July 13, 2020: Implementation could be deferred due to weak market conditions
State-owned Jawaharlal Nehru Port Trust (JNPT) has won large rate hikes from the tariff regulator at a time when its volumes have plummeted by 31.38 per cent during the first quarter, putting the port authority in a dilemma over implementing the hike.
The Tariff Authority for Major Ports (TAMP) has approved a rate hike of 19.03 per cent in vessel related charges (VRC) and 22.56 per cent each in container, bulk and liquid cargo related charges for a three-year period beginning August 3.
The rates approved by the regulator will be indexed annually to the wholesale price index (WPI), a measure of costs, to the extent of 100 per cent.
Vessel-related charges comprise port dues, berth hire and pilotage and are collected from ships calling at the port.
The rates approved by the regulator are ceiling rates and the port has the flexibility to charge lower rates, according to government rules.
On back burner?
The rate hikes were opposed by the port users during the consultation process and JNPT has indicated that it may defer the implementation of the increase due to the market conditions.
“If the emerging market conditions demand that the upward revision need to be deferred or rebates to be given on its revised rates, for growth of business or to sustain the existing business, such proposal can be decided by the Board of Trustees of the port at the appropriate time,” JNPT said.
Cargo volumes dip
During the April-June quarter of FY21, JNPT handled 12.099 million tons (mt) of cargo, a drop of 31.38 per cent on the 17. 631 mt handled during the same period last year as the pandemic roiled global trade.
The container volumes handled by the port plunged 35.14 per cent during the first quarter to 847,849 twenty-foot equivalents units (TEUs) from 1.307 million TEUs last year.
NSICT rate hike
On April 17, Dubai’s DP World-run Nhava Sheva International Container Terminal (NSICT), one of the five terminals operating at JNPT, won the backing of TAMP to raise rates in the range of 50 to 138 per cent in various services for a three-year period beginning May 17.
The rates will automatically rise every year because it is indexed WPI to the extent of 60 per cent.
NSICT handled 122,690 TEUs during the April-June quarter.
The rates are worked out on the basis of the annual revenue requirement (ARR). The ARR (a cap) is the average of the actual expenditure for the past three years plus 16 per cent return on capital employed (ROCE).
The 16 per cent ROCE will be calculated on gross fixed assets. It also includes capital work in progress and working capital.
Source: The Hindu Business Line
