TARIFF AUTHORITY FOR MAJOR PORTS

NOTIFICATION

New Delhi, the 28th November, 2001

No. TAMP/47/2001-MBPT.—In exercise of the powers conferred by Section 49 ofthc Major Port Trusts Act, 1963

(38 ofl 963), the Tariff Authority for Major Ports hereby disposes of the proposal of the Mumbai Port Trust for revision of

Port Dues on all vessels except Coastal Vessels as in the Order appended hereto.

.SCHEDULE

Cage No.TAMP/47/2001-MBPT

The Mumbai Port Trust (MBPT)

Applicant

O R D E R

(Passed on this 5th day of November 2001)

This case relates to a proposal received from the Mumbai Port Trust (MBPT) for

revision of Port Dues on all vessels except coastal vessels.

2.1.

In its proposal, the MBPT has made the following points:

(I).

Port Dues on all vessels were revised with effect from 20 May 1991. In pursuance of

Government directions, the Port Dues were denominated in dollar terms with effect

from 2 June 1992. Subsequently, the unit of charging Port Dues was changed from

'NRT' to 'GRT basis from 23 January 1994 Port Dues on vessels have not been

revised since 1994.

(ii).

The Government has directed all the major ports to review the port charges once in

three years Revision of Port Dues is already overdue. The Port has also incurred

considerable expenditure on dredumg of the main channel to facilitate deep drafted

vessels.

(Hi).

A comparison of the existing Port Dues levied at the MBPT with those of the JNPT

indicates that rates at the JNPT are much higher though its channel length is shorter.

Further, Port Dues are leviable at the JNPT on every visit as against the levy of this

charge once a month at the MBPT.

(Iv).

In the meeting of the Board of Trustees It was clarified that though this service per se

was not in deficit, the proposed revision in rates would be necessary considering the

overall financial situation (of the Port) and increasing costs on dredging and

maintenance (of channel)

2.2.

The MBPT has proposed the following revisions/amendments to the Schedule of Port

Dues In the MBPT Scale of Rates.-

(i).

The Port Dues have been proposed to be revised in respect of foreign-going vessels

as given below:

Vessel chargeable

Foreign going vessels of 3000 tons and

upwards (except fishing boats)

Foreign going vessels of 10 Tons and

upwards but less than 3000 tons

(except fishing boats)

Tugs, boats ferry boats and river boats,

whether propelled by steam or other

mechanical means arriving from ports

outside India

Rate of Port Dues per GRT

(in US cents)

Existing

Proposed

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART111—SEC. 4

(ii).

It has not proposed any revision of Port Dues on coastal vessels on the ground that

any Increase in the tariffs on coastal vessels will adversely affect the attempts of the

port to attract coastal cargo to the Mumbai Port

(iii).

A note at SI.No.(4) of explanations in the Schedule of Port Dues was incorporated in

1997 prescribing levy of full Port Dues as per the Schedule in respect of vessels

plying between the MBPT and the JNPT for carriage of cargo. This was applicable

for vessels plying only between the MBPT and the JNPT and not in respect of vessels

engaged in foreign trade or coastal trade and calling from other ports. This

explanation was not accepted by the Audit as It resulted in vessels paying additional

charges to the MBPT. To obviate such difficulties to the trade, the MBPT has

proposed to amend this provision as given below.

"The vessels visiting the JNPT, if for any reason same vessels visit the MBPT,

half of the Port dues recoverable as per the above schedule shall be levied.

Vessels plying exclusively between the MBPT and the JNPT for carriage of

cargo and not sailing out of Mumbai Harbour Limits, however, shall be levied

full Port dues as per the above schedule."

(iv).

The MBPT has also proposed to incorporate the provision about re-conversion of

dollar denominated tariffs at the time of billing based on a common adoption Order In

this regard passed by the Authority.

(v).

All other existing provisions in the Schedule of Port Dues are proposed to be

retained.

3.1.

The proposal of the MBPT was circulated among various port users/representative

bodies of port users and the JNPT for their comments. The comments received from them are

summarised below:

The Jawaharlal Nehru Port Trust (JNPT)

(i).

In pursuance of an agreement signed in August 1989 between the MBPT and the

JNPT, the JNPT Is recovering half of the MBPT Port Dues from vessels calling at the

JNPT and remitting the same to the MBPT.

(ii).

It has no objection to the MBPT proposal for increasing its Port dues. The JNPT has,

however, taken up with the MBPT the issue of charging 50% of the MBPT Port dues

at the JNPT. It has requested the MBPT to review the matter as twelve years have

passed since the signing of the agreement.

(ili).

The MBPT has stated that though this service is not in deficit, the revision in Port Due

is proposed considering the overall financial situation and increasing costs on

dredging and maintenance. The Authority may examine this in the context of Its

stated policy of not allowing cross-subsidisation.

The Container Shipping Lines Association (CSLA)

(i).

