Chittagong Port is profitable, why increase surcharges?

A total of 92 per cent of the country’s import-export trade is conducted through the Chittagong Port. Imports through this port include food grains, cement, fertiliser, coal, salt, sugar, fuel oil, and edible oil, among others. Exports through the port include readymade garments, jute, jute goods, leather products, tea and frozen goods. As a result, the entire economy of the country depends on this port.

Recently, news reports have said that the interim government has decided to raise various service tariffs at Chittagong Port by an average of 40 per cent in one go. Although the average is 40 per cent, the rate of increase for some services is even higher. For example, loading and unloading containers from vessels. In this sector, the charge for a 20 ft  container has been proposed to be raised from 43 dollars 40 cents to 70 dollars 11 cents, an increase of about 62 per cent. Earlier, on 15 July, the private Inland Container Depot (ICD) Association announced in a circular that rates for private container handling would be increased. According to that announcement, starting from 1 September, charges will rise by between 30 and 100 per cent depending on the service.

There is already a kind of stagnation and uncertainty in the country’s economy. Added to this are concerns over Trump’s increased tariffs and the announcement of higher service charges at privately owned inland container depots. In such a situation, Chattogram's port tariff hike has come as a double blow.

The government says that charges for most port services have not been raised since 1986. While rates for five services, including port tax, berthing fees, forklift charges and other utility costs, were slightly adjusted in the 2007-08 fiscal, all other charges have remained unchanged since 1986. Therefore, the government argues, raising tariffs is necessary to expand the port’s capacity. There is, however, a catch in this argument: port charges are collected in US dollars. In 1986, the dollar stood at 30 taka 41 paisa. It is now 122 taka. So, even without any official tariff hikes, the increase in the exchange rate has automatically pushed up charges by more than four times.

Chittagong Port is a service-oriented institution. According to the Chattogram Port Authority’s annual report, one of its key commitments is to provide port services at the lowest possible cost and in the shortest possible time. As a service provider that plays a crucial role in the national economy, the justification for raising its tariffs is questionable, especially since the port is not operating at a loss. For example, in the 2024-25 fiscal year, the port earned 5,227 crore taka against an expenditure of 2,314 crore taka, resulting in a profit of 2,913 crore taka. Why would a state-run service institution that makes nearly 3,000 crore taka in profit annually need to raise tariffs in this way?

If tariffs are increased, the cost of importing consumer goods and raw materials will rise-costs that businesses will ultimately pass on to consumers. This will further fuel the already high inflation in the country. On the other hand, for export goods, transportation costs will go up, which may weaken exporters’ competitiveness in global markets.

Many fear that the tariff hike, despite the port not being in deficit, is intended to make the port more attractive for DP World. Under the previous Awami League government, electricity and fuel prices were repeatedly raised to attract private and foreign investment in those sectors. This has prompted questions about whether the same model is now being applied to make Chittagong Port appealing to foreign companies.

Both the leasing of the New Mooring Terminal to a foreign company through a PPP arrangement and the tariff hike initiative were undertaken during the tenure of the previous authoritarian government. According to information from the PPP Authority, the UAE state-owned company DP World expressed interest in investing in Chattogram's port in 2020. As reported by Bonik Barta, in 2022 Spanish consultancy firm Messrs IDOM Consulting was hired to review the port’s tariff structure and prepare new proposals. Although there had been previous efforts to review port fees, there is strong reason to believe that the process gained momentum specifically in anticipation of DP World’s investment.

DP World has a bad reputation in many countries around the world for frequently raising port tariffs. According to a report by the United Nations Conference on Trade and Development (UNCTAD), in Australia, DP World unilaterally and dramatically increased its infrastructure surcharge in order to recover its investment. At the Port of Melbourne, the surcharge per container jumped from 3.45 Australian dollars in 2017 to 85.30 dollars in 2019, an increase of over 2,000 per cent. Similar extra charges were imposed in Brisbane and Sydney, which raised concerns for Australia’s competition regulator. (Review of Maritime Transport 2019, UNCTAD, 31 January 2020)

In Bangladesh’s case, was this advance tariff hike made to prevent DP World from gaining such a negative reputation here? The interim government’s plan is to complete negotiations and sign an agreement with DP World by November of this year. After the deal is signed, the terminal will come under DP World’s control. They will collect tariff and hire staff. In return, the port will receive lump-sum payments, annual payments, and container fees. Naturally, the surcharge hike will mean that DP World’s earnings will be higher than the current rates.

Raising tariffs Chattogram's port in the present economic situation would not be reasonable. If both the port and private inland container depots (ICDs) raise tariffs, costs will increase at every stage of the import-export process. For exports, there will be an extra tariff when goods are kept at a private ICD from the factory, and another extra tariff when they go through the port for shipment.

In the case of exports to the United States, Trump’s additional tariffs may add to the burden. For imports too, extra tariffs will apply at every stage. Therefore, the decision to raise tariffs at an already profitable Chattogram Port must be scrapped. At the same time, through discussions with private ICD owners, their tariff hike should also be brought down to a reasonable level.

It is also necessary to reconsider the decision to hand over the operation of the New Mooring Container Terminal (NCT) of Chattogram port to a foreign company. After the expiry of the port’s contract with the controversial Saif Powertec Limited, the navy-run Chittagong Dry Dock Limited took charge of operating the NCT for six months starting from 7 July. This has further accelerated port operations, which demonstrates the capability of domestic institutions in port management. Therefore, considering the strategic importance and economic significance of Chattogram port, the interim government should refrain from increasing port surcharges and from handing over terminal operations to foreign companies.

* Kallol Mustafa is a writer on power, energy, environment and development economics. He can be reached at kallol_mustafa@yahoo.com

* Views expressed are the author’s own