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Sydney Ports, Patrick at ten paces at Port Botany


Following the release of new terms, conditions and pricing for its rail services at Port Botany, which users have condemned as monopolistic bullying, Patrick has been threatened with regulatory intervention by Sydney Ports Corporation.
 
Sydney Ports will recommend regulations be imposed on stevedore rail operations at Port Botany, following a second attempt by Patrick to increase rail window charges  from September 1, 2010.
 
Sydney Ports will be immediately seeking the Minister’s support to add rail window pricing and rail data to the regulatory documentation currently being finalised for industry consultation through the industry supported Port Botany Landside Improvement Strategy (PBLIS).
 
Chief executive officer of Sydney Ports Corporation Grant Gilfillan warned that the proposed increases in rail operating fees had the potential to undermine the NSW Government’s long-term target of moving 40% of freight to and from Port Botany by rail and would put more trucks on the road.
 
Mr Gilfillan said Sydney Ports had met with Patrick senior management last month and provided the company with the opportunity to withdraw their initial proposed rail windows rules and price increases that they had intended to introduce from August 1, 2010.
 
“We acknowledge the positive steps taken by Patrick to withdraw their initial proposed rules and price increases in late July, and to commit to discussing any future rules through an ACCC authorised process in the Port Botany Rail Team. This was a welcome step,” Mr Gilfillan said.
 
“However, the company has continued to indicate to industry that it believed the original framework for increasing charges still applies, and would not rule out similar changes to rail operations in the future.
 
“At the same time, Patrick has continually acted outside the spirit and intent of PBLIS by failing to fully consult all industry stakeholders in a timely fashion and have tried to introduce changes without warning,
 
“Without notice, last Friday Patrick issued its second pricing proposal which imposes price increases upon industry, with windows charges going up by 67 per cent.
 
Sydney Ports will now be finalising a submission to the Minister for Ports and Waterways to regulate key components of the PBLIS rail program at Port Botany,” he explained.
 
“Matters under consideration for such a regulation include specific mode share targets for the stevedores, setting a maximum cap on rail pricing at the port interface and ensuring there is price equity between rail and road transport.”
 
The impacts of the proposed pricing increase - more trucks in the port precinct and on the M5 - are the very reason that the NSW Government has set a rail mode share target.
 
Under its original proposal, from August 1, 2010 Patrick was to raise the rail window fee from $15 per container to $42, a near threefold increase.
 
Under its latest notification to industry, Patrick will increase its rail window fee from $15 per container to $25, commencing on 1 September 2010.
 
However, Mr Gilfillan said Patrick were fully aware that terminal charges for lifts on to both road and rail are currently and traditionally incorporated into existing contracts between the respective port stevedores and shipping lines.
 
“For Patrick to now propose to charge a fee of this magnitude for a service which is already paid for by shipping lines, and ultimately the cargo owner, is quite extraordinary,” he said.
 
“As we begin to implement the PBLIS reforms at Port Botany, Sydney Ports will not stand back and allow Patrick to unilaterally set its own rules and charges at the road and rail interface.
 
Patrick’s response
 
After commencing consultation with ARTC, Railcorp, rail operators, Sydney Ports Corporation and the ACCC in May 2010, Patrick recently advised that it would increase rail-handling charges to cover its costs and introduce reciprocal rail performance rules for operators and Patrick.
 
These rules and charges would improve efficiency and productivity at the terminal which over the past 18 months has seen rail mode share at Port Botany continue to decline and rail services become so inefficient that 92% of trains do not arrive on time to the terminal, due to factors outside of Patrick’s control. 
 
The inefficiency is immensely costly notwithstanding that Patrick maintains a rail team 24/7 to man its rail operation whether trains arrive on time, late or not at all.
 
While labour and other rail costs have continued to rise, Patrick had only a nominal $5 per lift increase in its rail service charge to rail operators in the past nine years.
 
Divisional general manager Paul Garaty said: “With no improvement in rail mode share or rail efficiency expected in the foreseeable future, and Patrick costs continuing to rise, Patrick has no choice but to increase charges.
 
“It is unreasonable for anyone to expect Patrick to provide services without recovering its costs, no commercial entity including Sydney Ports would accept this situation.
 
“Sydney Ports’ assertion that shipping lines currently pay for rail handling is incorrect, shipping line charges are based on providing national stevedoring services and do not include rail handling charges at Port Botany.
 
 “It is disappointing to see that Sydney Ports has once again sought the threat of stevedore regulation to solve the problem of rail underperformance and the failure to move towards their stated 40% rail mode share target.
 
“Sydney Ports’ costs and time would be better spent working on solutions to improve the inadequate rail links to and from the port, the development of intermodal terminals in the Western suburbs of Sydney and creating incentives for freight owners to use rail”, Mr Garaty said.
 
Patrick has participated in the Port Botany Rail Task Force since its inception in November 2008 and has foreshadowed an increase in charges to members of this industry forum since May 2010.
 
What the industry says
 
David Knight, a director of Qube logistics, owner of rail company POTA that is one of the two big users of the rail services at the terminal, does not accept Patrick’s explanation.
 
“The consultation was a joke,” he said. “They told us what is going to happen, which is not consulting. Rail operators have no choice as they are faced with a monopoly.”
 
Mr Knight said the inefficiency is on Patrick’s side, not the rail operators’. He also questioned the charge being related to lifts.
 
“Originally, the rail access charge was implemented to cover the cost of managing and administering the rail windows. It is fair enough for the parties  to agree on some standard operating procedures as far as that goes, with equitable penalties on both sides for non-performance.
 
“But Patrick is endeavouring to do some double-dipping with this change. They are paid by the shipping companies for the lifts – whether rail or trucks – and now they want to cover their lift costs from rail operators as well.
 
“Patrick is operating a monopoly. While shipping companies can go to the other stevedore, rail operators can’t: if a container is at Patrick’s, we have to pick it up from there,” Mr Knight said.

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