Taking into consideration an average depreciation in Indian Rupee of 6% per annum,

the Port Dues have gone up by nearly 36% in the last six years (i.e. since the last

revision). With the introduction of 5% service tax, the effective increase in rates

proposed by the MBPT will be approximately 19%.

(ii).

The Port has confirmed that this service per se Is not in deficit

The attempt to

improve the overall financial situation by cross-subsidising the other services from the

surplus arising from revision proposed in Port Dues is contrary to the guidelines

prescribed by the TAMP.

(iii).

There is no change in the available draft at the Mumbai Port. The dredging done by

the MBPT is In nature of routine maintenance, which is fundamental for any Port/

Terminal.

(Iv).

The vessels calling at the JNPT/NSICT are required to pay 50% of the Port dues to

the MBPT for every call The MBPT must have made huge surplus without rendering

any extra service due to steep increase in traffic at the JNPT/NSICT from 1994

onwards; and, also due to increase in the size of vessels.

(v).

The proposed rate increase shall have severe implications on the vessel-related

charges at the JNPT/NSICT.

This will make the port call cost at these ports

uncompetitive.

(vl).

The Government plans to develop the JNPT/NSICT as a major transhipment hub and

the MBPT has a role to play in promotion of hub and spoke concept. Any Increase in

vessel related cost, therefore, will be detrimental to these efforts.

Indian Merchants Chamber (IMC)

It has no comments to offer on the MBPT proposal.

3.2.

We have not received any comments from the Bombay Chamber of Commerce and

Industry, MANSA, WISA, INSA and SCI, despite reminders.

3.3.

A copy each of the comments received from the representative bodies of port users

and the JNPT was forwarded to the MBPT as feedback information.

4.1.

On a preliminary scrutiny of the proposal, the MBPT was requested to submit the

proposal as per the proforma prescribed by this Authority for submission of tariff proposals. It was

requested also to furnish separate cost statements for the Port as a whole and for the entire vessel

related activities. The MBPT was also requested to furnish additional/information/ clarifications /

comments on certain points. Some of the main points raised are as follows:

(i).

Traffic projections need to be justified with reference to the Port's five year

plans/MOU signed with the Govt. The vessel traffic estimates relating to the JNPT

shall be indicated separately.

(ii).

Proportion of foreign-going vessels to coastal vessels.

(iii).

The proposal of the MBPT for not increasing Port Dues for coastal vessels appears to

be contrary to generally accepted principle. The reasons for requiring the foreign-

going vessels to contribute more than the accepted level of cross-subsidy in favour of

coastal vessels is to be clarified.

4.2.

In response, the MBPT has submitted the proposal in the prescribed proforma

alongwith the following clarifications / additional information;

(i).

The disparity in rates between the foreign-going vessel and the coastal vessel need

not be maintained now at 100% to 70%, since prior to conversion of vessel-related

charges In dollar terms, the Port Dues in respect of coastal vessels were prescribed

at 44% of the tariff applicable for foreign-going vessel.

(ii).

The MBPT does not work out service-wise capital employed. The ROCE for the port

as a whole is worked out and then apportioned to each of the services on the basis of

net block of each service for the purpose of revision of charges.

(iii).

Proportion of foreign-going vessel to coastal vessel is 52:48 and 50:50 for the years

1999-2000 and 2000-2001 respectively.

(iv).

Any increase in Port Dues on coastal vessels will have an adverse effect on the

Port's attempt to boost coastal cargo through the Prince's and Victoria docks which

are lying unutilised. The MBPT does not like to witness a further fall in coastaJ cargo.

Subsequently, the MBPT was requested to offer additional information/clarification on

the various points arising out of its earlier reply. Some of the main points raised are summarised

below:

(i),

The vessel traffic projections must include vessels calling at the JNPT; and, income

from such vessels need to be Indicated separately.

3 £7-6^/" /•*•"' "~3

THE GAZETTE OF INDTA . EXTRAORDINARY

[PARI ]]i—Svr. 4]

(li).

Breakup of operating cost and the basis of apportionment of various cost elements

(iii).

The MBPT has accepted the fact that net block of assets for each services are

identifiable. The capital employed and return on capital employed, therefore, need to

be calculated specifically for this activity.

(iv).

Reasons for proposing a further increase when the cost statement prima facie,

indicates a huge surplus in the region of 70% of the operating income after allowing

18.5% return on capital employed.

(v).

Cost statement in the prescribed proforma for the years 2000-01 (actuals), 2001-02

(BE) and 2002-03 (projected).

(vi).

Reasons for resorting to piece-meal revision of tariff instead of reviewing the whole

tariff structure of the Port.

An Agreement relating to the procedure to be followed for using the common user

channel was signed between the MBPT and the JNPT on 31 August 1989

Clause 18 of this

Agreement provides for a review after sufficient experience is gathered in implementation

The

Agreement also stipulates that the JNPT will collect and remit to the MBPT the Port Dues leviable as

per MBPT's Scale of Rates. The documents furnished by the JNPT indicate that it has already

proposed to the MBPT for a review of the Agreement, but, response from the MBPT is awaited for

more than a year now In this backdrop, the MBPT was requested to specifically comment on the

points made by the JNPT about review of the Agreement relating to common user channel.

