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Cyprus may absorb Limassol port tariff shock

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The government is trying to find ways to absorb a hefty 16% hike in tariffs announced by the three concessionaires at Limassol port, with the business community up in arms, saying this will cause irreparable damage to the economy, especially exports.

The main proposal from the island’s Chamber of Commerce is for the state to abstain from its 62% share of the fees to make the cost burden on traders less painful.

Even the Transport Minister is upset with the hike, posting a comment on social media that “we are opposed to the intention of the operators of Limassol port to increase their tariffs and are working on ways to resolve the matter.

“Next week, I should have the relevant study on the tariffs and the government will try and find a way so that this cost does not pass on to the consumers,” said Yiannis Karousos.

The consortium of Eurogate International GmbH, Interorient Navigation and East Med Holdings received the contract for the container terminal, and the consortium of DP World and G.A.P Vassilopoulos received two separate concessions for the operation of marine services (with P&O Maritime) and the multi-purpose terminal.

In late 2015, the three agreed to pay €1.9 bln for the 25-year concession.

News reports suggest the three operators want to push up all their tariffs by 4% to 96%.

Comply with contracts

In comments to news site StockWatch, Karousos said that the state will first be looking into whether the tariff increases announced by the port operators comply with the terms of their concession contracts.

Karousos appeared confident that, “there are ways for the state to absorb the increase, which are being worked out by the Ministry’s port development team.”

He stressed that the Ministry does not agree with the increases at this time, due to the skyrocketing price of raw materials internationally and the huge problems it has caused in the market.

However, Karousos pointed out that “under the concession agreements, the companies have a right to revise the tariffs, should the benchmark Producer Price Index in the domestic market increase, as compiled by Eurostat. This index has recorded an increase of 16%.”

The minister said his department is also considering if a number of tariffs could be detached from the PPI.

The Chamber of Commerce said the formula is skewed as it only considers the PPI for the domestic market and no other parameters.

The issue was to be tabled at a meeting of the House Commerce Committee on Tuesday.

Representatives of the concession operators were expected to attend the meeting to justify the tariff increases, despite the reactions and pressure from both the Ministry of Transport and the rest of the business community.

Worst timing

In comments to state radio CyBC, the Secretary General of the Cyprus Chamber of Commerce and Industry (CCCI) Marios Tsiakkis said that “the timing could not be worse for an increase in charges” and called on the three managing companies at the Limassol port to reconsider their decision.

Arguing that the decision is wrong and short-sighted, Tsiakkis added that “it was taken having in mind only exports and forgetting the domestic market”.

Tsiakkis called on the Transport Ministry to intervene, noting that if the port operators go ahead with the increase, he will call for President Nicos Anastasiades to personally step in.

The concession operators at the Limassol Port have been accused of exploiting a monopoly, as the island’s only operational port, holding the entire economy hostage.

The alternative port of Larnaca has started the transition process of upgrading and developing the marina under its new management.

A year ago, the chairman of the port’s owner and regulator Cyprus Ports Authority told parliament that Limassol port had lost business in the four years since it was privatised, due to higher rates and competition from rival destinations.