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A DECISION by a PSA International unit to cut the number of containers it can handle at its port in south-eastern India has caused alarm among shipping lines calling there.
PSA Sical said on Monday it was lowering its annual handling capacity to 300,000 standard boxes at the Tuticorin Container Terminal (TCT).
The terminal, which Singapore-based PSA first invested in nine years ago, was designed to handle up to 450,000 containers. For the year ended March, it moved 377,000 boxes.
PSA cited a decision by India's Tariff Authority for Major Ports (Tamp) concerning the tariffs or fees that PSA Sical must charge as the reason for the capacity reduction.
In India, the tariff charged by major port operators per 20-foot equivalent unit (TEU) is set by Tamp. A TEU is the standard size of a container.
'The much reduced revenue per TEU is not able to cover the cash operating expense and the royalty payment per TEU,' PSA Sical said.
The company warned that ships calling at the port would be likely to face delays because of the decrease in capacity and the decision to use two quay cranes instead of the usual three.
PSA announced its decision on Monday, but shipping lines had got wind of the possible move last week.
While lower tariffs typically mean good news for the shipping lines, the drop in efficiency as well as the potential loss of valuable foreign investment have raised concerns among many shipping lines.
The Container Shipping Lines Association of India (CLSA) was driven to write a letter to the Indian Prime Minister's Office last Friday to express its alarm at the news.
It wrote: 'At a time when the government of India is seeking to increase the country's share of international trade and...encourage increased private investment in the port sector to facilitate this, it seems most unfortunate that one port is seeking to reduce its capacity because it allegedly cannot make sufficient returns on its investment.
'The adverse consequences for India's trade, not to mention the unhelpful signals that will be sent to potential investors in the port sector if PSA Sical does reduce its volumes, need no elaboration.'
In its letter, the CLSA also urgently requested the intervention of the Prime Minister's Office in the matter.
Other shipping lines which call at the Tuticorin port have expressed similar concerns.
Feeder line Bengal Tiger Line's managing director, Mr Bill Smart, said that any reduction in terminal productivity would result in prolonged turn-around times for vessels.
'There will be severe cost implications for feeder operators and this will ultimately lead to some form of surcharge recovery,' he added.
Surcharges allow shipping lines to pass on costs to their customers.
PSA Sical currently charges slightly over 2,500 rupees (S$94) for a standard box at TCT, compared with rates of more than 2,700 rupees charged at other major ports such as the Jawaharlal Nehru Port and Chennai Container Terminal.
Tamp has ordered the slashing of tariffs rates at TCT by more than half, which will result in charges of just 1,137 rupees.
It did not respond to e-mail queries, and repeated attempts to contact Tamp secretary C.S. Venkatraman yesterday were unsuccessful.
nicholas@sph.com.sg
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