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THE GAZETTE OF INDIA: EXTRAORDINARY

IPART Iff—SEC 4]

TARIFF AUTHORITY FOR MAJOR PORTS

NOTIFICATION

New Delhi, (he 29th January, 2001

N*>-fAIW%?8/2000-TPT.—In exercise of tfic powers coaffemd by Sectin| 48 of the Major Ptaffi

^firsts Act, 106? ($q of 1963), the Tariff Authority for Major Ports tiereby distfdfces of the repTOKHttaflan¹

sWmitted by the Tutiqgrin Steamer Agents' Association regarding anomalies in levying containerKramdling

fiRa'fgeS'by the PSA SICAL Terminals Limited, as in Ihc Order appended hereto

SCHEDULE

Case No. TAMP/78/2000-TPT

Case No.TAMP/78/2000-TPT

The Tuticorin steamer Agents' Association (TSAA)

...

A^ncant

Tho PSA SICAL Ttrmlnals Llmrtad

...

Rv^mntoit

(Passed on this 5th day of January 2001)

The Tuticonn Steamer Agents' Association (TSAA) has submitted a

representation about container handling charges levied by the PSA SICAL Terminals Limited

(PSA SICAL) at variance with the tariffs approved by this Authonty.

2-1.

The TSAA has tabulated the tariff applicable as per Scale of Rates vis-a-vis

charges levied by the PSA SICAL as given below.

Activities

Para 1.5 Charges for shifting

Container wlih In Vessel

a) For a 40' container

shifted by landing and

reshlpping.

Applicable

charges as per

Tariff

US $ 38.81

Charges levied by PSA SICAL

US $ 38.81 + Lashing / unlashtng

Charges (twice) US $ 16.08 +

Container

wharfage

charges

(twice) US $ 2.76 + Cargo

wharfage

charges

(twice)

Rs.1500/-

The TSAA has stated that the PSA SICAL refused to accept its contention

inspite of having exohanged correspondence and lengthy discussions with them.

2 2

The TSAA has further stated that PSA SICAL has been levying US $ 8.04 per

container towa.ds lashing / unlashing and stowage planning charges which is not prevailing in

any of the ports in India. Also, interest is being imposed on the users which is not mentioned in

the tariff approved by this Authority.

The TSAA had earlier represented that there was no justification to collect

lashing / unlashing, supervision and stowage planning charges on the following grounds:

(i).

Any activity on board the vessel was the sole preugative of the vessel owner /

master.

(ii).

Lashing is only for containers on deck; PSA SICAL was collecting this charge

on all containers loaded / discharged.

Subsequently, the TSAA has informed that the PSA SICAL is not seeking

authorisation from the concerned vessel before carrying out lashing / unlashing operations on

board. It has also pointed out that when it was carrying out such operations in the past, the

cost was less than Rs.25/- per unit

T ^ GAZETTE OF INDIA . EXTRAORDINARY

[PART III—SEC 4]

In response, the PSA SICAL has offered the following comments:

(i).

Stowage planning, lashing/unlashing of containers and supervision are

terminal services carried out by all major international ports. It is an essential

part of an integrated terminal operations. With such an integration in the work

process it has been possible to achieve an average Gross Crane Rate of 23

moves per hour and a fast turn around of vessels within 12 hours. The

operational efficiency and high productivity is a testimony of this best practice

in port management and operations of international standards, ft is on this

basis that the charges for stowage planning, lashing/unlashing of containers

and supervision must be viewed as a composite one.

(ii).

The THC levied by the Lines includes the charges approved by the TAMP for

stowage planning, lashing/unlashing of containers and supervision services

provided by the PSA SICAL.

Since 7 January 2000, MLOs have been

recovering this charge from shippers and consignees.

(iii).

The PSA SICAL obtains prior approval from each and every Chief

Officer/Master of the ship authorising it to perform lashing/unlashing services

by getting a Notification form signed before commencement of any operation.

(Iv).

Its activities onboard the vessels are accepted by the Chief Officer/Master and

the TSAA

has

also

included

the

charges

for

stowage

planning,

lashing/unlashing of containers and supervision services as part of the THC.

(v).

Lashing/unlashing operation is only a very small component of the total

composite services provided by the PSA SICAL.

The approved rate

represents the average cost that covers integrated services.

(vi).

Its terminal productivity is significantly higher than that at Cochin, Chennai,

Bombay, JNPT and is comparable to that of the NSICT.

