Operations Cargo Handlers

Published on June 5th, 2017

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Uniform DPD Rates Across All Terminals at J N Port Fails to Take Off

A plan to set uniform shifting/handling charges across all the container terminals at Jawaharlal Nehru Port Trust (JNPT) to draw more importers to a so-called direct port delivery (DPD) program rolled out to speed-up imports through India’s busiest container port has suffered a set-back after private firms running three of the four terminals resisted the move, forcing the rate regulator to notify the rate only for the facility run by the port trust.

The Tariff Authority for Major Ports (TAMP) has approved a rate of Rs 1,688/- for 20 feet container and Rs 2,532/- for 40 feet container for JNPT-run terminal on an application filed by JNPT seeking identical rates for all terminals for activities linked to shifting of DPD containers at the yard following a direction from the shipping ministry.

The rates, notified by TAMP in the gazette on 31 May, are automatically, fully indexed to the Wholesale Price Index (WPI) subject to meeting performance standard of achievement of delivery within 3 hours of “Gate in” of the truck for taking delivery (of the container)”.

“The rates approved are ceiling levels. JNPT has the flexibility to charge rates at lower level of Rs1,600/- for 20 feet container and Rs2,300/- for 40 feet container or any other lower rates based on commercial considerations,” TAMP wrote in its order.

JNPT had proposed a uniform rate of Rs 1,600 for a 20-feet container and Rs 2,532 for a 40-feet container.

DPD essentially means import containers are delivered directly to pre-approved clients at the port itself instead of waiting in a CFS located outside for clearance, which reduces cargo dwell times and cost for shippers.

The shipping ministry at the behest of NITI Aayog instructed JNPT to set uniform rates for all the four terminals for making the DPD scheme attractive to the consignees in a bid to raise the DPD levels to 40 per cent from 3 per cent in 2016.

As DPD involved multiple shifting (average of 2 – 4) of containers stacked one on top of the other in the yard to facilitate delivery to importers from a mixed stack, this entailed extra costs. While each private terminal exercised their discretion to levy shifting charges from importers at rates approved by TAMP earlier, the port trust-run terminal has so far refrained from collecting rates on this count from importers to promote the DPD scheme.

There is no rate as DPD charges in the TAMP tariff guidelines for this purpose, according to JNPT. “The private terminals are linking and charging rates on single shifting /double shifting basis. This has led to a situation wherein the benefits under DPD is denied and there is no certainty of cost to the trade. To have a uniform rate for all DPD clients, JNPT had approached TAMP to notify new tariff for DPD,” says JNPT.

In its application filed before TAMP, JNPT said that a uniform rate for handling DPD containers “will help the importer by way of lesser cost”. Besides, being a “pre-determined rate”, it would enable the importer to plan his cost in advance.

Currently, JNPT has 632 registered DPD clients.

“As it is a new tariff for a new activity, the decision of TAMP will set the bench mark in rates and stop the arbitrary practices,” JNPT stated.

The application filed by JNPT for levying DPD charges from importers laid bare the deep-rooted bitterness between the government-owned port trust and the private terminal operators over rate cuts ordered by TAMP in 2012, the ensuing court cases and the wrangling over tariff setting guidelines.

D P World and A P M Terminals, which runs two and one terminal respectively at JNPT, took the opportunity to hit out at the “double standards” of JNPT/government in seeking uniform rates for a new activity to promote “national interest” and “competitiveness of the nation” while ignoring the interests of the private terminals on earlier occasions.

There are multiple issues involved here, says an executive with a private terminal. One is the court cases some terminals are going through. Other is, two terminals are on revenue share model, one on royalty and one is a port-owned terminal. “We are fine with the new charge provided there is equity among all players,” he said.

The question is when a new tariff is being tried, should it be uniform and just besides ensuring that nobody gets disadvantaged, he said.” Those under revenue share will definitely have a lower retention of income compared to those who are not under revenue share. Besides, this has to happen without prejudice to the court cases.

