PORT PRICING

Port Pricing

Port Pricing

The Government of the Sultanate of Oman and the Sohar Industrial Port Company (SIPC) are bound by mutual concessionary agreement, allowing SIPC to operate, manage and develop the Sohar Industrial Port area. The concession allows SIPC to levy the leverage to charge port dues for vessels entering the port area of Sohar.

Prior to privatization, major ports of the world have sought to devise effective pricing strategies to widen their competitive moat in an increasingly competitive market environment. When formulating a pricing strategy, it is imperative that ports take into account their individual operational and institutional structure. It is equally important to consider the competitive operations environment which is created as a result of the privatization programs of other ports operating in the region.

Ports that have been privatized are different form state-run ports since they are governed by a more complex and multifaceted institutional structure. Apart from this, they also interact with intermediary parties whereas principal parties include two private groups of users who are essentially shippers and shipping liners and a public operating port.

All the container terminals that are available in a port provide a set of basic services that are congruent to each other. The leading factors that have a direct impact on the pricing mechanism of privatized ports are range of operations, accessibility and competition. The overall structure of the market that provides port services has a high concentration. Due to this high concentration, the ports are frequently subjected to antitrust concerns. As a result, a number of countries have actually established dedicated agencies to supervise shipping and port operations.

The leading factors that have a significant influence on the pricing decisions of newly set up ports like the port of Sohar are highlighted below:

A structured network that is made up of intermediary parties as well as principal parties

A range of charging mechanisms and charges

Price discrimination and service discrimination

High concentration in the market both on the supply side as well as the demand side

An amalgamation of cooperative and competitive associations among parties

In the case of the port of Sohar, the market in which it operates and provides its serves comprises of inter-port as well as intra-port level of competition. Inter port competition refers to the competiveness tat exists between the different communities and coalitions operating in the port whereas intra-port competition relates to the competitiveness among the parties that operate in the same port.

When it comes to operating ...