the ports were not bound to follow them. The government plans to notify the new guidelines in order to provide them with legal sanctity," a government official said.

He said the Major Port Trust Act, under Section 111, empowers the government to give binding directions to TAMP.

TAMP has already submitted the draft to the ministry, which will finalise the draft after holding consultations with ports and port users.

The draft guidelines say that the rate of return on capital will be computed on the basis of the return on capital employed (ROCE) method where the capital base is taken as the sum of net fixed assets and working capital for both major and private ports.

The rate has been fixed at 15 per cent per annum for both kinds of ports. The rate would be reviewed at the end of each financial year and revised if necessary.

According to the earlier guidelines, while ROCE was used to calculate the rate for the major ports, the return on equity method was used for private ports. The base for the latter was equity capital subject to the debt to equity ratio being unity.

The draft has, with an emphasis on achieving high efficiency levels, also recommended that the return allowed be linked to capacity utilisation of the port or the terminal.

The threshold norm should be in the range of 50-60 per cent capacity utilisation and, for ports failing to achieve this, there would be a pro-rata reduction in the rate fixed by TAMP.

It has also said that the tariff for container and vessel related charges should be linked to benchmark levels of productivity.

Further, there should be a system of incentives and penalties depending on the achievement of the benchmark levels.

The benchmarks would, however, differ for each port depending on the local conditions. A committee has been constituted by the TAMP to work out a schedule for efficiency and capacity utilisation norms for each of the ports.

For cross-subsidisation activities, the draft has said the hidden subsidies should be phased out over a fixed period of time.

However, it has also said that the cross subsidies for meeting deficit in operating costs can continue, provided it is done in a transparent manner.

The draft also prescribes that, in case TAMP initiated proceedings in any tariff matter, ports would be given an opportunity to explain their stance. The present guidelines allow TAMP to unilaterally take action regarding a review and revision of tariffs.

Sweeping changes on cards

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• ROCE method to be used for computing return on capital for all ports

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• 15 per cent rate of return per annum to be fixed for all ports

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• Tariffs be linked to efficiency benchmarks

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• Hidden subsidies to be phased out