The focus of

comparison should not be on individual work process / practices, but on the

final result in terms of terminal's overall productivity. Vessel turnaround time

has declined by more than 100% and a year-on-year growth rate of 35% has

been achieved.

The number of Container ships calling at the TCT has

increased by 50% as a result of its fully integrated operational process.

(vu).

It has stopped collecting the charges for wharfage and stowage planning,

lasmng / unlashing and supervision services for the landing and reshipment

(L&R) of containers till the representation of the TSAA is decided by the TAMP.

(viil).

The tariff approved for L & R operations is only for stevedorage charges. As

long as a box passes the wharf, wharfage is applicable. Hence, wharfage

charges are collected twice for boxes requiring landing and reshipping.

(ix).

Similarly, stowage planning, lashing / unlashing and supervision is charged

twice since the service is performed two times.

(x).

It was agreed between the PSA SICAL and the TSAA that two options (viz.

Deposit System or Current System) would be given to the customers for

settlement of bills; and payment of interest beyond the credit period under the

two systems was also agreed between them. The interest rate of 2% per

month charged by it for delayed payments is the same as that charged by the

TPT.

(xi).

Since, charging of interest is an administrative matter, the BOT operator should

be allowed to decide this issue based on commercial principles customised

service levels and the financial policy of the company.

The representation of the TSAA was circulated among various port users /

representative bodies of port users and the Tuticorin Port Trust (TPT) for their comments.

Comments received from them are summarised below:

Container Shipping Linos Association (India)

(i).

The PSA SICAL is charging twice for the same activity.

(ii).

There is no dispute in the rationale for transhipment charge but lines cannot bo

charged the transhipment charge and the other charges which is unjustifiable

and double charging.

The Customs Licensed Agents' Association

They fully agree with the views of the TSAA ^nd request the TAMP to guard

the Port Users by taking appropriate action to avoid payment of unapproved

charges to the PSA SICAL.

7.1.

A joint hearing in this case was held on 6 September 2000 in Tuticorin. During

the joint hearing following submissions were made:

Tuticorin Steamer Agents' Association

(i).

The PSA SICAL charges double wharfage which is illegal, rt also charges for

extra movements.

(ii).

No stevedoring is involved. Therefore, landing and reshipping cannot be said

to cover that. Even if stevedoring is recognised, it shall cover lashing also.

(Hi).

Lashing charge shall not be collected at all. The terminal charge covers that.

In any case, it shall not be passed on to users.

(iv).

Rate of US $ 8.04 towards stowage planning, lashing / unloading and

supervision services is very high.

(v).

The TAMP in its order has stated that this charge is conditional upon obtaining

specific authorisation from the vessel. This is not being followed by the PSA

SICAL. They are compelling us to pay, without allowing us to exercise the

option.

(vi).

The PSA SICAL is charging interest without authorisation from the TAMP.

(VII).

Why penalise a consignee for a ships' fault in wrongly loading containers? If at

all, treat such containers as transhipment containers; not as import and export

separately.

PSA SICAL

Our position is explained in our letter dated 5 September 2000. We will submit our

further submissions by 25 September 2000.

7.2.

During the joint hearing, it was decided to allow the PSA SICAL to submit a

detailed written submission alongwith break up of cost of rendering services by 25 September

2000. The TSAA was also advised to give details of costing from its side.

8.1.

As decided in the joint hearing, the PSA SICAL has furnished its written

submissions, a summary of which is given below:

(i).

Stowage planning, lashing / unloading and supervision is an essential part of

integrated terminal operation designed to provide high level of terminal

1 4

THE GAZETTE OF INDIA

hXTRAORDINARY

|P,\i<r III—SLC\ 4]

-ervices to their customers. This is also a critical prerequisite to achieve

productivity obligations as stipulated in its Licence Agreement with the TPT.

(ii).

The basis and rationale of their tariff structure is to deliver higher productivity at

most competitive prices. Its tariff structure is lower compared to the container

handling charges prevailing in COPT, JNPT and NSICT.

(in).

Its charges for various services were bench-marked against Chennai Port's

tariff structure. The extra services that it offers using its integrated operational

process and computerised terminal management system are packaged within

this bench- marked tariff structure. The total container handling charges in the

PSA SICAL terminal should be considered in the decision making process.

(iv).

