Are our Port Trusts relevant?

Private sector participation in development and operations of ports has increased considerably over the last few years resulting in a radical change in the organisational model of ports. The change has permeated to some extent into the Indian ports sector in the last decade. But not so when it comes to ports managed by the Port Trust system, writes Janaki Krishnamoorthi.

The Government of India which administers the major ports has realised the port restructuring is essential to attract large investments required for augmentation of the ports capacity. The government therefore adopted the concept of landlord ports and issued suitable policy guidelines in the mid-nineties which provided for private sector investment. But all that resulted only in a few investments by private players in developing and operating some berths or container terminals. But the Port Trusts continued to be port regulators and providers of commercial services. In addition, despite a policy decision taken by the government a decade ago to corporatise the major ports, not a single port has been corporatised apart from Ennore Port.

As a result, despite the governmentÂ’s ambitious expansion plans and investment targets, little progress has been made at the ground level. Project delays, lack of connectivity, slow turnaround time, litigations etc, continue to plague the major ports.

On the other hand, non-major ports and private ports present a more positive picture attracting more private investments resulting in modernisation, faster capacity addition due to investor-friendly state gov­ernment policies.

In this scenario, the very relevance of the present Port Trust structure of major ports has come under the spotlight. Has the present Trust structure of administer­ing major ports become obsolete? If so what is the alternative? These questions are being debated widely.

Framework flaws

The most fundamental cause of inertia in the major ports is their organisational system. The Board of Trustees of Port Trusts, appointed by the Central Government to administer the major ports have limited financial and management powers. They are function­ally dependent upon the Ministry of Shipping (MoS) and/or Cabinet Committee on Infrastructure’s (CCI) approvals for implementation of projects, for approval of expenditure beyond certain limit and also for other significant decisions. This has created an addi­tional level of decision-making, considered a major stumbling block in efficient management and operation of the ports.

Bureaucracy: This is a major impediment, says Shashank Kulkarni, Secretary General, Indian Private Ports & Terminals Association (IPPTA). “Lack of speedy decision is the foremost issue as far as the major ports are concerned. Port Trusts are part of government machinery and cannot take quick decisions. A Port Trust chairman has to fall into the system, follow the procedures, seek approvals from the MoS, which makes the decision making process too lengthy. Hence, right action cannot be taken at the right time. A competitive environment demands quick and effective decision-making.”

Policy framework for major ports, particularly the tariff regulation imposed by Tariff Authority for Major Ports (TAMP) is yet another drawback in the existing system, allege port professionals.

TAMPering with tariffs: Differential tariffs for major and non-major ports could be a step back in corporatisation. L Radhakrishnan, Chairman, Jawaharlal Nehru Port Trust (JNPT), and a critic of the new reduced-tariff rules for major ports, says: “The different tariff framework for major and non-major ports and drastic rate cuts imposed by TAMP is impairing private initiatives and making terminal operations unviable.”

Reiterates Kulkarni, “TAMP was set up when conditions were different and when there was a fear of private monopoly. But now with competition entering in a big way, the government should let the market decide the tariff. The role of TAMP now should be more like the Competition Commission ensuring quality service, healthy competition and resolving disputes.”

Whither corporatisation?

Corporatisation of major ports is now being looked upon as a possible alternative to resolving these issues. It is expected to bring in functional/financial autonomy, transparency, adoption of corporate planning practices, development of technologically updated workforce and also pave the way for modernisation.

However, many industry pundits opine that corpo­ratisation will be effective only if the company is given total autonomy without any bureaucratic interference.

If going for corporatisation means total autonomy and speedy decisions, then it will be effective, Kulkarni reasons, because when the private operator invests he expects a fair return on his investment, which in turn means faster clearances and faster execution of projects. “Delays increase the project cost and all calculations go haywire.”

Radhakrishnan seconds him: “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.” JNPT corporatisation is now held up due to an industrial dispute which is before the Chief Labour Commissioner (CLC) Delhi.

The governmentÂ’s plan to convert JNPT into a company has not materialised due to fierce opposition from its workers. Major port trade unions across the country are not in favour of corporatisation as they fear it will pave the way for private monopolies. They also fear exploitation and retrenchment.

There are others who think there is no single formula that can be applied across the sector citing the example of Ennore Port, country’s first corporatised major port has not been a great success story “There cannot be one single formula for success.

Things which are successful at one location need not apply to other location. If corporatisation had been a success abroad, need not be a solution to all the ports in India. Closer evaluation of each port management system is required with the objective of increasing operational efficiency and making the best use of infrastructure assets. The government should understand that opportunity cost of losing trade is much higher than cost of infrastructure,” states Ramesh Singhal, Chief Executive Officer, i-maritime Consultancy.

The government is yet to pass the draft Indian Ports Bill, 2011, which will merge the two existing legi­slations— the Indian Ports Act, 1908, and the Major Ports Act, 1963, and will pave the way for corporatisa­tion of major ports. But this bill too is being opposed by labourers as also others. Some feel that it strengthens TAMP though under a new name, making the Port Trusts more dependent on the government.

Certain provisions in the Act may be detrimental, says Kulkarni. “For example, a very strong regulator has been proposed in the draft Bill. This we feel will stymie the development. Any Act or policy should be conducive and facilitate development.”

It evident that the road to corporatisation is stret­ching ahead.