Differential tariffs for major and minor or private ports will have a debilitating impact on investment in major ports such as JNPT, says L Radhakrishnan, Chairman, JNPT, in an interview with Janaki Krishnamoorthi.What significant changes have occurred in the Indian ports sector in the last few years and what is in store?Over the years, the Indian ports sector has witnessed structural changes, with state monopoly gradually giving way to greater private sector participation in port investment. The changes in investment, as per Public-Private Partnership (PPP) policies,can be attributed to the large volumes of outlay required to augment port capacity, and the need to improve service and efficiency levels. Private participation has been further enhanced by an open policy regime which facilitates 100 per cent Foreign Direct Investment (FDI) in port projects, taxation benefits to investors, apart from relatively robust returns on investments. Indian government has ambitious plans for the development of new ports, augmentation of existing facilities, mechanisation, purchasing of modern cargo handling equipment and improving logistics infrastructure to meet the challenges that would emerge from the projected growth in trade. Capacity at the 12 major ports is likely to rise to 1459.53 million tonne (mt) by 2020 from the 616.73 mt level in 2009-10. Capacity at the non-major ports is expected to hit the 1660.02 mt mark by 2020, up from 346.31 mt recorded in 2009-10. Efforts are being made to boost port capacity to at least a consolidated 25 per cent over the projected demand. If successful, this would enable Indian ports to provide berthing facilities upon arrival of vessels and eliminate pre-berthing detention. The proposed investment needed through the next 10 years has been pegged at Rs 2.77 lakh crore-1.09 lakh crore for major ports and Rs 1.68 lakh crore for non-major ports. What are the major challenges encountered in port operation today? The ports sector is passing through an exciting but uncertain times. It has witnessed growth in all areas—from operational, capacity enhancement to investments—at an accelerating pace in the last two decades. However, there are still certain challenges that must be countered to ensure smooth operations and to attract investments. These challenges can be classified into three broad categories—regulatory, infrastructure and operational.On the regulatory side, policy framework for major ports, long gestation period for setting up new facilities, environment guidelines, legal and procedural bottlenecks are the major challenges. Capacity limitation, inadequate road/rail network, obsolete cargo-handling equipment/machinery, poor hinterland connectivity and lack of adequate draft are the major infrastructural bottlenecks.On the operational side, labour disputes, requirement of navigational aids and facilities, inadequate IT implementation are the major issues.What measures are required to speed up the development of major ports?The government has already taken a positive step in this direction. The Cabinet Committee on Infrastructure (CCI) recently approved a proposal to delegate enhanced financial powers to the Ministry of Shipping for port projects in line with National Highways Development Programme (NHDP) projects. Henceforth, CCI approval will be required only for port projects costing more than Rs 500 crore under PPP, instead of the earlier Rs 300 crore.But there are several other policies that need a re-look. For instance, the different tariff framework for major and non-major ports and drastic rate cuts imposed by the Tariff Authority for Major Ports (TAMP) are impairing private initiatives andmaking terminal operations unviable. No other country has such a regulatory authority. Hence TAMP should be abolished and government should let the market set the tariff rates.Regulatory clearances including environment clearances must be rationalised as they delay projects. The gestation period in setting up new projects should be reduced by setting up a single-window system wherever possible. New land acquisition bill may pose a challenge to port development as it would increase the cost of acquisition, which when passed on, will further increase the already high logistics costs in Indian ports.Is PPP a workable model for ports sector? PPP has been quite successful in the ports sector as indicated by the interest evinced by international bidders. However, the attractiveness of PPP projects would depend entirely on the way they are structured. There should be sufficient revenue streams and demand in line with the projected capacity to evoke investors’ interest. The current regulatory risk needs to be mitigated by appropriate change in the major port regulatory policy. In recent years, the huge cuts (in the case of the GTI Terminal in JNPT, it was as high as 44.4 per cent in 2012) have also discouraged prospective investors for PPP projects in major ports. However, by and large, international investors are quite keen to invest in Indian ports. Their interest as well as quotes of revenue share would be enhanced in proportion of the mitigation of regulatory risks. Projects must be structured after taking into account the concerns of prospective bidders and stakeholders through pre-bid meetings. PPP is the preferred method of investment in all the major ports and only where PPP is not advisable, does the government look at investments from port reserves/government budgetary support.Do you think the