Cost assessment and tariff determination : cargo handling experiences at a private port

Abstract

(This case is written based on personal observations, interactions, and information collected from authorities of a private port in Gujarat and is purely for academic discussions to suit post graduate students. Taking this objective as cue and as per suggestions of authorities, financial figures are tweaked and name of the port is not disclosed.) Assessment of costs involved in handling a ship holds key for calculating tariff to be levied for services provided to client. A port provides numerous services to a ship that visits for loading and/or unloading of cargo and in the process incurs numerous costs. Precision in identifying costs incurred while providing services and charging clients accordingly help in maintaining confidence of clients and profits for port. The present case deals with cargo handling process of a private port and costs determination for such services. A port attempts to provide reliable and speedy services at competitive prices for its clients so as to maintain client satisfaction and business. Ports in competitive market environment are investing huge amount of funds on infrastructural setup only to reduce stay time of both ship and cargo at the port. Modern ports, often, maintain alternative mechanism to handle the cargo that they handle. This Case Study is based on the observations, interactions and subsequent data collection from a private port in Gujarat on west coast of India and covers assessment of costs involved in handling a ship arriving with coal that the port is to handle for one of its clients. A port also provides certain additional services as desired by client for further charges. A decision on identifying a cost-effective alternative with ease of handling from among two modes of cargo handling process is to be made by the students. The case is well suited for students with ability to understand process costing concepts.