Services provided under this charge are an integrated process that starts from

the time the container arrives at the gate, flowing through the yard, to the

wharf, and finally on to the vessel. All operations are computer integrated on

real time date.

(v).

S owage planning requires capturing of relevant container details, determining

the best crane split given the storage on-board, planning the discharge

sequence, yard space, slotting sequence of export/import containers and

stuffing /shifting of containers in the yard prior to and during vessel operations

to achieve high productivity.

(vi).

The integration of lashing / unlashing in their total operation enables them to

discharge the first container within 15 minutes of berthing of the vessel and to

maintain high level of productivity through their computerised terminal

management system.

(vii).

Supervision services involve co-ordination of all integrated terminal operations

both on-board and on shore.

(viii).

The stevedoring rate for container handled at Chennai is Rs.375/- which

includes lashing / unloading, shoe and cone fixing, etc., performed by the

stevedoring agent by employing Port Trust and Dock Labour Board labour.

The nature and services provided at the PSA SICAL are not the same as those

provided by the stevedoring agents at the CHPT. It has, however, adopted the

rate of Rs.350/- in consistent with this philosophy to adopt the rate structure of

Chennai Port.

The rate adopted is definitely reisonable considering its

efficient se<Mces and high productivity.

8.2.

The PSA SICAL has mentioned that it is not possible to give a detailed break

up of the cost of rendering these services since they are part of integrated terminal operation.

It has, however, provided an indicative break up of the cost. The PSA SICAL has requested

this Authority to maintain confidentiality of the information furnehed since it is commercially

sensitive.

With reference to the totality of information collected during the proceedings of

this case, the following position emerges:

(i).

The existing Scale of Rates of the PSA SICAL was approved by this Authority

in December 1999. The approval has been accorded based on the proposal

from the PSA SICAL seeking to adopt the CHPT rates.

It is relevant to

mention here that the existing tariffs of the PSA SICAL fixed for the first time

are not based on its own cost of operations and capital employed; but,

basically, are an adoption of the notified tariffs in the neighbouring port, i.e., the

Chennai Port Trust.

(n).

The TSAA has represented that the Terminal Operator levies twice the charges

relating to lashmg/unlashmg, wharfage on containers, and wharfage on cargo,

in the case of shifting of containers within the vessel by landing and reshipping

(L&R).

The Scale of Rates of the PSA SICAL contains a specific tariff for the handling

operation relating to a container shifted within the vessel by landing and

reshipping. The Scale of Rates is silent about levy of wharfage on container

and containerised cargo in such cases. As has been mentioned earlier, the

existing tariffs of the PSA SICAL are an adoption of the CHPT tariffs. It is,

therefore, relevant to refer when in doubt to the CHPT Scale of Rates including

the conditionalities governing the tariffs. Item No.17(c) in Chapter tt(A) of the

CHPT Scele of Rates clearly specifies that the containers and containerised

cargo covered by the operation of shifting of the containers from one hatch to

another of the same vessel via the quay using the CHPT tractor trailers or

other equipment shall not attract any wharfage. A similar prescription has,

therefore, to be applicable in the case of the PSA SICAL also. That being so,

the PSA SICAL cannot levy any wharfage on the containers and the

containerised cargo shifted within the vessel by landing and reshipping.

The reasonableness and justification of levying lashing/unlashing charges are

discussed later in this Order. Here, the discussion is confined only to the

issues of charging this rate twice in the case of shifting of containers. The

explanation offered by the PSA SICAL showj that this charge is mainly to

cover capital and operating expenditure of its computer system and activities

relating to stowage planning The actual cost of lashing/unlashing included in

this charge is negligible.

The PSA SICAL Scale of Rates allows charging of tariff for lashing/unlashing,

etc., on containers shifted on board vessels. The question is whether this

charge is to be levied twice, as allegedly done by the PSA SICAL. In the case

of shifting of containers, the Terminal Operator's efforts in stowage planning

and general supervision may not be of the same order as in the case of normal

import/export containers passing through his gate. In fact, in these cases, it

comes to the knowledge of the Terminal Operator in advance that the

container landed is to be reshipped and this aspect is taken into account in

stowage planning That being so, the Terminal Operator's involvement is only

for one time and not twice warranting collection of this charge twice

In the light of the discussion above, the PSA SICAL can levy the (handling)

charges prescribed in the Scale of Rates for shifting the container by landing

and reshipping alongwrth lashing/unlashing, stowage planning and supervision

charge only once in such cases.

