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TasPorts - Bass Island line


Cassy O'Connor MP

Cassy O'Connor MP  -  Thursday, 1 December 2022

Tags: TasPorts

Ms O'CONNOR - Minister, I think it was last Wednesday you announced your intention to initiate a prescribed body inquiry under the Economic Regulator Act in relation to the pricing policy of TasPorts' wholly owned subsidiary Bass Island Line. When do you expect to have the terms of reference finalised? Who will you consult on these terms of reference? I am sure that the people of King Island will be very interested to know this.

Mr FERGUSON - Thank you, Ms O'Connor. It has been something of considerable interest to me and the Government. I walk through this policy area both as Minister for Infrastructure and Transport with an interest in Bass Island Line as well as Treasurer of Tasmania. It is well understood that Bass Island Line, which is owned by TasPorts as a subsidiary, was a very dramatic, if I can put it this way, response to standing in the gap between King Island and the rest of Australia in terms of the loss of the previous shipping service through SeaRoad. The Tasmanian Government used its wherewithal through TasPorts to ensure that shipping services could continue.

There has been a lot of change in relation to the best way to structure that service. The operating model that was embarked upon in the early days was clearly not sustainable, because as you'll note from my opening remarks this subsidiary was losing over $4 million a year. That comes off the bottom line of TasPorts and is paid for by all Tasmanians through loss of dividend. That operating model needed to become sustainable. I will leave that subject there in case you want to come back to it.

With pricing, there's been a lot of conjecture and claims and counter claims made that I've become aware of in relation to costs and the way in which Bass Island Line allocates certain cost elements within what is ultimately paid for by customers on King Island, whether they're shippers or consumers wanting to pay for goods such as fuel or grocery items.

The first thing I want to say is that I speak well of Bass Island Line. It continues to provide a reliable service to the island and customers have really responded. Following the new model that started in March, we've seen significant uplift in custom. That's a good sign. I acknowledge, and the Government acknowledges, ongoing concern from people who aren't satisfied with the answers that have been provided in good faith by TasPorts and BIL, often via me in a question on notice in the parliament.

In the environment of some scepticism around these matters, I've announced in my role as Treasurer that I will commission an independent inquiry under the Economic Regulator Act 2009. Ms O'Connor, I'm currently speaking with the office of the Tasmanian Economic Regulator and the Economic Regulator himself, Mr Joe Dimasi and terms of reference are being considered at the moment that take into account some of those unresolved or unsatisfied concerns. I look forward to having more of a say about it. I intend to be as transparent as you would expect in the lead up to commissioning that work. Once commissioned, it will be entirely arm's length from me and conducted independently by Mr Dimasi. We will all look forward to the response and any findings, positive or negative, as may emerge.

I don't yet have a reporting time frame, however, I am broadly advised to expect that this volume of work would need at least six months to conduct. I am hopeful that a response and a report, once the terms of reference are finalised and once Mr Dimasi has been given that instruction by me, by the middle of next year.

Ms O'CONNOR - Thank you, minister. As you would be aware, it is not only the cost of the service that's been raised as an issue by people who use it or companies that use it, there are also criticisms of shipping delays to the service. Is that going to be part of your terms of reference and something that the Economic Regulator would look at?

Mr FERGUSON - I would not think that the Economic Regulator looks specifically at that because the Economic Regulator would be looking at the economic elements and the pricing components that go into prices charged to customers. I would invite you to direct some of these questions to the people at the table. I am very happy for them to do so.

For example, the on-time performance of Bass Island Line often cops some pretty unfair criticism given that it sails when the weather is appropriate as it carries livestock. I am sure you would agree that the line should travel when it is optimum, noting that the nature of the freight task requires that. It has an on-time performance that when there are delays, they are on average, one and a half days. On average it sails every week.

Without wanting to be defensive about that, I will invite the CEO to go deeper with you on that subject with regard to the nature of the service. The role that the Economic Regulator will take will be much as the ACCC would do in the private sector and look at business practices and the level of charging as it affects consumers.

Ms O'CONNOR - Thank you for that, minister. I am happy to hear from the CEO. I am interested in the CEO's thoughts on how you might run that service on a commercial basis and make it affordable to customers as well? I foresee subsidies coming or something in order to make that a viable service from a commercial point of view.

