Model deal on ports held up due to differences on tariff setting

A standoff between the Planning Commission and the Ministry of Shipping is threatening to delay the formulation of the model concession agreement (MCA) on ports. And the reason of conflict: Redefining the role of Tariff Authority for Major Ports (TAMP).

The Planning Commission, which is considering the proposed MCA draft, has suggested that TAMP, instead of setting and regulating tariffs for ports and terminal operators, should allow the tariffs to be determined by market forces. Such a suggestion does not find favour with the ministry, as it wants TAMP to continue as a tariff regulator.

Simply put, if the Planning Commission has its way, then it may allow the current process of bidding for port terminals by private players to be done in such way that the tariff is decided by market forces or by the bidders themselves. As per the commission's suggestions, the revenue share should also be fixed.

However, shipping ministry sources say that the ministry officials are not comfortable with these ideas. They say the Plan panel has been told that the ministry would like to continue with the current bidding system for terminals.

Bidding for terminals is done on revenue-sharing basis (it is not fixed) and terminal operators add operational costs to show an inflated revenue share, sources say. TAMP fixes the tariff that is charged by ports and terminal operators, based on the volume of containers handled by the terminals.

The logic behind the Planning Commission's sugg estion that tariff should be decided by market forces, is to attract greater private sector participation in terminal handling operations of major ports.

Also, with the Ministry of Shipping already running the National Maritime Development Programme (NMDP) to attract private sector participation in the maritime sector, the Planning Commission's suggestion seems to gel with that of the ministry's future plans.

However, sources say that the reason behind the friction is that the ministry does not want to tamper with the set role of TAMP as it feels that implementing Plan panel's suggestion may diminish the authority's status, say sources.

Both the Planning Commission and the shipping ministry have been working in tandem on preparing the new MCA on ports. However the difference in opinion has delayed the MCA's finalisation.

It was way back in May 2005, when an inter-ministerial group (IMG) for the preparation of the MCA under the chairmanship of the then shipping secretary DT Joseph had been set up.

The group prepare the terms of references for preparation of the MCA, while the Planning Commission began started its own exercise on the issue. Sources say that once the differences are sorted out, only then the draft MCA could be sent to the Cabinet for clearance.