Article by Sean Nicholls, State Political Editor Sydney Morning Herald

Deputy Premier Troy Grant is preparing to hand the pubs and clubs that operate pokies in NSW a potential $40 million windfall under proposed changes to fees associated with monitoring the machines.

Mr Grant has pledged to change the indexation of a monthly fee paid by most pubs and clubs operating poker machines to the private operators of the Centralised Monitoring System (CMS).

Under NSW law poker machine owners must pay the fee to the CMS operator, which monitors the integrity of the poker machines and ensures the correct amount of tax is paid to the state government. Since its inception in 2001 the monthly fee – currently about $42 plus GST per poker machine per month – has risen by a flat 3 per cent per year as determined by the Gaming Machines Act.

But Mr Grant is proposing to change the indexation rate to the Consumer Price Index from November next year, when the exclusive licence to run the CMS expires. Based on the Reserve Bank of Australia’s 2.5 per cent target rate, such a change would likely mean a saving of around $40 million for pubs and clubs over the next licence period.

A bill introduced by Mr Grant and being considered by the upper house changes the indexation rule and also removes the Independent Pricing and Regulatory Tribunal’s role in setting the monthly CMS fee. It allows Mr Grant, in consultation with NSW Treasurer Gladys Berejiklian, to instead determine the CMS monitoring fee.

The changes are being sought ahead of a tender process for the right to operate the CMS when the existing 15-year exclusive licence held by Maxgaming Pty Ltd expires on November 30 next year.

In his second reading speech on the bill, Mr Grant said removing IPART’s role in setting the CMS fee ‘‘provides certainty of cash flows to the new licensee’’.

The CMS has been unpopular. In 2004, the then Coalition gaming spokesman,  George Souris told parliament the CMS ‘‘is frequently the subject of complaint by licensees in both registered clubs and hotels. Because of its nature and its cost, licensees predominantly object to that system,’’ he said.

On Tuesday a spokesman for Mr Grant argued that ‘‘there is no windfall to industry – this is about continuing a strong monitoring and probity regime of the use of poker machines in NSW. CPI changes over time so you cannot pick an arbitrary number on which to predict fees over the life of the licence,’’ he said.

“Over the next 15 years the rate of CPI could very well rise again above 3 per cent and our bill would capture this and pass on the costs to industry”.