Nhava Sheva overcharged users

Importers and exporters using the country's first private sector port Nhava Sheva International Container Terminal (NSICT) paid around 80 per cent extra during the period 2002-05, according to a study by Bharat Salhotra which has been hosted on the Planning Commission site "� though the site says the study does not represent the Planning Commission's views, the author gratefully acknowledges Gajendra Haldea of the Planning Commission for key insights and valuable inputs (http://www.infrastructure.gov.in/pdf/NSICT.pdf).

The study is one in a series of such reports carried out to identify areas of improvement in PPP projects.

According to the study, lax regulatory supervision by both the Ministry of Shipping and the regulator, the Tariff Authority for Major Ports (TAMP), resulted in NSICT (which cost Rs 733 crore to build) getting annual returns in excess of 100 per cent against the permissible 20 per cent during this period.

When contacted, NSICT authorities refused to comment. Its GM (Finance), Harish Krishnamoorthy said that tariff orders are gazetted and all financial orders of TAMP are in the public domain, and he would not be able to comment on the findings of the study.

Recently retired chairman of TAMP, AL Bongirwar said that he would like to go through the contents of the report before commenting.

The major problem areas, according to the study, are in the way the TAMP allowed NSICT to classify the revenue share (royalty) it was supposed to pay the government as a cost "� so, the higher the revenue share it promised (and it won the bid on this basis), the higher the cost. This then boosted tariffs for users.

According to the study, the law did not envisage that revenue-shares would be treated as a cost "� while the law was a bit ambiguous initially, it was clarified later.

According to the clarifications, revenue-shares would be treated as a cost only if the port was making a loss, and if this was to be allowed, the revenue-share which would be used would be that of the second-highest bidder.

According to the study, this resulted in NSICT gaining Rs 5,830 crore over its concession period of 30 years.

Another problem area, according to the study, is that the TAMP allowed NSICT to charge certain tariffs in 2000 based on NSICT's traffic projections "� the lower the projections, the higher the tariffs allowed since, by definition, the tariffs have to be high enough to cover costs and a decent profit.

However, by 2003, it was clear the actual traffic handled was around two-thirds more than the initial projections "� hence, NSICT had overcharged consumers by around Rs 473 crore. Yet, the TAMP did not review NSICT's tariffs till 2005 and even then allowed it to retain half the extra windfall earnings.

Indeed, the TAMP order of 2005 which the study quotes says that a "strict application of cost plus principles followed for regulating port tariff will warrant a reduction to the extent of approximately 30 per cent in the existing tariff of NSICT" "� the TAMP, however, reduced tariffs by only 12.8 per cent.