TAMP has cut the rates of D P World run NSICT and A P M Terminals-run GTI in 2012. The Mumbai high court has stayed the rate cuts based on separate petitions filed by the two firms and allowed them to continue charging the existing rates, but the petitions are yet to be decided.

NSICT is run on the royalty model (it has to pay royalty to JNPT on each container handled at rates specified in the contract) while GTI and NSIGT are operating on the revenue share model wherein they have to share annual revenue with the port trust finalized through a tender.

GTI said that JNPT should waive revenue share on DPD charges while NSICT wanted royalty payment to be set off on other containers as condition to consent to the DPD charge proposal.

“JNPT, NSICT, NSIGT and GTI’s scales of rates are currently subject to different tariff guidelines which have been issued by TAMP from time to time. The proposal intends to fix a uniform scale of rates for DPD containers for all the container terminals, which is not permissible as per the current regulatory mechanism which differentiates between container terminals on the basis of the tariff guidelines under which their respective tariff is fixed. Without prejudice to the foregoing, you are requested to clarify that the fixation of charges for handling the DPD containers is being fixed under which guidelines?,” NSICT asked in a written submission during the rate-setting exercise.

“We have not come to JNPT for implementation of DPD. Do not force the levy on us. The rates are to be levied by NSICT. We do not want to delink this levy from the other charges being levied based on the direction of the Court. The levy of DPD charges by us will have an impact on the Court direction. We do not want to jeopardize that,” NSICT wrote in its submission.

“NSIGT scale of rate has been set as per the TAMP guidelines of 2008 under upfront tariff setting. We would seek clarity as to under which part of the guideline TAMP seeks to introduce this scale of rate. We would like some more list of activities to be introduced in our scale of rates for which then we can approach TAMP separately”, NSIGT wrote in a tongue-in-cheek submission on the matter.

“As per the proposal, TAMP is introducing clause 3.3.10 under Chapter 111 of JNPT scale of rates for the DPD charges. We request to clarify whether JNPT scale of rates supersedes the scale of rates of respective terminals,” both NSICT and NSIGT said.

We have had various discussions with JNPT on the subject and had put forward the need for certain issues to be resolved. We are still awaiting response from JNPT on the matter, NSIGT said.

On the other hand, GTI said that since revenue share is not applicable in the case of the terminal run by JNPT and D P World-run NSICT, fixing a standard rate for all the terminals would be “discriminatory and unequitable”.

“In order to maintain parity amongst all the terminal operators at JNPT, it is recommended that the charge for handling DPD containers by GTI be fixed at Rs2,560/- for 20 ft. container and `Rs3,840/- for 40 ft. containers for all deliveries effected within 48 hours. In case JNPT agrees to waive the payment of revenue share by GTI on the DPD charges, GTI agrees to fixing of a charge for handling DPD containers of Rs1,650/- for 20 ft. container and Rs2,475/- for 40 ft. container for all deliveries effected within 48 hours”, GTI stated.

The issues on concession agreement and unrelated issues, according to JNPT, may not be clubbed with fixation of charges for DPD containers. “Don’t attach strings to the levy of DPD charges”, JNPT retorted.

“The proposed DPD charges have been fixed to promote DPD. The tariff application made by JNPT seeks to apply to JNPCT, GTI, NSICT and NSIGT. Hence, it is not agreeable for keeping a higher rate of Rs2,560/- for 20’container and Rs3,840/- for 40’container. It had been made clear that the revenue share will have to be paid by the terminals as per the clauses of concession agreements and any deviation cannot be considered at this stage. In such an event, it is also not agreeable to concur a rate of Rs1,650/- and Rs2,475/ (as suggested by GTI). The business model of NSICT is different and a comparison solely on the revenue share of DPD is incorrect to evaluate parity,” JNPT stated.

NSICT, NSIGT and GTI should follow the recommendations issued by the ministry in the overall interest of the sector and competitiveness of the nation as a whole to offer rates that will support DPD, JNPT added.

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