existing Port Trust system for major ports should be replaced by landlord policy or corporatisation? When is JNPT likely to be corporatised?The landlord port policy is being adopted to a great extent by government for major ports. Corporatisation would be effective if the company board is given adequate powers. As far as JNPT is concerned, we would become a ‘Navratna’ company as soon as we are converted into a company. This would entail considerable autonomy in decision making as well as a more'professional’ board as in such Public Sector Units (PSUs). JNPT’s corporatisation is held up due to an industrial dispute which is before the Chief Labour Commissioner (CLC) Delhi. The trade unions of Indian major ports have objected to corporatisation.How can hinterland rail-road connectivity be improved which is delaying the cargo movement?There is an urgent need to evaluate the present network of road and rail connectivity to meet the present and future requirements.The rail transit time between Tughlakabad and JNPT is 42 hours (against 19 hours for passenger trains). In reality, Container Corporation of India (CONCOR) is unable to ensure the 42 hours of transit time consistently, since the rail line is controlled by Indian Railways and there are no dedicated freight lines. The exporter typically keeps a few days buffer, thereby incurring extra inventory cost. The Indian Railways need to have a service level commitment, which is now virtually absent.The Western Dedicated Freight Corridor (DFC) between Dadri-JNPT and Ludhiana-Dankuni is expected to support Inland Container Depots (ICDs) in the Northern hinterland. However, any delay in this freight corridor will cost India dearly in its container trade. Revival in exim trade, increasing acceptance of containerisation in port logistics and the huge potential of containers in domestic railway haulage have set the stage for sustained growth in the Container Freight Station (CFS) /ICD business in India. The proportion of container traffic in port cargo has been steadily increasing over the past few years, which is primarily expected to drive growth in the CFS/ICD segment.Are our ports using latest technology, modern equipment and materials in port design, construction and operation? Our ports do adopt appropriate technology in construction and equipment for port operations. However, in some concession agreements, the type of machinery to be used is specified in such a detailed manner that even upgradation of machinery can be done only with the modification of the concession agreement, which is a very cumbersome process. Also, certain rigidities that exist on the labour front in major ports restrict the deployment of new labour-saving technology and machinery like remote operations of quay cranes which can handle even 3 to 4 containers at the same time. The changes in information technology for facilitating management and enhancing productivity of terminals as well as reducing the cost on both water and land side are being adopted to a great extent in Indian ports. However, in the rail and road evacuation by small transport operators, there is greater scope for use of IT/communication technology to track cargo, reduce waiting/delivery times, ensure public safety and also enhance productivity. What are JNPT’s expansion plans? Our expansion plan is multifaceted, focusing on various aspects, from dredging, extension of existing berths, expanding liquid handling capacity to development of fourth container terminal and port-based SEZ as indicated below: • Extension of berth by 330 m by 2014, awarded to DP World (Rs 800 crore, 0.8 million TEUs per annum)• Dredging to 14 m of channel being done by Boskalis (Rs 1,219.75 crore + service tax 12.36 per cent) and to 17 m (Rs 5,000 crore) to be completed by 2014 and 2018 respectively• Development of fourth container terminal as two projects of 2.4 million TEUs per annum each by 2016, after completion of which, JN Port will handle over 10 million containers per annum, an increase of 150 per cent• Completion of multi-purpose berths (Rs 4,000 crore) by 2018• Quintupling of liquid handling capacity to 30 million tonne (Rs 1,500 crore) per annum by 2015 (presently 5.5 million tonne)• Development and allotment of phase-I of port-based SEZ by 2014• Completion of logistic park along with commissioning of phase II of dedicated freight corridor by March 2017. What is the status of the SEZ to be developed by JNPT and what are its salient features? JNPT has received in-principle approval of the Ministry of Commerce. The notification of the SEZ is in process and the approval of land development estimate is pending with the Ministry of Shipping.The proposal is for development of port-based SEZ spread across 277 hectare. It will be a multi-product SEZ with free trade and warehousing zone, non-conventional energy sources, electronic hardware, engineering goods (general and light), textiles, multi services etc. JNPT will develop the basic infrastructure on its own and allot sequence units to different SEZ units based on the master plan to be prepared by the consultant.The basic land development cost is estimated to be at Rs 284 crore and the Expenditure Finance Committee’s approval has been sought from the Ministry of Shipping, a few months ago. The total infrastructure will be completed within two years after receipt of the approval. Some of the units in the SEZ are expected to be operational within three years, ie, within one year of development/allotment.