The Indian Port sector, which awaited adoption of market-linked tariff, will now witness improved investment climate and superior operational efficiencies, thereby kicking off the first phase of infrastructure overhaul at 12 major ports in the country, according to leading rating agency ICRA.
In Jan-Feb 2015, two key developments took place in the Indian Port sector which indicates that reforms with regard to tariff setting process and practices have gathered momentum. Firstly, the TAMP has issued the policy guidelines ‘Policy for determination of Tariff at Major Ports, 2015’ allowing market linked tariff for Major Port Trusts. The revised guidelines have been framed due to growing market share of non-major ports over the past few years (43% in 2013-14) and lack of parity in the regulatory mechanism between the major port trusts and the non-major ports as non-major ports are not covered by any tariff regulation.
The guidelines provide for the major ports to adhere to performance standards committed by them in order to get the indexation benefits, wherein the rates would be automatically fully indexed to WPI every year. If a particular port trust does not fulfill the performance standard, no indexation would be allowed during the next year.
According to Mr. K. Ravichandran, Senior Vice-President and Co-Head, Corporate Ratings, ICRA, “In ICRA Research’s view, the new policy provides partial flexibility in setting tariffs which should lead to better performance standards. Overall, the policy should lead to fairer competition between major and non-major ports while the investment climate at major ports will get a fillip”.
The second major development is the approval of the Attorney General of India (AG) for the MoS’s plan to allow existing private operators at major ports operating under the tariff guidelines framed in 2005 and 2008 to migrate to the new market-linked tariff regime announced in July 2013.
With the approval from the AG, the proposal now requires approval from the cabinet, post which, all the ports/ terminal operators operating under different rate regimes would be brought under a common platform.
“In ICRA Research’s view, uniform application of 2013 guidelines to all existing terminal operators will provide the requisite impetus to fresh investments in the sector for capacity creation as well as for advanced technology in the existing terminals to improve operational efficiencies and provide better services to the trade, which will support volume growth at the major ports until the planned capacity additions come on-stream.”
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