Fisheries Cost Recovery Standing Committee Meeting #2

Phased cost recovery program for Victorian commercial fisheries

Fisheries Cost Recovery Standing Committee

Chairman's Summary of the meeting held 15 November 2004

Introduction

The second meeting of the Fisheries Cost Recovery Standing Committee (FCRSC) was held on the 15th November at the DPI Offices. The following representatives attended

Chair:

Mr Ian Cartwright

In Attendance:

Mr Tim Mirabella (industry)
Mr Paul Welsby (industry)
Mr David Lucas (industry)
Mr Gerry Geen (industry)
Mr Ross McGowan (observer industry)
Mr Stephen McCormack (DPI)
Mr Paul Mainey (DPI)
Dr Peter Appleford (observer DPI, part of meeting only)
Mr Peter Rawlinson (DPI) (supporting expertise Fisheries Activity Costing System and budgetary analysis)

At its second meeting the Committee:

gained a better understanding of the cost recovery system;
scrutinised key management activities and their respective rates of attribution to the commercial sector;
reviewed key elements of the Fisheries Activity Costing System (FACS), recovery rates and other aspects of the cost recovery process;
gave specific consideration to the attributable elements of the major cost categories of 'Other Costs' and 'Fisheries Victoria' (FV); and
agreed on recommendations to the Minister on cost recovery arrangements for the 2004-5 season.

The Committee also gave initial consideration to the abalone royalty issue.
It as agreed that it would be important to consider the FMS activities, costs, recoverability rates and their underlying assumptions in more detail at future meetings. Given the time imperatives facing the Committee, the opportunity to do this during his round was limited.

Ability to pay

In relation to developing advice to be provided to the Minister on the implementation of the cost recovery regime in Victoria the Committee agreed that ability to pay was key issue. Accordingly, the following paragraphs from the Review of Fisheries Levy Administration 2003 document were considered by the Committee to be fundamental guiding considerations under which the principles of cost recovery would be applied:

The timing of achieving appropriate cost recovery will be dependent to a large extent upon the capacity of the beneficiaries to adjust to new cost regimes. The path to recovery of costs is limited by 3 main factors:

Definition and extent of benefit pt a particular user group.
Existence of extenuating socio-economic issues (i.e. protecting traditional lifestyles).
Cost effectiveness of recovering costs

The Committee noted the increases in the 2005 levies in the context of declines in the production value of some fisheries and increased costs. These factors had severely eroded profit margins were likely to impede industry's ability to pay increased levies.

The Committee discussed its role with respect to

considering the ability to pay circumstances of individual fisheries; and
making specific recommendations to the Minister on those circumstances.

The Committee will draw attention to, and seek to address areas of exceptional cost increases or declines in economic circumstances. However, the main way of providing specific advice on the impact of cost recovery on individual fisheries will be through SIV, and other stakeholder groups making submissions on the RIS directly to the Department.

Recommendations by the Cost Recovery Committee

It is hoped that the Cost Recovery Committee will be able to agree on recommendations to Minister that incorporate the views of both industry and the Department. However, there will be limited occasions where agreement may not be reached, such as on the matter of cost recovery for the 'illegal activity' cost category discussed later in this summary. In these cases, the positions of the Department and Industry will be made clear during the relevant meeting of the Committee and reported in full to the Minister.

Industry consultation

It was agreed that considerable detailed knowledge of the drivers behind the costs of management was held by industry at fishery level. The Committee agreed to seek means of getting advice to the Department from individual fisheries on reducing the costs attributable to each fishery, as well as overall operational/overhead costs. In this context, it was agreed that when a full year's cost data is available, the data should be fed back to industry and specific fisheries for comment and subsequent advice back to the Committee.

Review of Cost Recovery for 2004-5

The Committee reviewed the proposed cost recovery arrangements for 2004-5.

It was noted that that % proportions of full cost recovery against licensing years stated in Table 4 in the Review of Fisheries Levy Administration 2003 document, was a forecast, and as such are not correct.

The costs associated with Fisheries Victoria (FV) will be distributed across all other beneficiaries according to their allocated individual activity costs (determined by the hours and hourly salary and on-cost average annual rate associated with the staff carrying out the FMS activity for the particular beneficiary). All hours attributed to a particular activity are therefore linked to the direct cost of the staff member carrying out the activity.

Unlicensed Activity

The Committee debated at length the attribution of compliance costs associated with "unlicensed" activity. Industry strongly maintained their position that under Cost Recovery Principle 4 (the avoidance principle) costs for unlicensed activity were not attributable to industry, since the need for compliance as a fisheries management service would not be eliminated if commercial fishing ceased. Further, Industry stated that there is a duty placed on the Government to protect the species depending on whether or not there is a commercial industry.

The Department considered that the cessation of commercial fishing for abalone was not a realistic scenario and that if there were no market or commercial fishing there would be a greatly reduced compliance cost. As such, there was a justification for a proportion of illegal costs to be recovered from industry.

Efforts were made to reach a compromise recommendation, but after extensive discussion, the matter was not resolved. The issue will be referred to the Minster for final decision, with the respective positions of the Committee members clearly stated in the Chair's report.

Agreement was reached on all other issues.

Allocation Rules

Allocation Rules were accepted as presented by Department, but in doing so, the Committee noting that the Rules would be more closely scrutinised for the next cost recovery period. Particular attention will be given to the Activity "Allocation of illegal (Abalone & Rock Lobster)' FMS costs.

The meeting agreed that Rock Lobster Fishery costs would be adjusted under the FACS data by boat days rather that amount of fish caught.

Abalone Royalty

As per its terms of reference, the Committee will review the present royalty arrangement for the abalone fishery, and advise on options or a new royalty regime for the future. To initiate discussions, Industry tabled a potion paper on a suggested means of calculating royalty and this and other options will be considered at future meetings. As an interim arrangement, it was agreed to recommend that the current formula would be used for the 2004-5 season on

Other issues

To provide adequate time for industry to comment, the Committee agreed to recommend that the date for public submissions to the cost recovery RIS be extended to Friday 28th January.

Next year, the Committee intends to move the timetable for the cost recovery process forward to ensure that more time is available to fully consider the first full year of FACS data, the operation of the fisheries activity costing system, and recovery rates.

The following process will be followed in terms of finalising the 2004-5 cost recovery arrangements: