Fisheries Cost Recovery Standing Committee Meeting #3

Phased cost recovery program for Victorian commercial fisheries

Fisheries Cost Recovery Standing Committee

Chairman's Summary of the meeting held 22 February 2005

Introduction

The third meeting of the Fisheries Cost Recovery Standing Committee (FCRSC) was held on the 22nd February at the DPI Offices. The following representatives attended

Chair:

Mr Ian Cartwright

In Attendance:

Mr Tim Mirabella (industry)
Mr David Lucas (industry)
Mr Gerry Geen (industry)
Mr Ross McGowan (industry observer)
Mr Neville Fowler (DPI)
Mr Peter Appleford (DPI)

Supporting expertise:

Mr Peter Rawlinson (DPI)
(FACs and budget analysis)

Minutes:

Ms Nicole Catlin

At the third meeting of FCRSC the Committee:

discussed the issue of transparency in the budget setting process;
agreed on a workplan for the Committee that will result in bringing the RIS process forward to avoid a clash between the Christmas break and the public comment period for the Regulatory Impact Statement (RIS);
considered the key issues arising from submissions to Government on 2004 Regulatory Impact Statement (RIS) on Cost Recovery;
gave detailed consideration to the following issues raised within the RIS submissions: compliance costs, including zonal differences in for the abalone sector; the ability to pay, particularly within the rock lobster sector; overpayment of levies in 2003/4; and managing abnormally high costs at fishery level;
deferred further discussion of abalone royalty to a meeting to be held in April that will specifically consider the issue;
requested DPI provide clarification on a number of specific issues relating to the implementation of Cost Recovery; and
noted that the matter of the recovery of compliance costs in relation to 'unlicensed' activity remains unresolved.

Overall, the Committee noted that the FSRSC had made good progress in 2004 and looked forward to moving ahead in 2005. Communication with stakeholders remains a priority, and additional efforts will be made to inform and engage license holders

Transparency and communication

The Committee agreed that the current cost recovery methodology meant that budgets and cost recovery were being revied by the FCRSC after the fact. Ideally, the Committee (and industry) should evenually be able to review of DPI fisheries budgets before they are finalised. The initial step will be for DPI to provide the Committee with a briefing on how the budget for fisheries is currently established, and this is planned for May 2005.

The Committee reiterated the importance of good communication with industry, and the need to engage them in improving FACS and the outcomes of the FCRSC. To assist in this process, presentations the workings of FACS and the work of the FCRSC will be made to the relevant sub-committees of SIV and Fisheries Co management Council. Circulation of the Chairman's summaries will continue.

Issues with Fisheries Activities Costing Scheme (FACS)

The Committee discussed the need for comprehensive documentation of FACS, including allocation rules, to ensure consistency and continuity. In addition, it was noted that administrative aspects of FACS were the domain of the DPI, but that the Committee had a useful role in terms of overseeing quality control.

The Committee noted that it remained very important that decisions made under FACS should be transmitted to industry in a timely fashion, and include clear explanations of how such decisions were arrived at. In addition, industry should be aware of what future decisions of the FCRSC will be based on.

Review of Submissions to RIS

The Committee was pleased to note a major reduction in the number of submissions received this year (15) from last year's total of around 150. received last year. This reduction was taken as an indication that there was general acceptance in the wild sector that cost recovery is a fact of life when doing business in the fishing industry, and that the FCRSC process was working. Of these 25 submissions only one recommended that the regulations should not proceed

Capacity to pay was a key issue mentioned in about half the submissions, including six from the Western Zone Rock Lobster Fishery, some of which were from associations representing more a number of license holders. A key factor for this sector of the RL fishery was the recent restructure following the move to quota, which had resulted in number of operators in the Western Zone purchasing additional quota to remain viable. One submission was received from the Bays and Inlets finfish fishery citing the impacts of a cost-price squeeze on capacity to pay.

Compliance issues, and particularly this associated with unlicensed activity and the difference in costs between the Eastern and Western Zones of the ablone fishery, were raised in three industry association submissions.

Other issues raised discussed included:

the efficiency of delivery of services by DPI and the need for an audit of these services;
'freezing' levy payments at current levels in order to give industry some chance to recover from the current difficult economic circumstances;
that costs for Giant crab research were being incorrectly attributed to RL fishers, effectively resulting in subsidy of the GC fishery by RL fishers in the Western Zone; and
the need for loan assistance to fishermen to help with current economic difficulties e.g. through the Rural Finance Corporation (RFC). DPI representatives noted that the intervention of DPI was unnecessary, since individuals could apply to the RFC and loan finance would be considered.

Committee response to RIS

Rock lobster

The issue of the difficult economic circumstances facing the Western Zone RL sector was discussed at length. It was noted where government decisions on cost revovery were implemented without adequate warning and subsequwntly led to financial hardship could form a basis of a legitimate argument for some form of relief. It was the view of DPI that sufficient notice of the impending introduction of cost recovery had been provided.

The Committee noted that it would be difficult to target invividual sectors or individuals for the provision of relief from cost recovery since it was difficult to extrapolate individual financial hardship to the entire sector, noting that licences, and hence cost recovery processes, were issued on this basis .

Overpayment of levies

Given the difficulty with targeting relief from cost recovery to sectors or groups of individuals, the alternative of seeking a refund to cover "overpayment "of the licence amount paid last year was discussed. It was noted that some sectors had paid more than 42% last year over the predicted budget estimate. The main reason for this was that while the correct levels of cost recovery had been applied, estimates of costs had been used owing to the lack of available cost data at the time when the estimates were made.

The Committee agreed that there was some merit in using the FACS system to determine where under and overpayments had occurred and for an adjustment to be made. A number of factors supporting this approach were raised. DPI noted that it could not give support to this initiative until further discussions were held within the Department.

Compliance Costs

Industry members of the Committee expressed concern at the level of compliance costs in some fisheries and in particular the eel fishery. The problem occurring in small fisheries when levying all license holders with high compliance costs associated with one or two individuals was discussed.

In the case of the abalone fisheries, the Committee agreed that the differences in compliance cost between the three zones be further examined and the results be communicated to industry.

Managing abnormally high costs

The Committee noted that the FAC system provided an avenue for maintaining a watch on costs to provide an early alert in the event of unexpectedly high costs. The Committee agreed that such a review should occur quarterly, and that the results of the review and reasons for abnormal/unexpected increases should be communicated to industry. Once 12 months of FACS data is available, it will be easier to allow for seasonal variation.

Other Issues

Committee members requested that DPI provide clarification on a number of detailed FACs issues including the level of research costs attributed to the Purse seine fishery.

The Committee noted that the Aquaculture Cost Recovery Standing Committee (ACRSC) has now been established, and that there would be some implications for the FCRSC process as a result. DPI stated that it would like to see, where appropriate, a standard set of recovery rates and allocations used across both wild and aquaculture sectors. Such areas where commonality should occur would include the treatment of overhead and administrative charges.

Industry pointed out that they expected that FMS recoverability rates, once negotiated and settled down, will remain the same across sectors but those rates will be capable of being further discussed and amended if required, by exception.

DPI advised the Committee that a full years FACS reporting will be available in May (April 2004 – March 2005). This will give a better picture of seasonal expenditure patterns across industry.