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Section 4 : Other Reporting Requirements

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4.1 Purchaser-provider arrangements

AMSA does not have any purchaser-provider arrangements with other agencies.

4.2 Cost recovery arrangements

Overview of AMSA's Cost Recovery Arrangements

When AMSA was established in 1990, the Australian Government took a policy decision that AMSA's ship safety and regulatory services would be fully cost recovered from the shipping industry primarily by three statutory levies and fee for service sources. The three levies are:

  • The Marine Navigation Levy funds maintenance and management of Australia's national network of aids to navigation. As the network primarily assists the safe navigation of commercial shipping, the Government policy is to recover the full cost from the industry. This is in line with the "user pays" principle so those benefiting meet the cost.
  • The Regulatory Functions Levy funds the safety and environmental regulation and surveillance of the shipping industry to ensure seaworthiness and safe operation of ships in Australian waters. The Government policy is to recover the full cost of ship safety and regulatory functions from the industry in line with public sector pricing principles to recover avoidable costs. Shipping is an economic activity requiring regulation in the community interest and the cost of such regulation should be borne by those generating the need for it and not by the general community.
  • The Protection of the Sea Levy funds the operation of Australia's National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances and the new National Maritime Emergency Response Arrangements (NMERA) (described below). The recovery of the full costs of managing the National Plan and the NMERA is based on the principle of the "potential polluter pays". Any ship may require pollution or emergency response services under these national arrangements and hence the industry should meet the cost of maintaining these services.

Table 2.5 outlines total estimated levies and Table 2.3 outlines total estimated fees and charges This shows AMSA's primary funding source for its safety and regulatory functions is through its levies and only a small part of revenue is from fees and charges. The Australian Government receives the statutory levy payments from the shipping industry and these funds are appropriated to AMSA under section 48 of the AMSA Act as special appropriations.

AMSA's search and rescue coordination services are met by the Australian Government through Budget Community Service Obligation (CSO) funding. Under a number of international conventions, Australia is obliged to provide search and rescue services for persons in aircraft and vessels in distress in Australia's internationally designated search and rescue region. This covers almost 53 million square kilometres or one tenth of the earth's surface and comprises the east Indian, southwest Pacific and Southern Oceans. The majority of search and rescue incidents involve recreational and fishing vessels and small aircraft.

New Cost Recovery Statement: National Maritime Emergency Response Arrangements

In November 2005, the Australian, State and Territory Governments agreed at an Australian Transport Council (ATC) meeting to implementation of the NMERA, a comprehensive package of measures for the ongoing protection of Australia's coastal and marine environment, including:

  • Ensuring the availability of an agreed level of ocean-going emergency towage capability at strategic locations around Australia's coast through contracting with service providers for assets which, at other times, perform other commercial activities.
  • Providing a dedicated emergency towage vessel for the northern part of the Great Barrier Reef and Torres Strait.
  • Appointing AMSA to regulate, monitor and coordinate emergency response arrangements as the national decision-maker when there is a significant pollution risk in relation to any ship in Australia's waters and around Australia's coast.
  • Funding the NMERA by the Australian Government on the basis of full cost recovery from the shipping industry through an increase in the Protection of the Sea Levy.

The NMERA represented a significant addition to AMSA's functions and a change to its cost recovery arrangements in relation to the ATC's agreement to extend the Protection of the Sea Levy to fund the NMERA, for which AMSA prepared a CRIS, which is summarised below.

Public Policy Objective

It is in the national interest to protect the marine environment from pollution by a shipping casualty in Australian waters. An emergency towage response capability can be a vital factor in assisting a damaged or disabled ship before it becomes a casualty and causes pollution, environmental damage and economic loss. The Australian and State/Territory Governments agreed to the NMERA to maintain an agreed level of emergency towage capability around Australia's coast in view of the risk that these services would no longer be viable on a commercial basis. While the number of maritime incidents has declined so reducing demand for, and the viability of, commercial emergency towage, the risk of a one-off catastrophic ship incident needs to be addressed by maintaining a level of emergency towage response capability.

Cost Recovery Arrangements

The full cost recovery of NMERA from the shipping industry is in line with the Commonwealth Cost Recovery Guidelines for Information and Regulatory Agencies. It accords with the Australian Government's approach to the funding of AMSA's other safety and regulatory functions. It reflects the "user pays" principle, whereby the beneficiary of these emergency towage services, the shipping industry, meets the cost of these services.

The Protection of the Sea Levy is imposed under the Protection of the Sea (Shipping Levy) Collection Act 1981 and the Protection of the Sea (Shipping Levy) Act 1981. It applies to ships visiting Australian ports of 24 metres or more in length and carrying more than 10 tons of oil in bulk as cargo or fuel. It is charged on a quarterly basis at a current rate of 3.3 cents per Net Registered Ton (NRT) of the ship. This represents a simple measure of the ship's earning capacity and hence the value it draws from the availability of emergency towage services during the quarter in which it carries cargo and/or passengers in Australian waters.