7.1

A joint hearing in this case was held at the MBPT on 13 August 2001. At the joint

hearing, the Chairman of this Authority requested the MBPT to specifically address the following

points, apart from its submissions on any other issues it would like to argue:

(i)

For vessels going to the JNPT, the MBPT collects 50% of Port Dues. This collection

is being made on its behalf by the JNPT with reference to an Agreement between the

two Ports This Agreement has been in existence since 1989. The Agreement itself

envisages a review after a few years The JNPT had, in fact, proposed for a review

some years ago The MBPT has not yet responded. Is it not time for the Agreement

to be reviewed instead of simply continuing with the 50% charge?

(ii)

In its computations, has the MBPT reckoned with the revenue earnings to be realised

from vessels going to the JNPT?

(iii).

The cost statement shows a (huge) surplus position in respect of the Port Dues cost

centre. If this is so, how can a further increase be justified?

(iv)

The Port Dues are being levied on a 'per month' basis even on foreign-going vessels.

Can it be on a 'per call' basis'?

(v)

Why is the MBPT coming with piecemeal proposals for tariff revisions instead of

formulating comprehensive proposals for all activities as is being done by most other

major ports'?

(vi)

The proposal specifically excludes coastal vessels. But, it has to be understood that,

even if there is no revision in the coastal vessel rates, the mere re-adjustment of the

70% figure with reference to the new rate for foreign-going vessels will involve a

change in the coastal vessel rate.

7.2

At the joint hearing, the following submissions were made.

The Mumbai Port Trust (MBPT)

(i)

Based on the financial results of earlieryear accounts, we admitted the 'surplus'. We

have spent Rs 26 0 crores on maintenance dredging in 2000-01. We have to spend

I¹'

Rs. 20 0 crores more in 2001-02. We now see that we are in deficit This warrants a

revision of tariff

(ii).

With reference to recovery of 50% of Port Dues on vessels calling at the JNPT, it

needs to be noted that we also incur expenditure. What we get is not, therefore, a

total 'gift'

(iii).

Recovery of 50% of Port Dues on account of the JNPT vessels has been taken into

account in our costing.

(iv).

We were not aware of the JNPT letter of 23 July 2000 for a review of the Agreement

The TAMP has pointed out this now. We have not had time to examine the said

JNPT letter.

(v).

We need to consult our Board of Trustees to change the frequency of levy of Port

Dues from 'per month' to 'per call'. Please allow us time.

(vl).

Regarding piece-meal proposal for revision, we have lot of difficulties this year. We

have incurred nearly Rs. 500 crores loss. Our Board has called for all possible efforts

to increase revenue. We will explain in detail in our written submission. We will give

a complete written submission (covering the points raised in the Authority's letter

dated 8 August 2001 also) by first week of September.

(vii).

It is incorrect to think that exchange rate fluctuations always benefit the port. We also

incur expenditure in dollar terms (e.g. payment for VTMS). In such cases we end up

paying more.

(viii).

Our own oil tanker traffic also requires deeper draft.

The Container Shipping Linos Association <CSLA>

(i).

Please take into account additional revenue earning due to exchange rate fluctuation.

(ii).

The JNPT's 50% recovery of Port Dues for the MBPT Is a total additionality. It is a

bonus to the port. The MBPT spends nothing extra on the JNPT traffic

Mumbal and Nhava-Sheva Ship Agent's Association (MANSA)

(I).

The JNPT traffic requires deeper draft; whereas, the MBPT traffic does not. Why

should we pay for the JNPT's requirement?

(ii).

Navigational aids like buoys/markers, etc., hydrographic services and VTMS

(especially with respect to fishing vessels) are missing at the Port. Our vessels have

repeatedly complained. Nothing happens; but still Port Due is Increased.

7.3.

The request of the MBPT for time upto 7 September 2001 to file a comprehensive

written submission was allowed.

8.1.

As decided at the joint hearing, the MBPT has made a written submission giving

additional information /clarification on the various points raised by us. The salient points made in the

written submission are given below:

(i).

The actual cargo handled at the MBPT is 27.06 MT as against a traffic projection of

28.67 MT as per the MOU for the year 2000-01. It will fall further due to collapse of

storm gate and declining trend of traffic witnessed during the last few months. It is

confirmed that the vessel traffic projections include vessels calling at the JNPT.

(ii).

A statement Indicating breakup of operating cost and basis of apportionment of

various cost elements has been furnished.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PARTID—SEC. 41

{ill).

It Is not feasible to work out service-wise capital employed with the present

accounting system. If it is absolutely essential It may have to be worked out arbitrarily

based on some assumptions, which may not reflect the correct position.

(iv).

The cost statement indicates a surplus of 70% for the year 1999-2000, however, for

the year 2000-01 there Is a cost deficit of 63.3% for the Port conservancy activity.

