Only manageable risks with total de-control

Regulation of tariffs for the core infrastructure services is a matter of not just policy but is indeed based on a very complex set of economic and social principles that often vary from country to country and from one stage of economic development to another for the same country.

There are good models of regulation in many countries (such as the UK or Australia) but this does not necessarily mean that we must adopt similar practices for India. It is important to learn from these but carefully examine their applicability to our economy and our context. The issue of future regulation of port tariffs therefore certainly calls for some thorough introspection.

As all the port users will tell you, there is no one tariff that we can talk of for usage of ports. The total cost of using the port services is what we need to focus on in totality while talking of the objectives of any regulation for port tariffs. Does it therefore make sense in talking about regulating charges paid to the port authorities when there are significant costs incurred for payments to the state governments or their agencies (such as Maritime Board in cases like Gujarat) and to the private service providers who provide port related services?

Does it also make sense in regulating port tariffs of only those so-called major ports when there are competing ports promoted by state governments (referred to rather misleadingly as minor ports). Indeed, does it make sense at all to regulate tariffs when there is expected to be so much competition amongst all types of ports, going forward. There is enough competition prevalent in the market other than for (import/export of ) some limited commodities.

In my view, the discussion that is now taking place around cost plus regulation or the norm-based regulation, albeit temporarily is quite irrelevant in the present day context in India. Having said that, it is important that transition to deregulation should be smooth. However, there is no reason to shift now to any other method even if adopted temporarily. The transition should be smooth but quick so as to avoid any other interim method or discussion about the exact modalities.

The main question to be asked before deciding on the issue is will such a move help in bringing in more efficiencies. Equally important is to see if there are any real risks with going in for complete tariff deregulation. In my view, there are limited risks and are very manageable. Real competition always brings about better efficiencies and lower costs of doing business for the port users.

The policy makers in the government should stick to their job of making policies and give complete freedom to the port managements to develop themselves into healthy competitive businesses. The ports have the ability and the expertise to do so. The government should not really worry about looking at port investments through their five year planning exercises. Private money will find its way here if given the opportunity and there is no interference. It is high time government stopped giving the port managers formats for even their visioning and business planning. Let a hundred flowers bloom.

(The author is executive director, PricewaterhouseCoopers)