The use of Protection of the Sea Levy to fund NMERA means the costs are recovered from all relevant ships visiting Australia. This reflects the levy's underlying principle of "potential polluter pays", whereby any ship may require emergency towage services to avoid becoming a marine casualty and causing major pollution and hence all ships should contribute to the cost of maintaining the availability of these services. It is not practical or efficient to recover the full cost of maintaining the emergency towage capability from only ships that use the service given the low level and random nature of incidents when emergency towage is required.

Cost Impacts

The full cost recovery of the NMERA will require an increase in the rate of the Protection of the Sea levy. However, the emergency towage contracts are only partially implemented with some tender outcomes to be finalised. While AMSA has made cost estimates based on expected outcomes for the completed tender process, these may require refinement following completion of the contracts. In 2006-2007, AMSA estimates the cost of establishing and maintaining the NMERA emergency towage capability will be $13m.

Based on AMSA's estimate of the overall cost of NMERA, it is calculated that the rate of the Protection of Sea Levy will need to increase from the current level of 3.3 cents to around 11.25 cents per NRT. It is proposed to phase-in the levy rate increase over the next four financial years to provide maximum time for the shipping industry to plan and budget for meeting the full cost of the NMERA. It also will allow the exact costs, and therefore the required levy revenue, to be accurately quantified based on the finalisation of the emergency towage contracts and AMSA's experience with the management of the NMERA system. The table below shows the indicative levy rate as at 1 July over the next four financial years.

YEAR
Date of Proposed Levy
Rate Increase
Levy Rate
2006-2007
No change proposed
3.3 cents per NRT
2007-2008
1 July 2007
7.7 cents per NRT
2008-2009
1 July 2008
9.6 cents per NRT
2009-2010
1 July 2009
11.25 cents per NRT

The change in the levy rate require regulations to be made pursuant to the Protection of the Sea (Shipping Levy) Act 1981 and is subject t o the usual regulatory approval process.

The proposed staged increase in the levy will require AMSA to budget for a deficit over the next three financial years until the levy rate increases to that required for full cost recovery of NMERA. AMSA plans to offset these deficits by using its accumulated surplus and cash reserves arising from past operating surpluses when shipping levy revenue slightly exceeded expenditure in recent years, despite AMSA's consistent reduction in the overall rate of levies. This is discussed further in Section 5.1 Analysis of Budgeted Financial Statements.

Consultation

There has been extensive consultation with relevant stakeholders over a number of years on emergency towage issues. In 2005 and 2006, consultative meetings have been held in the major shipping centres (Melbourne, Sydney, Brisbane and Perth) to discuss specific key issues and future policy options for provision of emergency towage in Australia and recently on the implementation of the NMERA. The Australian Maritime Group, comprising federal, state and territory marine administrations, has been involved in developing the NMERA over a number of years culminating in the ATC decision in November 2005, and is being kept advised of progress in the implementation of NMERA.

The AMSA Act requires in section 12 that AMSA is to consult, where appropriate, in the performance of its functions and the exercise of its powers with government, commercial, industrial, consumer and other relevant bodies and organisations. AMSA has established an AMSA Advisory Committee of key stakeholders, which regularly discusses the development and implementation of NMERA and is consulted on an ongoing basis about the management of AMSA's levy system and cost recovery policies.

Monitoring and Review

The Commonwealth Cost Recovery Guidelines for Information and Regulatory Agencies require a review of cost recovery arrangements every five years. AMSA annually reviews the level of levies required to recover its costs. It also regularly reviews its levy arrangements with the most recent review in 2002 and further review is scheduled in 2007 08 in line with the Guidelines.

Expenditure/Revenue Comparison

The undernoted chart shows the overall stable trend in AMSA's revenue and expenditure over the four years since 2001 2002, which demonstrates AMSA's efficiency gains in service delivery flowing from its consolidation of its asset base and adoption of a range of management strategies.

The rise in revenue and expenditure shown by the chart in the four future years results from two influences. The first is the Budget measures in 2004 2005 and 2005 2006 allocating additional funding to enhance AMSA's search and rescue capability. The second is the proposed rise in levy revenue required to fully recover the costs of AMSA's new functions in providing a level of emergency towage response consistent with the NMERA.

AMSA proposes budgeting for a deficit in the next three financial years, from 2006-07 to 2008-09, as a one-off measure to support the proposed staged increase in the levy revenue from the Protection of Sea Levy required to fund the NMERA with the aim of achieving full cost recovery of the NMERA by the shipping industry in 2009-10. AMSA will draw upon its accumulated surplus and cash reserves to cover the deficit years.

Figure 4.1

(click on the image to view the larger version)

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4.3 Australian Government Indigenous Expenditure

Table 4.1: Australian Government Indigenous Expenditure

AMSA has no Australian Government Indigenous Expenditures.

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budget

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