Port Regulatory Authority Bill in the offing in India

Trade in India finds that replacing the Tariff Authority for Major Ports by the proposed Port Regulatory Authority Bill 2011 is akin to jumping out of the frying pan into the fire

A draft of the Port Regulatory Authority Bill 2011 is being proposed to be brought before parliament by the Ministry of Shipping, Government of India. If adopted, it will be an Act providing for the establishment of Regulatory Authorities to regulate rates for the facilities and services provided at the ports and to monitor the performance standards of port facilities. This is intended to replace the present regulatory body the Tariff Authority for Major Ports (TAMP) which has run into severe criticism.   

 The formulation and establishment of a regulatory authority took shape when India’s first Major port privatisation agreement was entered into way back in 1997. The tariff at the private terminals became an issue since the land-lord port would be competing with the licensee. Hence, the government set up TAMP for regulating the tariff at major ports. TAMP’s jurisdiction is restricted to the 13 Major ports which come under the administration of the Central government whereas the 185 non-major ports that are administered by the nine coastal states are generally free to fix their own rates.  It was intended that TAMP would cease to operate once enough inter/intra-port competition was generated. But things turned out differently.

Over the years TAMP has came out with 3 sets of guidelines but each was considered flawed, warped and not able to meet the objectives. In short it is unanimously felt that TAMP’s approach is to cap profit, fix tariff at maximum capacity, etc. Terminal operators find that there is no reward for efficiency and that TAMP keeps changing the norms and adopting higher levels of efficiency as its standard. Terminal operators have been accusing TAMP of punishing efficiency and this has resulted in the public private port model in recent times becoming a discouragement to players. Thus a fortnight back New Mangalore Port Trust called off its earlier plan of developing a container terminal under the Public Private Partnership model as all private players who had shown interest initially backed out of the project.

 “TAMP, which to date has been performing a ‘quantitative’ function, has clearly outlived its purpose, notwithstanding the overall opposition it faced throughout its existence,” says S.S. Kulkarni, Secretary General of Indian Private Ports & Terminals Association. “The proposed Bill, 2011, provides for “regulation” on two counts, viz. (a) tariff and (b) performance. The Regulatory Authority would lay down guidelines for setting tariffs as well as performance norms for various facilities and services provided at the ports. The regulator will also monitor the performance standards of port authorities and private operators providing such facilities and services.

 “Further, two Authorities are sought to be created – one for framing guidelines for tariff fixation and performance criteria and the other for hearing disputes. Creating more bodies would mean more procedures, more bureaucracy and more cost to the ultimate consumer. Instead of creating a separate Appellate Tribunal for hearing disputes, the Regulatory Authority itself can look into complaints of excessive / monopolistic tariffs; adjudicate upon any disputes that may arise between one service provider and another or between a service provider and a group of consumers.”

Kulkarni goes on to explain that as far as performance norms for private operators are concerned, there is already a licence agreement signed between the Port Authorities and the BOT (Build Operate and Transfer) operators, compelling the licencee to comply with the performance standards as prescribed. In the event of failure to meet these obligations, the procedure for dealing with defaulters has also been laid down in the agreement. Clearly, there is no need for an additional authority viz. the Regulator to be constituted to enforce a different set of regulations; undertake performance monitoring/evaluation and impose penal measures in case of non-compliance.

In order to ensure private sector participation in development of ports, it is important to provide flexibility to the developers to structure their tariff keeping in mind the higher level of investment required in dredging, breakwater, modern equipment and system, and the substantial benefits that directly accrue to the port users from such superior infrastructure and facilities.