Fisheries Cost Recovery Standing Committee Meeting #7 - Chair's summary

Fisheries Cost Recovery Standing Committee

Chairman's summary of the meeting held on 4 October 2005

The seventh meeting of the Fisheries Cost Recovery Standing Committee (FCRSC) was held on 4 October 2005 at the DPI, 1 Spring Street, Melbourne. The following people attended:

Chair:

Mr Ian Cartwright

Members:

Mr Paul Welsby (Industry)
Mr David Lucas (industry)
Mr Gerry Geen (industry)
Mr Tim Mirabella (Industry)
Mr Ross McGowan (SIV Permanent Observer)
Mr Dallas D'Silva (DPI)
Mr Peter Rawlinson (DPI)
Mr Paul Mainey (DPI)
Ms Karen Weaver (DPI Permanent Observer)

Observers (for relevant discussion only):

Mr Vin Gannon (Abalone fishery)
Mr Allan Taylor (Abalone fishery)

Introduction

The seventh meeting of the FCRSC focused on consideration of the latest Fisheries Activity Cost System (FACS) data, the draft Regulatory Impact Statement and progress with the options paper on Abalone Royalty.

The Committee:

noted the repeated call from industry for DPI to adequately support and provide resources for the implementation of Cost Recovery, including senior level representation on the FCRSC; DPI responded positively in this regard;
gave particular attention to the allocation rules for fishery wide ('global') costs and allocation rules for research and reached an agreed position on a new royalty mechanism for the abalone sector;
considered means of separately identifying components of major expenditure items (eg Operating Costs) in order to add to the transparency to the cost recovery system;
looked at developing more equitable means of allocating Fisheries Victoria and Commercial Victoria recoverable costs;
agreed ways of allocating public research costs, including taking account of recreational beneficiaries;
agreed to recommend basing the Regulatory Impact Statement (RIS) levies for 2006 on 2005 levies plus 22%;
did not agree with a DPI proposal to fix the level of cost recovery based on current (4 Oct 2005) FACS data for a period of three years;
continued to progress the abalone royalty options paper, noting industry input into the latest draft, including a new option which was essentially a sliding progressive scale based on the beach price of abalone ($ per kg); and
provided DPI with input on a draft scoping document prepared by auditors, Acumen Alliance in respect of the upcoming review of operational aspects of the FACS system.

Review of the 2006/07 FMS Levies

The draft fees and levies currently being considered for the 2005/06 Regulatory Impact Statement were considered. At its previous meeting, the Committee had asked DPI to consider:

apportionment of rock lobster zonal costs based on differential FMS rates relating to "management" and "compliance" costs;
pro rata apportionment of costs associated with the global FACS category "Commercial Victoria" according to proportion of recoverable costs rather than total costs; and
apportionment of Bays and Inlets research costs based on Recreational/Commercial split between species.

DPI reported progress with each of these items.

The meeting discussed the suggestion that major expenditure items (eg Operating Costs) should be identified separately in order to add to the transparency of the tables. Industry suggested that in future, consideration be given to developing another levy for operating costs, which would have the advantages of providing greater transparency and becoming an efficiency driver.

Alternative ways of displaying the attribution of costs to compliance and management from the three global (overhead) categories was discussed. It was believed that this would enable the Committee and industry to gain a greater understanding of the nature of these major costs. A format was agreed that DPI will use to provide enhanced data reports to the next Committee meeting.

The attribution of global categories of costs, "Fisheries Victoria" (FV) and "Commercial Victoria" (CV) were discussed. It was noted that Fisheries Victoria costs are allocated across all beneficiaries according to the proportion of the costs directly allocated to that beneficiary i.e. Those fisheries that generate the most activity will bear most of the "FV" costs. The observation was made that relatively immaterial costs are being, at times, used to pro-rata relatively large material allocations, like, for example other global categories like 'Abalone Unlicensed'. This situation arises as a result of the way the data is entered into FACS, whereby a large number of hours are logged in the FV and other global categories. The Committee considered a range of options to address this issue and will continue to give the matter further consideration. Using a recoverable cost basis (rather than directly attributable costs) was considered to be a better way of attributing "CV" recoverable costs

Basis of setting levies for 2005/06

The Committee agreed that, on balance and in recognition of the current status of implementation of FACS, it was in favour of basing the Regulatory Impact Statement (RIS) levies for 2006 on 2005 levies plus 22%. This increase was in line with the previous Committee discussions was considered to be in line industry expectations. The assumption was made that collection from the Abalone industry for 2005/06 will be under the fixed rate – combined collection option, which equates to a rate (at 04/05 weighted average beach price of $40) at 7.2% of GVP.

The Committee recognised that in recommending adoption of a 22% increase on last years FACS data, implications may exist for the review of the subsidy for the EZ Rock Lobster. The working group undertaking this review should be apprised of the FCRSC recommendation on the 22% increase.

Proposal to fix costs for three years

The Committee considered a DPI proposal to fix costs based on current (4 Oct 2005) FACS data for further period of three years. Industry noted that there had been insufficient lead-time given by DPI to allow it to fully consider the proposal. While noting the DPI position that the proposal would provide some certainty to industry while allowing further refinement of the FACS to occur, the Committee recommended that the earlier recommendation of 22% increase over last year's cost recovery figures for this current RIS remains. This was considered to be in line with industry expectations. The period until full cost recovery is in place would effectively increase by 12 months under this arrangement. It was noted that there will need to be a concomitant extension of the EZRL subsidy by an equivalent amount.

The Committee agreed to an ongoing commitment to refining the cost recovery process whether costs were fixed for three years or not. The Committee agreed to keep an open mind on the three-year proposal and stated that it was prepared to examine ways of building greater stability into the process for the 2006/07 RIS.

Audit of the FACS

DPI presented a scoping document prepared by auditors, Acumen Alliance and sought input from the Committee. A number of comments were provided at the meeting and the Committee agreed to provide additional comments by Friday 7 Oct 2005.

Abalone royalty

The Committee considered a revised version of the Options Paper, which included a new option which was essentially a sliding progressive scale based on the beach price of abalone ($ per kg).
The meeting noted that the paper and any preferred approach will require endorsement of the Department of Treasury and Finance (DTF) and that industry and DPI will work together to prepare a Brief for presentation to DTF.

It was agreed that the next meeting of the FCRSC would be held on the 29 November 2005.

Fisheries Cost Recovery Standing Committee Meeting #7 - Chair's summary