The Market Monitor Minding the Nation's Business
By Luis Leoncio
Port stakeholders said it would be prudent for the Philippine Ports Authority (PPA) to withhold action on the 37.45-percent tariff-increase petition of the Manila North Harbour Philippines Inc. (MNHPI) until President-elect Rodrigo Duterte has appointed a full complement of officials of the regulatory body.
The proposed MNHPI tariff hike was described as unwarranted and unjustified by port stakeholders in separate position papers submitted to the PPA.
According to the Philippines Inter-Island Shipping Association (PISA), the umbrella group of domestic shipping and related associations, the PPA should defer any action “on the MNHPI rate-increase petition until a new board of directors is appointed” by Mr. Duterte “especially the vice chairman in the person of the general manager of the Authority, which is presently held by an Officer-In-Charge (OIC).”
A technical working group composed of PPA officials and government agencies will review the position papers, as well as MNHPI’s reply, and make a recommendation to the PPA Board, which will make the final decision.
PISA said PPA statistics showing a steady increase in volume handled at the North Harbor that enabled NHPI to generate a net or total comprehensive income of P177.9 million for 2012, P305.7 million for 2013, and P332.6 million for 2014.
“Percentage-wise, net income to revenue, MNHPI’s net incomes for the said years represent 13 percent, 19 percent and 16 percent, respectively,” it said.
It added that for every increase incurred for any cost driver reflected as expense computed per twenty-foot equivalent unit (TEU), there was proportionate revenue earned to compensate such costs at MNHPI.
In August last year, MNHPI sought the increase in cargo-handling tariff, saying it needed to compensate for the “upward trend in cost drivers” and the increased cost of operating Manila North Harbor.
At a PPA public hearing almost a year later, the agency gave stakeholders until last June 1 to submit their position papers on the petition.
The PPA had granted MNHPI, which operates North Harbor for domestic cargo and passenger shipping, a total of 18-percent increase in tariffs from 2013 to 2014.
MNHPI said its new petition for a tariff increase was to keep up with cost drivers in its operations, which are labor, fuel, power and repairs and maintenance.
Liners cast doubt
In its position paper on the labor cost driver, the Philippine Liner Shipping Association (PLSA) questioned the basis of MNHPI’s claim that it needed to increase its pool of port workers from 1,100 in 2014 to 1,470, or a 34-percent increase.
“Despite so, shipping lines have complained of insufficient deployment of ‘mano’ (dock hands) middle of last year,” it said.
PLSA said this “could be because port workers are on a no-work, no-pay scheme, which means there is no regularity on the personnel it deploys.
“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,” it said.
It added there were instances when two vessels had to share dock hands and use of the equipment.
“This occurred again early January 2016. Such delays have resulted in additional unnecessary costs incurred by the lines,” PLSA said.
PLSA added that the yearly increase in fuel costs of 55 percent from 2012 to 2013, and 78 percent from 2013 to 2014, or a total of a 126.11 percent for those years, “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,” PLSA said.
On power use, PLSA asked MNHPI to provide details, since the annual increase in its power consumption of almost 2 million kilowatt hours, or a 103.12-percent increase in power cost per TEU, within a two-year period only, was “quite alarming.”
PLSA said that with brand-new equipment MNHPI claimed to have obtained for port services, it was “surprising” that it should incur an increase in cost of repairs and maintenance of 180 percent between 2013 and 2014, or 177.67 percent from 2012 to 2014, it added.
“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-percent increase in repairs and maintenance,” PLSA said.
The group added the PPA should impose 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.”
“As such, there is an excess in MNHPI of 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 said.
The Supply Chain Management Association of the Philippines (SCMAP), for its part, said 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.
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,” it said.
“We also believe that any additional investment on equipment and infrastructure should have an accompanying quantifiable improvement in performance,” it added.