Major Overhaul

There have been talks about restructuring the major ports by way of corporatisation. The sole thrust of restructuring should be on providing autonomy to its boards in decision making, to raise financial resources, to attract investments, to improve project execution, to fix tariffs, etc.

India has a coastline of 7,517 km, with 12 major ports and 200 notified non-major (minor or intermediate) ports along the coastline. Out of the 200 notified non-major ports, up to 2013-14, only 61 were reported to have been handling cargo brought through maritime routes. If one looks at the growth in the port sector, especially after 1990, it would be seen that the share of non-major ports, which handled only 11 MMT of cargo in 1990 rose to 462 MMT by 2014-15, accounting for 44 per cent of the country´s total sea trade.

For a better comprehension of comparative growth in major as well as non-major ports in the last seven years, analysis of data concerning cargo handled by these ports reveals that cargo volume at 12 major ports rose from 519 MMT in 2007-08 to 581 MMT in 2014-15, registering a rise of around 12 per cent. In the corresponding period, the cargo volume at non-major ports rose from 206 MMT to 462 MMT, registering an increase of almost 123 per cent. The trend emerging from this analysis poses few basic questions. What is the difference between a major and a non-major port? And why is there a disparity in growth between ´major´ and ´non-major´ ports?

The difference between the expression ´major´ and ´non-major´ with reference to ports does not appear to have been clearly defined anywhere. Functionally, the ports provide vessel-related and cargo-related services to the maritime trade in the least, leave aside the value added services and facilities expected from them to make the port a logistics platform in today´s competitive era. From this functional perspective, the word ´major´ when compared with ´non-major´ ordinarily may give an impression to a person of common prudence that major means one which is vested with more resources, higher capacity, and greater skills as compared to non-major. Whether it is so or not is a matter of examination, but one thing is certain that in terms of the number of years of existence, major ports are much older than non-major ports, and hence, more settled and experienced in the trade. If that be so, why are major ports languishing in growth when compared with minor ports? According to the legislative definition of major port in the Major Port Trusts Act, 1963, the expression ´major port has the same meaning as in the Indian Ports Act´ (MPT Act, 1963).

In the Indian Ports Act, 1908, major port means ´any port which the Central Government may by notification in the Official Gazette declare, or may under any law for the time being in force have declared, to be a major port´(IPA, 1908). By contrast a ´non-major port´ would mean a port which is not a ´major port´. Examination of these two terminologies from a legal point of view does not help much to understand the distinction between the ´major´ and ´non-major´ ports. A plain reading of these definitions makes no sense to a person who is not connected with the maritime sector. But a person from the maritime sector can understand that a ´major port´ is one which is governed by the provisions of Major Port Trusts Act, whereas a non-major port is one to which the provisions of Major Port Trusts Act have no application.

In any industry operating in a commercially competitive environment, be it ports or otherwise, it is imperative that free and full control of the industry´s resources, viz., financial resources, human resources, properties, and assets, is vested in the persons entrusted with the responsibilities of running the company by whatever designations known. It is further desirable in a market driven industry like shipping and ports that charging of tariff for the services rendered by the industry is left to the discretion of the entrepreneur, free from any regulatory mechanism. If one examines the pattern of governance of ´major ports´ from this perspective, it will be seen that excepting for the extent of delegations made, the Trustees appointed at the helm of the major ports may not exercise full autonomy in the above areas as is exercisable by the directors of a company or of non-major ports.

Thus, distinction between ´major´ and ´non-major´ ports in terms of resources, capacities, expertise and experience, quantum of cargo handled, etc., is not material. What is more important is the manner in which they are governed, the control they are subjected to, and the extent of freedom they exercise in controlling their resources and fixing the rates of services rendered by them.

Of late, there have been talks about restructuring the major ports by way of corporatisation. Whatever be the process, the sole thrust of restructuring the major ports should be on providing autonomy to its boards in decision making, to raise financial resources, to attract investments, to improve project execution, to fix tariff, etc.

In the post-globalised economy, taking advantage of cost variations in the factors of production across different regions, transnational companies are known to have developed logistics supply chains to keep the manufacturing costs low in order to maximise profits. This phenomenon gave impetus to maritime trade by substituting transportation of raw material and finished products with transportation of intermediate, semi-finished parts, and components from one destination to another. This in turn has converted the whole nature of port operations from end operator to a vital intermediate link in the supply chain. As the efficiency of port operations influence efficiency of the whole supply chain, the focus has to be on ports´ restructuring to develop commercial competence.

As an industry, ports performs a variety of functions. These functions can be classified into two broad categories, namely ´regulatory functions´, such as conservancy of harbour waters, determination of port limits, land reclamation, dredging, regulation of traffic in the harbour, etc., and ´commercial functions´ like terminal handling operations. Over time, to maintain commercial competence in tandem with market requirements, ports around the world have undergone transformation in their institutional structure by splitting these regulatory functions from the commercial functions. To illustrate, the Port of Singapore Authority formed by an ordinance in 1964 to provide and maintain efficient port services went through this split in its functions in 1997. The regulatory functions of the port were transferred to a separate entity called Maritime and Port Authority of Singapore and the core business of the operating the port terminal was retained with PSA Corporation. Furthermore, realising the need to remain competitive in the international market, the PSA Corporation expanded internationally by setting up PSA International in December 1993, of which PSA Corporation became a subsidiary. It is well-known to those in maritime trade that the geography sometimes changes. This change could either be nature induced or man-made, such as digging of the Suez Canal in 19th century joining the Mediterranean Sea with the Indian Ocean (Red Sea).

When the geography changes, the backwaters transform into zones of strategic significance. As the global economic power is shifting to the East, the geography of Asia is changing. With its ´Look East´ policy, the Indian Governments have afforded to revive and strengthen India´s ties with Far East, across the sea and over land. On the other side, the Chinese Government began its ´Go West´ strategy in 2000 and spent enormous amount of money to develop infrastructure in the region to its west. Since early 2000 Chinese companies have been building a big new port at Gwadar near Karachi to be linked through Karakorum, connecting to China´s Far West. China has also worked to deepen ties with Bangladesh over the past few years and has agreed in principle on a highway between them linking Kumming to Chittagong, Bangladesh´s main port. Beijing has even reached out across the Bay of Bengal to Sri Lanka, building the port there and started discussions with Nepal to start a train from Lhasa to Kathmandu. By early 2010, China began constructing oil and gas pipeline, which would connect its south-west across Burma to Bay of Bengal. The pipelines from Burma would ensure the energy need for faster industrialisation. Besides meeting the business and developmental needs, the pipelines have a strategic intention as well- to relieve the Malaccan dilemma should they be blocked through Malacca strait (Myint-U Thant, 2012).

Amidst these developments, restructuring of major ports to afford them desired commercial competence and establishment of international port company for expansion of the Indian Port sector globally assumes strategic importance.

List of projects approved or awarded in 2014-15 as on December 2014