Carriers, shippers reject 37% tariff hike petition of Manila port operator

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North Harbor_MinesManila North Harbour Port, Inc.’s (MNHPI) petition to impose a more than 30% increase in cargo-handling tariff at North Port has no basis, claim port stakeholders.

In separate position papers submitted to the Philippine Ports Authority (PPA), both the Philippine Liner Shipping Association (PLSA) and Supply Chain Management Association of the Philippines (SCMAP) dubbed the petition as “unwarranted” and “unjustified” for now.

MNHPI in August 2015 filed for a 37.45% increase in cargo-handling tariff, saying it needs to compensate for the “upward trend in cost drivers” and the increased cost of operating Manila North Harbor. In a public hearing almost a year later, PPA gave stakeholders until last June 1 to submit their position papers on the petition.

MNHPI said the petition—which comes after PPA had granted the operator a total of 18% increase in 2013 and 2014—is based on four cost drivers, namely, labor, fuel, power and repairs and maintenance.

Liners cast doubt

In its position paper on the labor cost driver, PLSA questioned the basis of MNHPI in saying it needs to increase its pool of port workers from 1,100 in 2014 to 1,470, or a 34% increase.

“Because despite so, shipping lines have complained of insufficient deployment of ‘mano’ (dock hands) middle of last year. Could be because port workers are on a “no work, no pay” arrangement. This lack of manpower was remarkably felt nearing the last quarter of 2015, worse during the Christmas season where most vessel operations had to stop due to non-deployment of mano. In fact, there were instances when two vessels had to ‘share’ mano and use of the equipment. This occurred again early January, 2016. Such delays have resulted to additional unnecessary costs incurred by the lines,” PLSA claimed.

On fuel, PLSA said a year-on-year increase in fuel costs of 55% from 2012 to 2013 and 78% from 2013 to 2014—or a 126.11% increase from 2012 to 2014—“showed a remarkable increase in fuel consumption that could mean inefficient use of fuel.”

“MNHPI should show the proportionate fuel consumption vis-à-vis cargo-handling equipment utilizing diesel vis-à-vis volume consumed,” the association said.

As for power, the liner group said MNHPI should provide details, since the annual increase in its power consumption of almost 2 million kilowatt hours, or a 103.12% increase in power cost per TEU, within a two-year period only, was “quite alarming.”

With brand-new equipment, it is “surprising” that MNHPI should incur an increase in costs of repairs and maintenance of 180% between 2013 and 2014, or 177.67% from 2012 to 2014, it further commented.

“This is NOT acceptable. MNHPI should provide details otherwise it may be concluded that MNHPI didn’t purchase the suitable or appropriate equipment or that most are not brand new equipment for them to incur a 177.67% increase in repairs and maintenance,” PLSA said.

Putting a cap on costs

The liner group is also asking PPA to put a “reasonable cap” on fuel and power consumption, as well as on repairs and maintenance, “to compel MNHPI to be efficient, cost-effective and conscious of the need to ensure maximum utilization of its resources.”

Since MNHPI took over port operations at the North Harbor from 2010 to 2014, there has been an increase of 89% in TEU volume. Based on MNHPI’s audited financial statements for the years 2012, 2013, and 2014, the port operator generated revenues of P1.388 billion, P1.634 billion, and P2.131 billion, respectively. Net income, meanwhile, amounted to P177.9 million, P305.7 million, and P332.6 million, respectively.

PLSA said this shows “a proportionate revenue earned to compensate for every cost incurred for any cost driver reflected as expense computed per TEU.”

It added: “MNHPI failed to consider this but instead charged to stakeholders such unreasonable and very questionable incremental expense on its cost drivers.”

After computing the return on rate base (RORB) using the values shown in MNHPI’s audited financial statements for the period 2012 to 2014 and considering an 18% rate of return and average working capital based on net operating expenses, PLSA calculated that the port operator yielded an RORB of 84.45%, 122.82%, and 102.60% for the respective years 2012, 2013, and 2014.

“As such, there is an excess in MNHPI actual revenue as against their required revenue based on the rate base to show that the MNHPI petition for an increase is unwarranted as of this time,” PLSA pointed out.

Moreover, MNHPI’s presentation showing the impact of the increase on commodities like rice, bananas, and steel was “very misleading,” the group alleged.

PLSA said that while the increase appeared to be small on a per kilogram basis, the operator supposedly failed to show the impact of the increase based on the annual total volume in TEUs carried outbound and inbound Manila.

Using 2014 PPA statistics where volume in TEUs-inbound and outbound Manila is 1.044 million TEUs, and assuming an estimated 86% PLSA share on total volume carried at the North Harbor, this would translate to an additional annual stevedoring cost of P118.782 million among PLSA members.

This will be added to other cargo-handling rates “which may eventually be passed on to the shippers,” including wharfage, cranage, storage, stuffing, and shifting charges, the association said.

SCMAP’s stand

In its position paper, SCMAP said it found the proposed upward tariff adjustment to be unjustified.

“We believe that any upward tariff adjustment predicated on the need for additional investment on equipment and infrastructure would put into question the original basis for the awarding of a franchise to operate a port to a contractor,” SCMAP said.

It added that any such bid should put into account its projections on capital expenditure and operating expenditure for a particular time period.

“This information should be made publicly available for the perusal of stakeholders and other interested parties, to ensure transparency and allow for justifiable tariff adjustments, if needed,” the supply chain group said.

“We also believe that any additional investment on equipment and infrastructure should have an accompanying quantifiable improvement in performance,” it added.

A technical working group composed of concerned government agencies will review the position papers, as well as MNHPI’s reply to these papers, and make a recommendation to the PPA Board, which will make the final decision. – Roumina Pablo