(in).

The TSAA has also objected to the levy of interest imposed by the PSA SICAL

on delayed payments beyond an agreed lead-time

The PSA SICAL has

mentioned that it charges a penal interest @ 2% per month which is same as

the one charged by the TPT. The PSA SICAL has also argued that it must be

allowed to decide this issue based on its business policy.

The Authority has prescribed a 24% p.a. penal interest on delayed payments

by the users as well as on the delayed refunds by the port trusts subject to

certain conditions. The practice adopted by the PSA SICAL to levy penal

interest on delayed payments cannot be termed as unreasonable as such a

levy is a general practice in vogue in the normal course of business. What is

relevant here is that the Terminal Operator shall also pay the same penal

interest on delayed refunds to the users at the same rate Besides, the PSA

SICAL shall adopt the penal interest rate notified by this Authority from time to

time.

(iv).

The Scale of Rates of the PSA SICAL stipulates that the vessel operator shall

authorise the PSA SICAL to undertake the services relating to stowage

THE GAZETTEOF INDIA EXTRAORDINARY

|P\RI 111—Sci 4|

planning and lashing/unlashing of containers. The TSAA objection is that the

Terminal Operator does not seek such authorisation from the concerned vessel

before carrying out operations on board. The PSA SICAL has mentioned that

it obtains a prior approval from each vessel authorising it to perform

lashing/unlashing services by getting them to sign a Notification Form before

commencement of any operation. It has further argued that its activities on

board the vessel are accepted by the Chief Officer/ Master and the Lines have

also included this charge as part of the THC.

A reading of the General Notification Form (GNF) furnished by the PSA SICAL

does not indicate explicitly that such specific authorisation is made under that

Form. It is a fact that the Masters of the vessels after signing this notification

form have been allowing the Terminal Operator to carry out lashing / unlashing

and stowage planning. This shows that the vessels have been treating the

GNF as an authorisation for the PSA SICAL to undertake lashing/unlashing

and stowage planning also. It will, however, be appropriate for the PSA SICAL

to modify the Form to explicitly provide for a specific authorisation from the

Master of the Vessel.

The PSA SICAL's argument about inclusion of this charge in the THC cannot

be taken as a substitute for obtaining specific authorisation.

The rationale of inclusion of charges for on-board services in the THC is

currently under examination of this Authority in a different case relating to the

MBPT. The THC issue raised by the PSA SICAL is, however, not relevant to

the issue being canvassed for adjudication in this case.

(v).

It is to be recognised that lashing/unlashing of containers and stowage

planning do not ordinarily form part of terminal services. The Authority has

allowed a specific charge for these services after seeing force in the PSA

SICAL's contention that integration of such activities will be necessary for it to

achieve the productivity obligations. The PSA SICAL, however, has been

advised to seek a specific authorisation by the vessels before undertaking

these activities. Possibly, the PSA SICAL may negotiate with the vessels as a

part of its contract with the Lines to allow it to carry out these on board

activities.

If this does not happen, obtaining a specific authorisation in

individual cases is inevitable, and, levying this charge will be conditional upon

obtaining such authorisation.

(vi).

The reasonableness of the charge for lashing/unlashing, stowage planning and

supervision is also questioned by the TSAA.

As has been mentioned earlier, the existing tariffs of the PSA SICAL have

been adopted from the then existing tariffs of the Chennai Port Trust. At the

CHPT, the port does not levy any charge for lashing/unlashing and stowage

planning.

These activities are carried out by private Stevedores and

Surveyors. The PSA SICAL has in this case adopted the market rate charged

by these Stevedores and Surveyors.

In the CHPT context, this charge is

primarily for booking of labour gangs of the Port Trust and the Dock Labour

Board. As has been admitted by the PSA SICAL, such labour booking does

not arise in the context of its terminal operation.

The break up of costs, as furnished by the PSA SICAL now, indicates that

about 79% of this charge is proposed to be accounted for capital and

maintenance cost relating to computer hardware and software This fact was

not disclosed to this Authority when the PSA SICAL submitted its tariff

application at the time of commencement of its Terminal

In any case,

expenditure relating to computers cannot be seen as confined only to

lashing/unlashing and stowage planning. The computer system is used in all

terminal activities; and, hence the related expenditure is to be allocated to all

PSA SICAL contain some errors, a detailed analysis of which is not made in

the light of the above observation relating to expenditure on the computer

system.

