Experts are against Returning to Governmental Regulation of Tariffs for Services of Sea Ports

19 august 2016

The Analytical Center held a roundtable entitled “Regulating stevedoring operations in sea ports”. Experts met to discuss probable implications of the recent initiative of the Federal Antimonopoly Service to tighten regulation of tariffs for stevedore services. This is not the first time when this subject is discussed and key ministries are at the stage of forming a position on this issue now, said Svetlana Ganeeva, Deputy Head of the Analytical Center, opening the event.

The Analytical Center conducted express analysis of the situation in the market of stevedore services and came to a conclusion that it would be required to evaluate multilaterally a regulatory impact of the draft order developed by the Federal Antimonopoly Service of Russia “Approval of Methodological Instructions on Setting Tariffs for Loading and Unloading, Cargo Storage and Tugboat Services in Sea Ports of the Russian Federation” to reveal its positive and negative consequences.

The essence of what is happening is reflected very precisely in the survey of the Institute of Natural Monopoly Problems presented to participants of the roundtable “Evaluation of Consequences of Returning to Regulation of Rates in Sea Ports of the Russian Federation and Applying the Draft Methodological Instructions of the Federal Antimonopoly Service of Russia”. According to Yuri Saakyan, General Director of the Institute, since 2007 the Federal Antimonopoly Service has been consistently advocating deregulation of the cost of services in sea ports of the Russian Federation. Meanwhile, investment activity was stably increasing and even now, despite a leap in the ruble value due to exchange rate difference, the transshipment volume continues to grow for key types of cargoes. This enabled domestic sea ports to really strengthen their positions in the market and cargo owners - to substantially reduce costs of freight and sea transportation. The competition among basins, ports and stevedores in large ports is growing that also promotes the development of this business and the economy in general. Implementing the proposals of the Federal Antimonopoly Service will change the current situation for the worse.

The return to regulation will result in applying the transshipment rate that is 14-48% lower than the existing one and decreasing revenues from the profit tax in the constituent entities by 3-37% (excluding exchange rate difference related costs in the tariff), considers Mr. Saakyan. Besides, the number of tariff decisions to be made will grow several times and the system of managerial reports of stevedore companies will become much more complicated. “If the governmental regulation is returned, the volume of private investment will definitely decline,” the expert is sure. In his opinion, it is required to apply governmental regulation measures selectively only to those companies whose guilt in abusing their dominant position in the market has been proven.

The Federal Agency for Sea and River Transport has the same position. Mr. Konstantin Stasyuk, Deputy Head of the Agency, noted that instead of returning to governmental regulation we should prevent doubling operations and improve the efficiency of control authorities. Mrs. Alevtina Kirillova, Advisor to the Minister of Transport of the Russian Federation, said that data presented in the survey of the Federal Antimonopoly Service were often biased and would require comprehensive multifactor analysis. “The Federal Antimonopoly Service has all tools to monitor violations in stevedore companies,” said Ms. Kirillova.

However, participants of the roundtable considered that, perhaps, the Federal Antimonopoly Service would explain its position and governmental regulation would affect natural monopolies only, as there were no obvious grounds for returning to governmental regulation with strict monetary criteria and such decision would result in lower cargo flows. In addition, the experts agreed that strong independent analysis of the competitive situation in the market of stevedore services would be required.

“Governmental regulation of tariffs should be in Arctic ports and should be free in all other ports, otherwise, we will not be competitive in global markets,” expressed the common opinion Mr. Aleksander Alexeyenko, Chairman of the Committee on Economy and Social Issues of the Association of Commercial Sea Ports.

Switching to payments in the national currency for stevedore services was also discussed at the event. Mrs. Marina Labozina, Head of the Legal Department of the Analytical Center, stated in this connection that it would be required to assess all risks of such payments. Representatives of Russian consignors and stevedores failed to come to a common opinion on this matter, but it was noted that the laws of the Russian Federation did not directly prohibit payments in foreign currency. Most representatives of the business tend to believe that it is more convenient to denominate tariff rates in US dollars, among other things, due to the fact that switching to rubles will create additional difficulties in doing business, but at the same time does not warrant a physical decrease in rates.