Success beyond shores
Shipping & Ports
Private sector players, operating in major ports under the PPP regime, are functioning under multiple tariff regimes.
Of this, the older set of players operating under 2005 tariff guidelines of TAMP have seen material fall in profits and return on the capital employed, on account of sharp tariff cut.
Moreover, many of the tariff orders have been litigated upon resulting in a stalemate in the industry. In order to attract private capital, it is imperative to simplify the tariff regime and migrate the older set of players to the 2013 tariff regime, which offers some upside to the returns by giving partial freedom to fix tariff in line with the market conditions.
The Government is also expected to give a renewed thrust to the sector under ‘Saga Mala’ programme, which could mean more projects being bid out under PPP and development of new ports.
Coastal shipping and Inland water ways could also get more attention from the Government, as they are supposed to bring in efficiency in goods transportation, which could benefit players operating in this space. Dredging companies and other service providers such as tug-boat operators could also benefit if the port sector were to see pick up in awards. The Government might also take a decision on the demand of the foreign shipping companies and the port operators to relax the ‘cabotage law’, which gives the first right of refusal to domestic owners for coastal shipping.
K Ravichandran, Sr. VP, Co-head Corporate Sector Ratings, ICRA Ltd