The facts that integration of on board operations with the Terminal activities to

achieve the desired level of productivity and the investment made in the

computer system definitely deserve consideration. As has been mentioned

earlier, the entire expenditure on computer is sought to be recovered through

the charges on lashing/unlashing, stowage planning, etc.

Since the existing

tariffs of the PSA SICAL are not based on its own cost, it becomes difficult to

comment whether this expenditure is loaded to other activities also. The

existing tariffs have been allowed to be adopted by the PSA SICAL bearing in

mind a projected level of future revenue it has to earn. In these circumstances,

if the charge for lashing/unlashing, etc., is reduced by excluding the

expenditure on the computer system without giving the Terminal Operator an

opportunity to distribute such expenditure on all activities, the revenue model

considered earlier will be somewhat disturbed. That being so, the tariff item in

reference cannot be altered in isolation. It is noteworthy that from the users

angle, the total terminal cost of container handling is one of the lowest at the

PSA SICAL, even with the levy of the charge in reference.

This benefit

multiplies when the (higher) productivity levels achieved at the PSA SICAL, in

comparison with many other Indian Ports, are also taken into account.

(VII).

Nearly one year has passed since the PSA SICAL has commissioned its

operations. It can be reasonably expected that it has sufficient operational and

financial data for the past based on its working to be able to forecast such

details for the future also. So the time has ripened for the PSA SICAL to

branch off from the CHPT-based tariffs to a separate specification based on its

own revenue and cost projections. It is noteworthy that the Nhava Sheva

International Container Terminal (NSICT) at the Jawaharlal Nehru Port Trust

(JNPT), which had also adopted the JNPT tariffs initially at the time of

commencement of its operations, has recently opted for a separate set of

tariffs based on its own revenue and cost projections.

This Authority, therefore, finds it reasonable to allow the PSA SICAL to so

formulate its proposal for a review of the existing Scale of Rates by 1 May

2001. It is to be recognised that a tariff review need not necessarily end in a

tariff increase. If the PSA SICAL wants to stick to the two year tariff revision

cycle prescribed by this Authority earlier ignoring the specific suggestion made

now for an ahead-of-schedule review, this Authority will have no option but to

take up the tariff item relating to lashing/unlashing, stowage planning, etc., suo

mo/a for refixation.

While accepting the PSA SICAL's argument about integration of on-board

activities for achieving higher productivity, it needs to be emphasised that

tariffs shall also relate to productivity levels.

This Authority has already

prescribed an Efficiency-Linked Tariff (ELT) Scheme at the NSICT.

The

NSICT has also submitted a revised proposal for the ELT Scheme which is

under consideration. While formulating its proposal for revision of its Scale of

Rates, the PSA SICAL is advised to take into consideration introduction of an

ELT Scheme in its Terminal also.

10.

In the result, and for the reasons given above, and based on a collective

application of mind, this Authority allows the representation of the TSAA to the extend of

directing the PSA SICAL as follows:

(i).

It shall not levy wharfage on containers and containerised cargo in the case of

shifting wrthm the vessels (via quay) by landing and reshipping. It can levy

lashing/unlashing charges only once in such cases.

Billing done so far

OF INDIA.

AR\

|P,\KI III—Sw 4j

contrary to this position shall be amended and the excess payment received

shall be refunded.

(ii).

It can levy a penal interest @ X% per annum on delayed payments from the

users. In such cases, it has to pay penal interest at the same rate in case of

delayed refunds. (For the major ports the rate of penal interest prescribed is

24% per annum. But, there is no sanctity about 24%. What is relevant is that

the rate shall be the same both for delayed payments by users and delayed

refunds by the PSA SICAL.)

(iii).

It has to seek a specific authorisation from the vessels prior to commencement

of lashmg/unlashing and stowage planning activities.

Alternatively, it can

include such authorisation in the contract it may enter into with individual

Shipping Lines.

(iv).

It shall formulate its proposals for revision of the existing Scale of Rates based

on its own revenue and cost projections. Such proposals shall be submitted by

1 May 2001 to this Authority for approval.

S SATHYAM. Chairman

[ADVT -III/IV/143/E\ly/2OO(>l

Printed by the Manager. Uovt ot India I'rcs Ring Roud Mii\.ipun New Ddhi-110004

iind Published b> the Controller ol I'UIIIIL.IIJUNV Ddhi-110054