Mr BRADFORD - The decision on which direction Bass Island Line operates is a matter for the cargo owners. In the weekly service we operated up until February this year to Melbourne, we saw continuing cargo reductions in volume. That was because the cargo owners were making a different decision for a number of reasons. The prime one, they decided to source from Tasmania rather than Victoria. That is their call.

Ms O'CONNOR - Sourcing?

Mr BRADFORD - Source their product, particularly fertiliser. Source from Tasmanian suppliers rather than Victorian. That is their decision, not the ship owner. Mr Donald and his team did an extensive review and found that the most viable option was to run from West Devonport to Grassy on a weekly service, 52 services a year, one a week, only running a second service where we had strong demand. It has occurred but not frequently. That has seen an increase in volume. October and November are excellent months on volumes and revenue. Good solid months.

The problem with the losses when you cut through that, well not a problem, it does require a contribution from TasPorts because the service is there every week. Our competitor, and he has announced this publicly on the island, only sails when he's full. As a ship owner, that's a great option. The losers to that are the community on King Island. For the people who use the two supermarkets that would be a disaster. You cannot run a service like that.

Going back in history, Mr Hidding asked us when the private sector failed to provide a service. We are now operating out of West Devonport. The volumes are strong at this time of the year. They will probably drop off in June or July, but it is a good service. The pricing will be considered by the minister's regulatory review. That's fine. But I suspect it will lose money this year. There has been another insurance payment like last year, so we are at the end of that.

Ms O'CONNOR - This is a question, I think, more for the minister.

Because the Bass Island Line was making those losses, can you foresee, minister, that it is not going to be possible to charge, particularly King Island residents, commercial terms to make the Bass Island Line service viable? Rather than requiring TasPorts to pay, is a subsidy something the Government would consider to support King Island residents and producers?

Mr FERGUSON - Thank you, Ms O'Connor. I apologise. The line again dropped out during some of the previous discussion. I hope I caught all that. I am going to ask the team to help me with the answer to the question.

It must be commercial. It has to be, otherwise the gentlemen at the table will be taken to task by a different group of regulators. It needs to be commercial, but what the business is seeking to do is to not ever exploit the market role that it plays to ensure that prices charged actually stand up to a test scrutiny. That, of course, will be tested through the role of the economic regulator at a later time.

I would ask you to look at the numbers in the report. They indicate that there is an effective recognition that the state of Tasmania is carrying that service to an extent in that commercial model, noting that we hope that it will continue to improve but currently the report shows a $2.2 million loss that that PIL, has made. I think that recognises the structure of the service being reliable and weekly. Hopefully, as it continues to gather volume would recognise that customers are appreciating the service and shifting more and more volume to it.

I know that Anthony, in particular, has to be mindful that he and that business are not acting in any way that is taking advantage of its market position against competitors. There are other competitors that operate to King Island. Respecting all of that, there is an effective carrying of the losses by the State of Tasmania as it is.

Mr BRADFORD - We are receiving strong support from companies like JBS. The new mine, G6 Minerals, looks to be a strong customer. They will make their own decisions. If I was looking at the service holistically across Bass Strait now, and could suggest what could change, I would like Prime Minister Albanese to reconsider the freight equalisation scheme for cargo that is bound for Victoria, and has to be bound for Victoria, principal exports. There is now no direct service between Melbourne and King Island. It is not justified, but those exporters are critical for King Island 's economy.

Ms O'CONNOR - What sort of arrangement does TasPorts have with JBS in relation to King Island?

Mr BRADFORD - We are the supplier of shipping services between Grassy and West Devonport, their empty trailers of cattle and full trailers. They were with our competitor. West Devonport was, like a number of cargo owners, manna from heaven.

Mr DONALD - If I may, Ms O'Connor, one of the questions you asked earlier that we haven't answered yet related to reliability. Broadly speaking, 60 per cent of our sailings occur on time on a weekly basis; 40 per cent are delayed by an average of 1.59 and that's largely due to weather conditions and heavily influenced by our care for animal welfare.

Mr BRADFORD - The team put a lot of effort into trying to attract a refrigerated chilled and frozen product from Eire to 9 - 10 tonnes a week, a nice shipping product. Our rate was half the going rate. The island preferred their current method of transport. I call that Life: we tried; we put the equipment in place. It wasn't supported.

Mr DONALD - I'd also like to share, Ms O'Connor, we've attempted on two separate occasions to find a different private sector model. On both occasions, our very clear outcome, there hasn't been one entity that provides a better service to Tasmania and King Island than TasPorts and the Bass Island Service.