There is an increasing ground swell of opinion, particularly from private sector port interests, that TAMP has basically outlived its usefulness and is now exerting more of a negative influence than a positive one, including ultimately serving as a deterrent to future investment in the major ports from both existing participants and new entities. And, it has to be said, there is a growing body of evidence that suggests this view is correct. One major point put to Port Strategy by a seasoned observer of the Indian ports sector is:“It certainly may have been fair enough to control vessel and cargo related rates when India had, for example, only one or two container terminals (i.e. limited capacity) but to apply such a regime today when there are numerous  terminals competing with each other is a nonsense.The market itself will act as a regulator.”

There are other major structural problems identified with the rationale behind TAMP, including consumer/ shipper protection; that is the objective of protecting the Indian consumer by setting tariffs that effectively regulate how much profit investors in terminals can earn. This is one of the areas that TAMP is very strict about but when it is appreciated that terminal handling costs only contribute around 3% of the total end-to-end costs of a logistics chain it is manifestly clear that this effort is misguided.There is ultimately no mechanism to ensure that the reduction in port tariffs, which mainly benefit shipping lines, will actually be passed on to Indian shippers and consumers.

Then there is the issue of de-motivating port operators. The most efficient port operators are the ones that bring down costs and as a corollary of this push profits up.Ironically,however,these parties are the ones most penalised by TAMP. The net result is that TAMP’s tariff policy discourages an operator from striving for efficiency. Indeed, in extreme cases it could even lead to operators considering courses of action such as relocating equipment overseas and gearing operations to tick over just under the level of what TAMP regards as acceptable earnings.

Experience shows that TAMP’s tariff reduction can be so severe that it raises the prospect of terminals being forced out of business. Tuticorin Port is a current example of this, the port only really staying afloat thus far by applying to the courts for a stay of the TAMP order.

There are also methodology inconsistencies. Most strange is that when TAMP gets down to the hands-on business of setting tariffs it appears to do so on something of an arbitrary basis.Certainly,no rationale is immediately apparent. It may be that there is one, dictated by factors such as recognising different levels of investment by different investors etc, and if there is then it would be interesting for TAMP to spell it out for the edification of all concerned. Table 1 highlights the charges set for different container terminal operations in various major ports and studying this further highlights the problem.

Beware the backlash

Unrest with TAMP is clearly growing – its actions having wider ramifications other than hurting those in its firing line. Take, for example, the negative press generated when TAMP stepped in and announced it was going to cap the charges levied by Nhava Sheva International Container Terminal then operated by P&O Ports and now part of the DP World group. TAMP’s actions effectively sliced away a large part of this terminal’s annual profit – but was this right given that this investor was one of the first on the Indian port’s scene and had to shoulder a commensurately large risk? There was no recognition in this action of the principle of risk and reward, and other global investors will doubtless have noted this and taken a very dim view of it.

Thankfully, some sections of the Indian Government appear to have recognised that TAMP may have outlived its usefulness. It is to be hoped,however,that within this recognition bureaucracy does not triumph over common sense. It is known, for instance, that the Planning Commission has come up with a draft model concession agreement (MCA) which sees a reduced role for TAMP. This is being opposed by the Shipping Ministry which has started a parallel initiative to draft its own MCA.

Clearly, there is recognition for the need for change; let’s hope real, timely,progress is made in this area in line with sector requirements and this doesn’t become bogged down by “territorial” squabbles or other side issues to the detriment of the industry overall.