PSA-Sical says regulator's 34pc THC cut makes Indian CT unviable

OPERATIONS have become unviable at India's fourth biggest container terminal at the Tuticorin port in Tamil Nadu after the regulator slashed tariffs for services, said port operator PSA-Sical Terminals Ltd.

Revenue earned after the latest tariff cut would not be sufficient to cover operating expenses and royalty payments to the government-owned port, said a PSA-Sical executive on condition of anonymity.

PSA International Pte Ltd, the world's second biggest container port operator, is owned by the Singapore government's Temasek Holdings. It has a 57.5 per cent stake in PSA-Sical Terminals with local partner Sical Logistics Ltd holding 37.5 per cent, reports India's Livemint The Wall Street Journal.

The new rates, which came after PSA-Sical sought to raise tariffs by 30 per cent, will remain in force until December 31, 2011.

Said the regulator, the Tariff Authority for Major Ports: There is no merit in the proposal of PSA-Sical Terminals for an upward revision of 30 per cent over the existing tariffs. In view of the cost position, this authority decides to reduce the tariffs by 34 per cent.

This is the third time that the regulator has cut tariffs after PSA-Sical Terminals started operating the facility.

The first two tariff reduction orders were not implemented because of a stay ordered by the Madras high court in response to petitions by the port operator.

Though the regulator has cut tariffs 34 per cent, a director of the company said the reduction would effectively be in the 41-42 per cent range. Whatever profit we have made in the past 10 years will be wiped out by this decision, he said.

In 2006, Dubai's DP World, which runs a terminal at Jawaharlal Nehru Port near Mumbai, took the regulator to court after it cut tariffs for its container terminal services. The regulator later allowed DP World to raise tariffs 10.3 per cent from October 1.

Shareholders in the PSA-Sical joint venture, who were given rights to operate the terminal for 30 years from July 1998, will decide the future course of action against the tariff cut. The port has the capacity to handle 450,000 TEU a year.

In September 2002, the regulator cut tariffs by 15 per cent when the terminal operator asked for an increase. But the Madras high court set aside to allow the operator to charge the existing tariff when PSA-Sical Terminals filed a writ petition against the order.

Again, in August 2006, the regulator cut tariffs 50 per cent when the operator sought a hike of 30 per cent on the INR2,300 (US$47.70) per TEU. PSA-Sical challenged the order in the Madras high court. The firm also reduced the cargo handling capacity at the Tuticorin terminal to the minimum stipulated under its agreement with the government for 18 days from July 17, 2008.

On August 22, the Madras high court again quashed the regulator's order to cut tariffs by 50 per cent. The court also asked the terminal operator to file a representation before the regulator to revise the tariffs. Based on this representation, the court asked the regulator to pass a fresh order on merits and in accordance with law.

Said the regulator on December 30: The high tariffs levied at some other terminals alone will not justify similar tariff elsewhere.

Source: Schednet