India's top three container terminals yet to cut rates
India’s top three container terminals have defied the tariff regulator’s order to cut rates by ignoring the deadline for their reduction, Livemint reports.
The issue puts the spotlight back on the powers of the Tariff Authority for Major Ports (TAMP), the regulator for ports controlled by the Union government, and reinforces the view that it’s unable to enforce decisions.
“We haven’t yet started billing the new rates notified by TAMP,” said a top executive at Nhava Sheva International Container Terminal Pvt. Ltd (NSICT), the facility run by Dubai’s DP World Pvt. Ltd at Jawaharlal Nehru (JN) port. He didn’t want to be named. JN port is India’s busiest container gateway.
These terminals have gotten into an ad hoc arrangement with shipping lines, their main customers, not to charge them the new (lower) rates and to settle bills later, said an executive with a Mumbai-based shipping agency firm, on condition of anonymity. “These terminals have deferred raising bills based on the new rates. The idea is to see if they can get a stay order from the courts. Then they need not apply the new rates,” he added.
At least three Mumbai-based executives from three shipping lines confirmed that they have not been billed the new rates, but declined to be named.
“TAMP has no powers to enforce its own orders,” a spokesman for the regulator admitted.
On 8 February, TAMP notified a rate cut of 44.28% at the facility run by Gateway Terminals India Pvt. Ltd at JN port after the firm sought a rate hike of 8.72%. Gateway Terminals is majority owned by Denmark’s APM Terminals Management BV.
On 14 February, the regulator notified a rate reduction of 12.23% at Chennai International Terminals Pvt. Ltd in Chennai port when the terminal had asked for a hike of 15%. Chennai International Terminals is fully owned by Singapore’s PSA International Pte Ltd.
And on 1 March, TAMP notified a rate cut of 27.85% at NSICT when it had sought a 30% raise.
TAMP orders typically take effect 15 days after being published in The Gazette of India unless they’re stayed by the courts.
On 23 March, the Delhi high court dismissed separate petitions filed by the three terminal-operating firms seeking a stay on the rate cuts ordered by TAMP on jurisdictional grounds. The case was filed in Delhi when the terminals are located elsewhere. The Delhi high court order meant that Gateway and NSICT can approach the Mumbai high court, and Chennai International Terminals can go to the Madras high court seeking a stay on the rate revisions.
“No courts in the country have granted any stay against the TAMP order to cut rates at these facilities. So the TAMP orders have come into effect as per dates specified in the gazette,” the TAMP spokesman said. This is 23 February for Gateway Terminals, 29 February for Chennai International Terminals and 16 March for NSICT.
P.K. Agrawal, chief executive officer of Gateway Terminals, did not respond to calls made to his cellphone seeking comment. PSA declined to comment.
“It is for the aggrieved parties to escalate the issue in the appropriate forum if they feel they are paying higher rates. TAMP has not received any complaints from anybody saying that they have been overcharged. Even if somebody complains, TAMP has no powers to enforce its own orders. Only the courts have the powers to enforce or stay the orders of TAMP,” the spokesman for the regulator said.
There have been no complaints so far. That could be because container shipping lines—the only customers of these terminals—are not covered by any regulations on the rates they charge and are free to levy their own tariffs.
“There exists a significant variation in the terminal handling charges (THC) the shipping lines charge the importers and exporters versus the THC the lines pay the container terminal operators,” said an executive with one of the two private terminals operating at JN port.
Shipping lines levy THC on customers in addition to the ocean freight rate.
“The shipping lines should charge their customers whatever they pay to the terminals on an actual basis. But this is not the case. Shipping lines make a profit on the THC,” he said on condition of anonymity because of company policy on speaking to the media.
The Container Shipping Lines Association (CSLA) lobby group has rejected this accusation.
“We are recovering THC only on an actual basis. We are not making any money out of this. There is no profiteering going on,” said a CSLA spokesman.