Further, there has been no revision in Port Dues since 1994; and, hence, It is

proposed to revise the same now.

(v).

Review of working results of all the services Is undertaken every year. If any service

Is In surplus, revision of rates for that service is not proposed. In other cases,

revision has been proposed in that year. Hence, the revision is proposed in piece-

meal.

(vi).

Levy of Port Dues, on 'per call' basis will simplify the billing procedure. Since number

of vessels calling again at the Port within the same month is not large, rates proposed

by the MBPT (on "once in a month' basis) may be maintained,

8.2.

In repose to the comments of the JNPT and the CSLA, the MBPT has made the

following main points:

(i).

As per the Agreement between the JNPT and MBPT, the MBPT has to maintain a

minimum dredged depth of 10.8m in the common user channel, apart from provision

of navigational aids. In fact vessels visiting the MBPT (docks) require a depth of only

9 metres. The maximum depth required by vessels visiting Jawahar Dweep is 10.5

metres. Thus, a depth of 10.8 m is exclusively maintained for the vessels calling at

the JNPT.

(ii).

The expense incurred for dredging of common user channel during the year 2000-

2001 is about Rs. 25.23 crores whereas the revenue out of Port Dues accruing from

the JNPT Is just Rs. 7.30 crores which is not sufficient enough to meet these

expenses.

(iil).

The depth of 10.8 meters in the channel is maintained only for the benefit of the

JNPT. In return, the JNPT Is authorised to collect 50% of the Port Dues from the

vessels visiting the JNPT. In the event of ship bound for or sailing from the JNPT

becoming wreck within the port limits of the MBPT, it will be the responsibility of the.

MBPT, to remove the wreck as per the Agreement. Taking into consideration all

these aspects, recovery of 50% of the Port Dues payable as per MBPT schedule on

the vessels visiting the JNPT is justified.

(iv).

With reference to the CSLA contention about additional revenue accrued to the

MBPT due to depreciation in rupee, the MBPT has stated that even the Shipping

Lines collect freight charges and detention charges on containers in dollar terms and

they have benefited more than the ports on account of depreciation in rupee value.

(v).

It is not correct that vessels calling at the JNPT/NSICT are required to pay 50% of

Port Dues to the MBPT at every call. In fact, what is remitted to the MBPT by the

JNPT is on 'once in a month' basis

With reference to the totality of information collected during the processing of this

case the following position emerges:

(i).

This proposal is made by the MBPT based mainly on the following three grounds:

(a).

Last revision was in 1994; another revision is, therefore, overdue.

(b).

The port conservancy service is not suffering any cost deficit; but, the port as

a whole is not in the same position.

(c).

A huge expenditure has been incurred during 2000-01 towards maintenance

of the channel.

(ii).

The MBPT Initially mentioned that there was no cost deficit under Port Conservancy

activity. Subsequently, It has pointed out that the proposal was made based on

figures for 1999-2000; but, the cost statement for the year 2000-01 discloses a

deficit. It is to be recognised that this Authority has prescribed a tariff validity cycle of

two years and, therefore, takes Into account the average cost position relating to the

succeeding two years to decide on the quantum of increase in tariff to be followed.

The MBPT's approach of reviewing financial results every year and proposing

revision on only those activities showing deficit cannot be a rational one. It is a well

known fact that the existing tariff structure at all major ports includes elements of

cross-subsidisation between different activities. If piece-meal revision, as followed by

the MBPT, is adopted, the cross-subsidisation factor (at the existing level) remains

unaccounted for. Further, a comprehensive review of tariff at the specified time

interval provides an opportunity to examine various cost elements closely, particularly

In respect of overheads allocated between various activities.

Be that as it may, even if the MBPT's argument of piece-meal revision of tariff is

accepted, the action (not) taken by it to revise other tariff items remains unexplained

in view of the huge cost deficit reported for the Port as a whole.

It is also relevant here to point out that a mere fact of expiry of tariff validity period of

two years (or 3 years as earlier prescribed by the Government) cannot be a sole

ground to seek an upward revision of tariff.

This Authority has clarified on a number of occasions that a review at the end of the

tariff validity cycle need not necessarily result in an upward revision of tariffs.

(in).

The MBPT has confirmed that its income estimates include income from the JNPT

vessels and provision for (future) fluctuation of foreign exchange. The MBPT's

comments on the CSLA's observation about additional benefit to the port on account

of foreign exchange fluctuation cannot be accepted as relevant Accrual of a benefit

to the Lines due to foreign exchange fluctuation has no relevance to fixation of Port

tariffs, except in the context of currency-denomination, in the 'cost-plus' regime of

tariff setting.

(iv).

