Ship owners and ship agents in Australia have been burned by price rises surrounding the privatization of the Port of Melbourne, according to industry body Shipping Australia.
Namely, Andrews Labor Government in Victoria, Australia intends to lease out the Port of Melbourne for up to 50 years and has introduced legislation entitled the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015, to the Victorian Parliament.
As informed, Shipping Australia (SAL) is not philosophically opposed to the privatization, however, the industry body is more alert to potential problems that arise from the draft legislation, which according to SAL, falls short of effective regulation of future port pricing.
SAL also fears that in the long term this could undermine the competitiveness of Victoria’s supply chain and put trade volumes through the port at risk.
“The current stevedore rent review process has been clumsy and has unsettled the logistics industry.  SAL understands that negotiations have reached an impasse and an independent arbiter appointed to determine the appropriate rent,” Shipping Australia said.
As explained, the area of lease rents has been specifically excluded from price regulation in the Victorian Government’s Privatization Bill.
Under the current scenario the potential impact of the originally claimed rental increases would make port rents in Melbourne five times the next most expensive port in Australia. And these increases would be passed through to end-users, increasing costs on Victorian importers and exporters and, ultimately, Victorian consumers, SAL said.
“If the port is privatized and there are price controls or effective price monitoring in some sectors but others are excluded, then it is very likely that price gouging will take place in those uncontrolled/unregulated areas,” the industry body adds.
SAL also raised concern that the Bill would entrench a monopoly port owner and deter competition from an alternative container port in Victoria in the future.
“There is no transparency in the proposed compensation regime, and there is serious disagreement on the capacity of the port – anywhere between 4.2 and 7.5 million TEU. The Victorian people have a right to know the details before the Bill is passed,” SAL continued.
Moreover, SAL is concerned about the Treasurer’s stated intention to capitalise the Port Licence Fee as an up-front lump sum, saying that the attractive cash injection was essentially a Government loan that will be paid for by port users and ultimately Victorian exporters and consumers.
“The port purchaser will have no option but to recover the interest on this massive lump sum (in the order of $3.5bn) as well as claim a return on investment for the premium that they pay for the future potential earning power of the asset. Victorians will pay,” Shipping Australia went on to say.
The Bill goes before the Upper House in early August.
-Source: worldmaritimenews.com