In the late 1990s, TAMP unsuccessfully tried to regulate THC charged by shipping lines. CSLA took TAMP to the Mumbai high court, which ruled in the group’s favour.
A Shipping Trade Practices Bill drafted by a government-appointed panel in 2008 to deal with unregulated service providers, including shipping lines, in the logistics chain is gathering dust in the shipping ministry.
The three container terminals had previously sought to pre-empt rates cuts. Under the banner of the Indian Private Ports and Terminals Association (Ippta), a private port lobby, they filed a petition in the Delhi high court in December 2011 seeking a status quo on existing rates till the new guidelines for computing tariffs were finalized by the government. The existing guidelines framed by the government in 2005, which are followed by TAMP to set rates, are due for a revision.
Ippta had approached the court over fears that TAMP may lower the existing rates that were due for revision due to the way in which rates are set. On 9 January this year, the court declined to grant a stay on the rate revisions. The rate cuts followed.
Terminal operators argue that the ports sector has no appellate body, unlike other regulated infrastructure sectors in India, where affected parties can appeal against orders passed by TAMP. Besides, ports such as Mundra, Pipavav, Karaikal, Dhamra and many others that are owned by state governments are not regulated, creating two sets of ports in India—one that’s regulated and another that’s not.
“All port sector players should be treated at par irrespective of whether they are operating at major ports (those controlled by the Union government) or non-major ports (those owned by the states),” said Samir Kanabar, partner (tax and regulatory services), Ernst and Young Pvt. Ltd.
Meanwhile, The Energy and Resources Institute (Teri), which was mandated by the Union shipping ministry to frame new tariff-setting guidelines for port services, submitted its report to the ministry in March. The Teri report does not solve the problems of terminal operators, according to Ippta. But it makes one key suggestion by asking the shipping ministry to consider “whether the private terminals and cargo specific terminals at (Union government-controlled) ports should be freed from tariff setting and allowed to compete between themselves and non- major ports... TAMP and/or the Competition Commission of India could step in if competition is unfair or charges usurious,” the report said.
The issue puts the spotlight back on the powers of the Tariff Authority for Major Ports (TAMP), the regulator for ports controlled by the Union government, and reinforces the view that it’s unable to enforce decisions.
“We haven’t yet started billing the new rates notified by TAMP,” said a top executive at Nhava Sheva International Container Terminal Pvt. Ltd (NSICT), the facility run by Dubai’s DP World Pvt. Ltd at Jawaharlal Nehru (JN) port. He didn’t want to be named. JN port is India’s busiest container gateway.
These terminals have gotten into an ad hoc arrangement with shipping lines, their main customers, not to charge them the new (lower) rates and to settle bills later, said an executive with a Mumbai-based shipping agency firm, on condition of anonymity. “These terminals have deferred raising bills based on the new rates. The idea is to see if they can get a stay order from the courts. Then they need not apply the new rates,” he added.
At least three Mumbai-based executives from three shipping lines confirmed that they have not been billed the new rates, but declined to be named.
“TAMP has no powers to enforce its own orders,” a spokesman for the regulator admitted.
On 8 February, TAMP notified a rate cut of 44.28% at the facility run by Gateway Terminals India Pvt. Ltd at JN port after the firm sought a rate hike of 8.72%. Gateway Terminals is majority owned by Denmark’s APM Terminals Management BV.
On 14 February, the regulator notified a rate reduction of 12.23% at Chennai International Terminals Pvt. Ltd in Chennai port when the terminal had asked for a hike of 15%. Chennai International Terminals is fully owned by Singapore’s PSA International Pte Ltd.
And on 1 March, TAMP notified a rate cut of 27.85% at NSICT when it had sought a 30% raise.
TAMP orders typically take effect 15 days after being published in The Gazette of India unless they’re stayed by the courts.
