Partial deregulation of tariffs to provide incentive for better performance at major ports: ICRA

The new policy is expected to lead to fairer competition between major and non-major ports

Indian port sector’s investment climate and operational efficiencies are set to improve, thanks to two key developments that took place in the first two months of 2015, according to rating agency ICRA.

First, the Tariff Authority for Major Ports (TAMP) issued policy guidelines to determine market-linked rates for major ports. These guidelines were framed keeping in view the growing market share of non-major ports in the past few years (43 per cent in 2013-14). Currently, non-major ports are not covered under any rate regulation.

TAMP’s guidelines suggest major ports adhere to performance standards committed by them in order to get the indexation benefits, where the rates would be automatically indexed to the Wholesale Price Index every year. If a particular port trust does not fulfil the performance standard, no indexation would be allowed in the next year.

The new policy should lead to better standards and fairer competition between major and non-major ports, while the investment climate at the former would get a fillip, said K Ravichandran, senior vice-president and co-head, corporate ratings, ICRA.

The second development is approval of the Attorney General of India to allow existing private operators at major ports operating under the rate guidelines framed in 2005 and 2008 to migrate to the market-linked rate regime, announced in July 2013.

With the AG’s approval, the proposal now requires approval from the Cabinet, after which all the ports and terminal operators under different rate regimes would be brought under a common platform.