The major cost element in this case is the expenditure of Rs 25.23 crores incurred

dunng 2000-01 on maintenance dredging. There cannot be two opinions on the

CSLA's point that dredging for maintenance of navigable channel is fundamental for

any Port

But, it cannot be free of cost; the cost thereof has to be an essential

component of the tariff-computation

Alongwith the position explained above, It is also to be recognised that abnormal

expenditure or an accumulated liability or such expenditure incurred which produces

benefits over a period of time cannot be allowed to be considered only in the year in

which it is incurred. If this is allowed, then the tariffs are made to bear a permanent

burden on account of a one time abnormal liability.

The cost statement furnished by the MBPT shows no expenditure on maintenance

dredging dunng the years 1998-99 and 1999-2000. Only in 2000-01, the port has

incurred an expenditure of Rs 25.23 crores. Again, the cost statement Indicates no

projections of expenditure on this account In the years 2001-02 and 2002-03.

(Though the MBPT mentioned at the joint hearing about some expenditure In 2001-

02, the cost statement furnished by it does not support its statement)

From the

position disclosed by these facts, it can bo reasonably assumed that the MBPT incurs

huge expenditure on maintenance dredging not on an annual basis. That being so,

for the purpose of tariff determination, this Jiability will need to be considered as a

deferred revenue expenditure and written off over the number of years for which the

THE GAZETTE OF INDIA FXTRAORDTNARY

[POTIII—SK\41

benefit lingers on. Since no expenditure on dredging is to be incurred till 2002-03, it

is reasonably assumed that the benefit of dredging carried out in 2000-01 will

continue to be available till the end of 2002-03. That being so, the expenditure on

maintenance dredging is treated as deferred revenue expenditure and written off over

the period of three years from 2000-01 in the revised cost statement.

It is relevant here to mention that the cost position for the years 2001-02 and 2002-03

are relevant for this exercise If ths approach adopted by the MBPT to consider the

dredging expenditure only for the year 2000-01 is allowed, there need not be any

review of tariff with reference to expenditure on dredging, as cost position for the past

has no relevance to fixing tariff for the future.

(v).

The MBPT has furnished a revised cost statement for the Port Conservancy activity

for the year 2000-01 reportedly based on its annual accounts

There are major

changes in the operating expenditure, management and general overheads and other

allocated expenditure as compared to the cost figures furnished alongwith the original

proposal. The MBPT has, however, not furnished revised cost statement for the

years 2001-02 and 2002-03 based on these revised figures of the year 2000-01. As

a result, there is no apparent correlation between the actual expenditure considered

for the year 2000-01 with the expenditure projected for the years 2001-02 and 2002-

03. In the absence of any revised data for the years 2001-02 and 2002-03 the figures

as indicated in the original proposal are retained for these two years.

Further, the cost statement furnished by the MBPT contains many discrepancies

particularly with reference to computation of capital employed and ROCE. The MBPT

has not given any satisfactory clarifications to the queries raised by us in this regard.

In fact, most of these discrepancies were pointed out in this Authority's Order relating

to the MBPT's proposal for revision of wharfage charges and Pier Dues relating to its

MOT and Pir Pau jetties. Nevertheless, the MBPT has not bothered to take note of

the approach adopted in that case to draw up its cost statement in this case. The

following modifications have been made in the cost statement furnished by the MBPT

to arrive at a fair and reasonable cost position:

(a).

The MBPT has not correctly shown the written down value of assets in the

future projections. It has considered the capital employed for the year2001-

02 and 2002-03 same as capital employed of 2000-01. In the revised cost

statement, the depreciation of assets relating to the years 2001-02 and 2002-

03 has been reduced from the net block figures of the respective years.

(b).

The MBPT has given the working capital for the port as a whole. The working

capital for the 'port conservancy' activity has not been indicated separately

Working capital for the years 2001-02 to 2002-03 has also not been

furnished. In the absence of any data furnished by the MBPT, the difference

between the net block and the capital employed is assumed to be the

working capital.

(c).

The net block plus working capital subject to the modifications given above,

has been considered as the capital employed for computation of ROCE.

(d).

The MBPT has considered a return on capital employed at the rate of 18.5%.

In the revised cost statement POCE has been allowed at the rate of 19.5%

in line with the ROCE be inn, allowed ?^f present iv cases of major port trusts.

(e).

Interest pajobie on ADB ! Jan ha* '. eea double counted once as an element

of expenditure and again while computation of return on capital employed.

This double counting of interest on loan has been eliminated in the revised

cost statement.

(vi).

Subject to the analysis made in the foregoing paragraphs, the cost statement for the

'port conservancy' activity has been modified. The modified cost statement is

attached as Annex-I

A sw-niary of the oca* position for the 'port conservancy' activity disposed by the

cost ^ rtement^fwrni?hed by the MBPT vis-a-vis the modified cost statement is given

below

Year

2000-01

2001-02

2002-03

Net surplus (+) deficit (-) as a percentage

of operating income

As per MBPT's cost

statement

(-) 40.5%

As per modified

cost statement

(+)19.8%

(+) 64.2%

J+)32 1%

(+) 63 5%

(+) 32 4%

Interestingly, f.vf n i^nr a i^pse of more than seven years since the last revision of

Port Duz;3, t'le port conservancy' activity continues to show a surplus

(VII;.

