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Staggering 265-fold hike in labour levy at ports killing coastal shipping

Megha Manchanda/New Delhi 17 Mar 18 | 11:37 PM

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The government's practice of continuing to charge notional labour cess on coastal cargo operations, despite the fact that most ports are now mechanised and do not require manpower for loading and unloading, is taking a toll on the country's coastal shipping operators. Many are losing business to rail and road transport, and to ports run by the private sector.

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In some cases, the levy for a single labour job is as high as 265 times the total labour cost. Some ports have reduced it to 150 times, but others like Kolkata, Cochin and Mumbai continue to charge the cess in the absence of other sources of revenue. Experts say that with more and more ports being mechanised, labour cess is not required.

Port mechanisation initiative is redundant if the government continues with the practice of charging notional labour cess to the cargo companies even when the coastal cargo operator does not use services of the port, the experts added.

Earlier, there was a requirement for labour at the time of loading and unloading of cargo, but port mechanisation has minimised the need for manpower. Coastal cargo operators do not need manual intervention for their operations and payment of a levy over and above the labour employed costs them dear.

The former shipping secretary says, “Labour was required and, therefore, became part of the deal and later mechanisation took place. The funds collected from the levy are utilised towards pension contribution by the port authorities. Kandla Port was the first to have done that. Otherwise, the pension would eat into their (the ports') corpus. This levy was even authorised by the Tariff Authority for Major Ports (TAMP)."

The coastal cargo industry feels the levy should be completely scrapped instead of bringing it down, as the cess makes ferrying good through ports less viable compared to rail and road.

“With more and more ports going for mechanisation, there is no need for a labour cess," Vishwas Udgirkar, partner, Deloitte Touche Tohmatsu India LLP, said.

It is learnt that the industry has even petitioned the Prime Minister’s Office on this issue, but it is yet to respond on the matter.

Currently, all major ports barring Kolkata, Mumbai and Cochin are charging the levy only on bulk cargo and coal and have removed it for other commodities. India has 12 major ports -- Kandla, Mumbai, JNPT, Marmugao, New Mangalore, Cochin, Chennai, Ennore, V O Chidambarnar, Visakhapatnam, Paradip and Kolkata (including Haldia)

According to an official at Vishakhapatnam, every port nowadays is either reducing or removing this levy due to competition from private ports. The only reason Kolkata, Mumbai and Cochin are still charging this levy is because they are not making money otherwise.

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