Productivity Commission Inquiry: Economic Regulaton of Harbour Towage and Related Services - Government Response [28/03/2003]
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PRODUCTIVITY COMMISSION INQUIRY: ECONOMIC REGULATON OF HARBOUR
TOWAGE AND RELATED SERVICES
GOVERNMENT RESPONSE
In February 2002 the Government asked the Productivity Commission to report
within six months on whether harbour towage at major ports should continue to
be a `declared' service under the Prices Surveillance Act. In so doing the Commission
was to report on the impact of structural reforms on the provision of harbour
towage and other measures that could be taken to increase the level of competition
in harbour towage and related services.
In drawing up its recommendations the Commission was asked to review the market
structure including the effectiveness of competition, the extent to which cost
structures vary from one port to another, pricing of towage services and the
effect of regulations on the efficient provision of towage services.
The Government in requesting that the Commission undertake this inquiry was
responding to a number of factors that indicated a review of the Harbour towage
sector would be timely. These factors included; announcement by Adsteam Marine
that it intended to increase the price for its towage services in five of Australia's
major ports by between 11.7 and 26.2 per cent; the ACCC finding that no increases
were warranted; requests from the users of towage services and key stakeholders
including port authorities and shippers for an inquiry and the expiry on 19
September 2002 of the `declaration' of towage services under the Prices Surveillance
Act.
The Government received the Productivity Commission's Final Report on 20 August.
After detailed consideration of the report the Government has accepted the Commissions
findings and the four recommendations based on those findings.
The Government has also noted the Commission's view that the provision of salvage
services need not be adversely affected by the efficient pricing and provision
of towage services. Given the importance of adequate salvage services the Government
considers that the retention of adequate salvage capability needs to be factored
into tender specifications and contracts where port authorities seek to licence
towage operators. In addition the Minister for Transport and Regional Services
will maintain a dialogue with the shipping industry and related stakeholders
to monitor future developments in the Australian tug fleet and its salvage capability.
The Government's position in relation to the four recommendations is as follows.
Recommendation 1.
Subject to maintaining appropriate levels of safety, prescriptive regulations
that stipulate tug use and/or tug size or type should be modified to promote
provision of required levels of service at minimum cost.
Relevant jurisdictions should also promote harmonisation or, where appropriate,
introduction of a system of mutual recognition of minimum crew qualifications
and standards, to minimise impediments to the movement of crews and tugs across
Australian ports in different jurisdictions.
The Government strongly supports this recommendation and believes there is
scope for towage services to be provided on a more cost effective basis through
further review and reform in these areas. The Minister for Transport and Regional
Services will work through the Australian Transport Council to have the issues
identified in the Productivity Commission Report relating to towage guidelines
and the training and qualifications of tug crews addressed.
In this context the Government notes that in relation to tug crew training
and qualifications the ATC has already initiated work through the National Marine
Safety Committee (NMSC) to achieve the national adoption of all aspects of Australia's
Unified Shipping Laws Code. However, the Report has also identified other issues
in relation to the Code and international conventions to which Australia is
a signatory and the Government would like to see these matters also examined
by the NMSC.
The Minister for Transport and Regional Services will seek the agreement of
the ATC to have this work undertaken by the NMSC.
Recommendation 2.
Where port authorities currently do not have explicit discretion to license
towage operators (on an exclusive or non-exclusive basis), the relevant jurisdiction
should grant them that discretion.
The granting of such discretion should be accompanied by safeguards to ensure
that a port authority, if and when exercising its discretion to license towage
providers:
- does not use the tender process to appropriate savings in the provision
of harbour towage for itself (over and above the additional administrative
costs incurred by the port authority;
- demonstrates the net benefits of proposed licensing arrangements;
- formally consults with towage users in a transparent manner prior to
changing existing arrangements and about the conditions attached to any licences;
and
- implements `arms length', transparent competitive-tendering processes.
The Government accepts in principle the Productivity Commission finding that
competitive tendering offers an alternative and potentially more effective mechanism
for promoting competition and may lead to more efficient pricing and service
outcomes. The Government recognises that achieving more efficient pricing and
service outcomes is partly reliant on further workplace reform in the industry.
However, while it supports this recommendation the Government considers the
implementation of appropriate safeguards consistent with those specified by
the Commission are essential to ensure the integrity of any tender process.
The Government would not support the introduction of competitive tendering by
any jurisdiction or port authority that was in any way deficient in these areas.
Any tender process must be transparent and independent of any potential conflict
of interest. In particular the Government strongly believes any tender process
for the provision of towage services where the relevant port authority is associated
with a tenderer must be managed by an independent agency.
The Government recognises that any move to implement this recommendation rests
solely with the State and Territory Governments and their agencies. It has noted
that subsequent to the release of the Productivity Commission's discussion paper
in June Queensland has announced it will grant all port authorities in the State
the right to license harbour towage. The Minister for Transport and Regional
Services will raise the Productivity Commission's recommendation with his ATC
counterparts in those remaining jurisdictions that do not allow the licensing
of towage operators.
Recommendation 3.
Declaration of harbour towage services at the ports of Melbourne, Sydney
(Port Botany and Port Jackson), Newcastle, Brisbane, Fremantle and Adelaide
under s. 21 of the Prices Surveillance Act 1983 should not be renewed when the
current declarations expire on 19 September 2002.
Following consultation between the relevant Ministers it was agreed that the
declaration should be allowed to lapse on 19 September and this has occurred.
Recommendation 4.
Harbour towage charges where declarations currently apply should, as a transitional
measure, be subject to limited monitoring by the ACCC for a three-year period.
Price data should be published annually.
The Government supports the Commission's view that limited price monitoring
for a period of three years would be of assistance to users as well as other
industry stakeholders including ports and shippers. However, the Government
believes there may be merit in such monitoring including both regional and bulk
commodity multi-user ports. The Minister for Transport and Regional Services
will consult with industry stakeholders before announcing which ports will be
incorporated in the monitoring process.
The Government also accepts the Commission's view that any further monitoring
should be very "light handed". Given this approach it is considered
more appropriate for the work to be undertaken by the Bureau of Transport and
Regional Economics on an annual basis with the results being incorporated in
its publication Waterline. The monitoring will be limited to a survey
of prices being charged within the nominated ports. It is intended that a base
line survey will be undertaken and published in the first edition of Waterline
in 2003.