Eventhough the 'port conservancy' activity shows a revenue surplus, the Port as a

whole, and ,n particular the Port & Dock facilities, show a cost deficit. This implies

that the income from Port Dues cross-subsidises other vessel related tariffs The

stated policy of this Authority is against cross-subsidisation If cross-subsidisation is

to be eliminated completely, the existing rates of Port Dues deserve to be reduced

This Authority has, however, not taken a final view on complete elimination of cross-

subsidisation. Total elimination of cross-subsidisation at one go will have serious

implications

Recognising this fact, this Authority had decided to contain cross-

subsidisation at current levels by not hiking the rates for those activities that show a

revenue surplus In view of the stated policy of this Authority on cross-subsidisation

and the revenue surplus position obtained in the relevant activity center, there is no

justification to ^llow an unward revision of Port Dues as proposed by the MBPT.

(vin)

As far as a vessel 13 concerned, it pays generally three components of port charges

viz. Port Dues, Pilotage and Berth hire At the MBPT, the vessel related activity as a

whole is in deficit but Poit Conservancy is in surplus This means, the othertwo main

components of vessel related charges viz, Pilotage and Berth hire may perhaps

require upward adjustment There can be an argument that if cross-subsidy from

Port Dues is ircrei»3^rt"l th-¹ level of increase in berth hire and Pilotage, whenever

revised, will be less and, the total impact on vessel will remain more or less the

same That being so, thp decision of not revising the Port Dues on a stand-alone

basis does not have any significant bearing on the vessels.

Apart from the cost position and cross-subsidisation issue discussed above, the

following three points are also relevant for not allowing any increase in the existing

rates of Port Dues

(a)

It is always a better and transparent practice to resort to direct charging

bearing in mind the 'quid pro quo' principle for tariff setting emphasised by

the Supreme Court of India.

(b)

The proposal is for revision of Port Dues only in respect of foreign-going

vessels The benefit of dredging is equally enjoyed by coastal vessels also.

There is no apparent reason to shift the entire burden of dredging

expenditure on foreign-going vessel and make them pay for a portion of other

vessel related charges of the coastal vessels. Significantly, information

provided by the MBPi reveals that coastal vessel traffic is 50% of the total

traffic

(c)

Vessels calling at the JNPT pay 50% of the Port Dues as per the MBPT tariff

for using the common user channel There is no reason why these vessels

are required to cross-subsidise (at an increased level) the deficit in the vessel

related activities other than Port Conservancy at the MBPT. It is noteworthy

thdt the vessels calling -J\ � JNPT (io not pay Berth hire or Pilotage to the

THE GAZETTE OF INDIA EXTRAORDINARY

[PARTIII—SD. 41

MBPT. That being so, the continuance of these two items of tariff at a lower

level at the MBPT due to available cross-subsidy from Port Conservancy is

immaterial to them.

(ix).

As per the policy decision of the Government, coastal vessel tariffs are prescribed at

70% of the foreign-going vessel tariffs. Coastal vessel rates are prescribed in rupee

terms whereas foreign-going vessel rates are denominated in US dollar terms. In

order to restore the tariff defferential at the accepted level of 30% (which may have

widened due to depreciation of the Indian rupee) vis-a-vis the US dollar since the last

revision of tariff), restatement of coastal vessel tariffs is essential with reference to

foreign-going vessel rates and the current foreign exchange rates It is noteworthy

that foreign-going vessel rates, although denominated in US dollar terms, are realised

in rupees and the cost statement considered for tariff revision accounts for this

income in rupees. It is also relevant here to mention that the decision of the

Government to allow a 30% concession to coastal vessel was not valid only on the

date when foreign-going vessel tariffs were initially denominated in US dollar terms.

It is a continuing principle. Viewed in this perspective, the arguments of the MBPT

against adjustment of coastal tariff to maintain a disparity level of 30% with the

foreign-going vessel rates are found to be misplaced. The MBPT is advised to keep

this aspect in mind while proposing revision of vessel related charges in future.

(x).

Another reason advanced by the MBPT for not revising coastal vessel rates Is to give

a boost to coastal traffic through Its P&V docks facility, which is reportedly lying

underutilised now. It may be reasonable for a Port to embark on promotional

measures to achieve better utilisation of capacity available, provided the financial

burden of such measures do not fall on other sections of its users. If the MBPT wants

to allow concessional rates to coastal vessels, the resultant financial loss is to be met

from its general reserves till anticipated traffic picks up to generate adequate revenue

to cover the loss. In the instant case, the MBPT has not only sought passing the

additional burden on to foreign-going vessels on account of operating cost but also

recovery of 18.5% of ROCE. This means, the Port Is not prepared to forego (even) a

part of Its return in favour of the concessions envisaged but seeks it to be

compensated by other sections of users. This approach adopted by the MBPT

cannot be said to be very reasonable

(xi).