On 23 March, the Delhi high court dismissed separate petitions filed by the three terminal-operating firms seeking a stay on the rate cuts ordered by TAMP on jurisdictional grounds. The case was filed in Delhi when the terminals are located elsewhere. The Delhi high court order meant that Gateway and NSICT can approach the Mumbai high court, and Chennai International Terminals can go to the Madras high court seeking a stay on the rate revisions.
“No courts in the country have granted any stay against the TAMP order to cut rates at these facilities. So the TAMP orders have come into effect as per dates specified in the gazette,” the TAMP spokesman said. This is 23 February for Gateway Terminals, 29 February for Chennai International Terminals and 16 March for NSICT.
P.K. Agrawal, chief executive officer of Gateway Terminals, did not respond to calls made to his cellphone seeking comment. PSA declined to comment.
“It is for the aggrieved parties to escalate the issue in the appropriate forum if they feel they are paying higher rates. TAMP has not received any complaints from anybody saying that they have been overcharged. Even if somebody complains, TAMP has no powers to enforce its own orders. Only the courts have the powers to enforce or stay the orders of TAMP,” the spokesman for the regulator said.
There have been no complaints so far. That could be because container shipping lines—the only customers of these terminals—are not covered by any regulations on the rates they charge and are free to levy their own tariffs.
“There exists a significant variation in the terminal handling charges (THC) the shipping lines charge the importers and exporters versus the THC the lines pay the container terminal operators,” said an executive with one of the two private terminals operating at JN port.
Shipping lines levy THC on customers in addition to the ocean freight rate.
“The shipping lines should charge their customers whatever they pay to the terminals on an actual basis. But this is not the case. Shipping lines make a profit on the THC,” he said on condition of anonymity because of company policy on speaking to the media.
The Container Shipping Lines Association (CSLA) lobby group has rejected this accusation.
“We are recovering THC only on an actual basis. We are not making any money out of this. There is no profiteering going on,” said a CSLA spokesman.
In the late 1990s, TAMP unsuccessfully tried to regulate THC charged by shipping lines. CSLA took TAMP to the Mumbai high court, which ruled in the group’s favour.
A Shipping Trade Practices Bill drafted by a government-appointed panel in 2008 to deal with unregulated service providers, including shipping lines, in the logistics chain is gathering dust in the shipping ministry.
The three container terminals had previously sought to pre-empt rates cuts. Under the banner of the Indian Private Ports and Terminals Association (Ippta), a private port lobby, they filed a petition in the Delhi high court in December 2011 seeking a status quo on existing rates till the new guidelines for computing tariffs were finalized by the government. The existing guidelines framed by the government in 2005, which are followed by TAMP to set rates, are due for a revision.
Ippta had approached the court over fears that TAMP may lower the existing rates that were due for revision due to the way in which rates are set. On 9 January this year, the court declined to grant a stay on the rate revisions. The rate cuts followed.
Terminal operators argue that the ports sector has no appellate body, unlike other regulated infrastructure sectors in India, where affected parties can appeal against orders passed by TAMP. Besides, ports such as Mundra, Pipavav, Karaikal, Dhamra and many others that are owned by state governments are not regulated, creating two sets of ports in India—one that’s regulated and another that’s not.
“All port sector players should be treated at par irrespective of whether they are operating at major ports (those controlled by the Union government) or non-major ports (those owned by the states),” said Samir Kanabar, partner (tax and regulatory services), Ernst and Young Pvt. Ltd.
Meanwhile, The Energy and Resources Institute (Teri), which was mandated by the Union shipping ministry to frame new tariff-setting guidelines for port services, submitted its report to the ministry in March. The Teri report does not solve the problems of terminal operators, according to Ippta. But it makes one key suggestion by asking the shipping ministry to consider “whether the private terminals and cargo specific terminals at (Union government-controlled) ports should be freed from tariff setting and allowed to compete between themselves and non- major ports... TAMP and/or the Competition Commission of India could step in if competition is unfair or charges usurious,” the report said.