As has been mentioned earlier, vessels calling at the JNPT pay 50% of the Port Dues

at the MBPT tariff for use of the common access channel. The provision to levy 50%

of the Port Dues on such vessels is derived from Section 50B of the MPT Act. While

applicability of the provisions contained in Section 50B of the Act to the vessels

entering the Mumbal Port limit but carrying out cargo operation only at the JNPT

cannot be questioned, it has to be recognised that the arrangement prescribed In the

Act for such cases is to be viewed as a provision applicable to cases of a spasmodic

nature. Usage of the common access channel by the vessels calling at the JNPT Is a

regular feature. In such cases It will be rational to consider a separate fee for use of

the common channel instead of linking it with the Port dues payable at one of the

connected Ports. It is needless to mention that fees for such usage will be with

reference to the costs relevant to the common user channel. Alternatively, the MBPT

can seek from the JNPT reimbursement of expenditure incurred on the common user

channel. Since common user channel is an asset of the MBPT, it can reasonably

demand an accepted level of return on Its investment alongwith reimbursement of

cost. As a result, the JNPT can directly levy Port Dues on vessels calling at its

terminals after revising the existing Port Dues based on the revised costs which will

Include the re-imbursement (to be) made by it to the MBPT. If such a method of

direct charging is adopted, the existing position of the JNPT vessels possibly cross-

subsidising the other vessel related activities of the MBPT and also the arguments of

the MBPT and the MANSA about the MBPT being forced to incur extra expenditure to

maintain the depth in the channel to cater to the vessels calling at the JNPT can be

effectively addressed. Significantly, the Agreement in this connection entered Into

between the MBPT and the JNPT is also (over) due for a review. While reviewing the

Agreement, it may be useful for both the Port Trusts to consider the suggestions

made above.

In any case, there is no logic of continuing interminably with the existing system of

levying 50% of the applicable Port dues on the vessels calling at the JNPT. It has to

be recognised that Section SOB of the MPT Act prescribes levy of Port Dues at 50%

in the specified cases as a maximum limit. Eventhough, this Authority can prescribe

any rate below the maximum level, it is not in a position in the instant case to reduce

the rate suo motu in the absence of any supporting cost details with reference to the

common user channel. Further, the Implication of such a reduction of charge, which

is in force for more than a decade and a half now needs to be analysed in depth.

That being so, the MBPT is required to address this issue specifically when it

formulates its proposal for the next general revision of tariffs or comprehensive review

of vessel related charges.

(xii).

The frequency of levy of Port Dues is prescribed in the existing MBPT Scale of Rates

on a per-month basis. It may be more rational to levy Port Dues on a per entry basis.

The MBPT's suggestion about the number of vessels repeating in the same month

being negligible, the existing Port Dues rates (on a per-month basis) can be taken as

rates on a per-entry basis also cannot be agreed to In the absence of supporting data

furnished by the Port to analyse the implications of such conversion. Since the rates

of Port Dues are not revised upward now, the existing basis of charging is allowed to

continue till the next review of MBPT Scale of Rates. Nevertheless, the MBPT is

advised to specifically consider this position while formulating its proposal for the next

comprehensive review / revision of its Scale of Rates.

(xill).

The MBPT has proposed an amendment to the existing conditionality In the Scale of

Rates with reference to the levy of Port Dues in respect of vessels plying between the

MBPT and the JNPT. This amendment Is proposed mainly to distinguish between the

vessels using only the common user channel to have access to the JNPT and those

vessels which ply exclusively between the MBPT and the JNPT for carriage of goods.

The amendment proposed Is more for avoiding any ambiguity in charging. That being

so, the proposed amendment, deserves to be approved.

It appears that the

reference of 'harbour limit' made by the MBPT Is not relevant for the purpose of

levying port dues. Port Dues are levied for entry into the port limits. There is no need

to mix up between "Port limit' and 'Harbour limit'.

It is understood that vessels paying full port dues at the MBPT are not levied 50%

share of MBPT's Port Dues again at the JNPT. In the cases of vessels plying

exclusively between the JNPT and the MBPT, the non admissiblllty of 50% of MBPT's

Port Dues for entry into the JNPT needs to be explicitly mentioned in the Scale of

Rates to avoid ambiguity.

(xiv).

The MBPT has also proposed amendment of the existing conditionality relating to re-

conversion of dollar denominated tariffs at the time of billing. This Authority has

already passed a common adoption Order in this regard.

That being so, the

formulation already approved by this Authority in the common adoption Order is

formally Inserted in the Schedule relating to the Port Dues.

(xv).

The issue relating to charging daughter vessels at the MBPT was considered by this

Authority as a part of the proceeding relating to the MBPT's proposal for revision of

wharfage and pier dues at the Marine Oil Terminal and Pir Pau. In that case, it was

decided to insert a specific provision in the relevant Scale of Rates to prescribe that

the status of the vessel as borne out of its certification should be the deciding factor

for the purpose of levying vessel related charges. Even though this issue has not

been raised as a part of this case, for the sake of internal consistency between the

different Scale of Rates of the MBPT, a similar provision Is also inserted in the Scale

of Rates In reference.

10.1.

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

mind, this Authority rejects the proposal of the MBPT for revision of Port Dues on all vessels except

coastal vessels. The MBPT is advised to immediately formulate its proposal for a comprehensive

review of its Scale of Rates for all activities.

B6^(,e^Uim\ -ij

THE GAZETTE OF INDIA . EXTRAORDINARY

[PARTIII—Stc 41

10.2.

The following amendments to the MBPT's Schedule of Port Dues are approved which

will become effective on expiry of 30 days from the date of notification of this Order In the Gazette of

India:

(i).

The existing explanation number (4) is deleted and substituted by the following:

"(4),

The vessels visiting JNPT, if for any reasons same vessels visit the MBPT,

half of the Port dues recoverable as per the above Schedule shall be levied.

However, vessels plying exclusively between the MBPT and the JNPT for carriage of

cargo shall be levied full Port Dues as per the above Schedule. Vessel paying full

Port Dues at the MBPT need not pay 50% of MBPT's Port Dues at the JNPT".

(li).

A new note number (7) is inserted as follows:

"(7).

The status of the vessel, as borne out by its certification, shall be the deciding

factor for classifying into 'coastal' or foreign-going' category for the purpose of

levying vessel related charges; and, the nature of cargo or its origin will not be of any

relevance for this purpose".

10.3.

This Authority also approves the amendment to the existing explanation number (6)

to Incorporate the following provisions:

"(6).

(a).

The charges prescribed for foreign-going vessels in this Schedule will be

collected in Indian rupees after conversion of the US currency to its

equivalent Indian Rupees at the Market Buying Rate notified by the Reserve

Bank of India, State Bank of India or Its subsidiaries or any other Public

Sector Banks as may be specified from time to time. The relevant exchange

rate prevailing on the date of entry of the vessel into the port limit shall be

reckoned with In such cases.

(b).

A regular review of exchange rate shall be made once in thirty days from the

date of entry of the vessels in cases of vessels staying in the Port for more

than thirty days. In such cases the basis of billing shall change prospectively

with reference to the appropriate exchange rate prevailing at the time of the

review."

The amendment proposed at para 10.3 is only for formal Insertion and has already

come Into effect as prescribed In the common adoption Order passed in this regard

by this Authority.

S SATHYAM, Chairman

[ADVT/III/IV/143/2001/Exty ]

Annex -1

REVISED COST STATEMENT FOR PORT CONSERVANCY SERVICE /FACILITY AT THE MBPT

(Rs. IN LAKHS)

3RNO.

')•

II).

III).

Iv).

II.

1).

II).

III).

HI.

IV.

VI.

VII.

VHI.

XI.

XII.

PARTICULARS

Operating Income

Port Dues

Anchorage

Few for water conveyance

Miscellaneous Income

TOTAL OPERATING INCOME 1:

Operating Coat

Operating Cost

Deferred Dredging cost

Depreciation

TOTAL OPERATING COST 11:

Finance & Miscellaneous Expenditure

Management and General Overhead Expenditure

SURPLUS/ DEFICIT (HHIHV)

Intereet on ADB Loan

NET SURPLUS/ DEFICrT (V - VI)

Capital Employed

Retivn on capttal employed Q 19.5%

Return on capttal employed @ 19.8% less interest on

loansflX-VI)

NET SURPLUS / DEFICIT • after ROCE and interest on

loan* (VH-X)

NET SURPLUS/ DEFICIT as a percentage of operating

Income

(XVI)

1008-99

1,935 92

25.38

87.12

2,048.42

259.12

46 73

300.88

75.20

106.85

1,660.52

46.21

1,814.31

1,019.41

198.78

152.57

1,361.74

68.8%

1999-00

2,250 20

99.26

92.77

56.82

2,499.06

340.26

48.75

389.01

70.18

107.65

1,932.21

43.61

1,888.60

1,184.38

230.95

187.34

1,701.26

68.1%

Base Year

2000-01

2,547.07

101.31

133.34

59.61

2,841.33

606.83

841.07

51.29

1.399.10

317.41

403 49

721.24

40.21

681.03

814.22

158.77

118.56

562.47

19.8%

Without Change

2001-02

2,302.07

101.31

40.00

59.61

2,602.99

446.38

841.07

51.29

1,338.74

87.48

124.78

961.99

35.89

916.10

762.93

148.77

112.88

803.22

32.1%

2002-03

2,370 08

10131

40 00

59.61

2,871.00

480.57

841.07

51.29

1,372.83

90.72

134,34

973.01

31.45

941.66

711.94

138.77

107.32

834.24

32.4%

Prtniod by the Managar, Qovt. of India Praw, Ring Road, Mnygpurl. New D»lhl-110084

and Published by tha Controller ol Publications, Datit-110094 — 2001