Relax rules and regulations without losing control: Experts

It’s time for action now, they say. The sector has held promise in attracting investments, both domestic and foreign. But clearances, infrastructure and other bottlenecks continue to slow the pace of implementation down. These interviews were conducted before the Ministry of Shipping announced that it would phase out TAMP regulation on tariffs.

Our Experts

• P Mara Pandiyan, Chairman, Mormugao Port Trust. Mormugao handles 35 per cent of India’s iron ore export, and now plans to be a multi-speciality port.
• Pradip Kumar Agrawal, CEO, APM Terminals, which operates a global network of ports with operations in India at JNPT and Pipavav port.
• Shashank Kulkarni, Secretary General, IPPTA, the association of private port and terminal operators.

What are the major issues hampering private investments in ports sector?

Pandiyan
There is no doubt that major investments will have to be made to augment the port handling capacity and way forward is private investments. However, the pace of investments is not good enough. Some of the issues which are seen to hamper investments in the port sector are:

• Delay in environment clearances: Environment clearance for the port project takes anywhere between one to two years. Environment clearance normally is project specific which involves a process of first getting the Terms of Reference of the project approved before carrying out EIA studies and after this, there are various other formalities like public hearing, CRZ clearance from state government, etc. These are all time consuming processes.
• Notification of tariffs: This is an issue which is applicable for major ports. While ports operating under the state government have the freedom for fixing tariff, private operators operating in major ports have to necessarily follow the tariff dictated by Tariff Authority for Major Ports (TAMP). This process needs to be totally done away with. Operators should be given freedom to fix their own tariff.

Agrawal
There are three broad areas of concern hindering the investment decision by private sectors in port infrastructure through public-private partnership (PPP) route, ie, tariff regulation in major ports, project clearances process in India and poor hinterland connectivity.

• Present cost-plus approach in port tariffs fixation does not incentivise efficiency in the productivity, rather penalises to become more efficient. Also this does not provide a level playing field vis-a-vi s non major ports which are not under the purview of tariff regulation.
• There is no single-window clearance and a project moves through multiple departments and processes at the state and Central levels, which considerably delays the process.
• Poor connectivity to the hinterland from ports. The Maritime Agenda envisages only six per cent of investments in port connectivity. The onus is on the relevant ministries to undertake investments and project developments and there is no single agency owning the responsibility.

Kulkarni
While the economic slowdown for the past few years has been the biggest dampener, the investors have been awaiting certain key policy decisions by the government, pertaining to tariff deregulation, land allotment policy, amendments to the MCA etc. It is also seen that there is a gradual but substantial capacity build-up all around the country’s coast. Hence, operators have become cautious before committing any massive investment.

Why are foreign players not taking major investment route to Indian ports sector?

Agrawal
Although they are interested in port projects in India, foreign players have the same concerns [as domestic ones] with regards to issues mentioned earlier and impacting their decision to invest in Indian port sector.

Kulkarni
Foreign players have a choice of either going in for a greenfield project in the non-major port sector or participate in the tenders of the major ports. Either of the investment has its pros and cons. While the non-major ports offer a relatively ‘free-hand’, one has to study the marketability of the port. Developing terminals in a major port, though a relatively ‘safe’ route, it is bound by many rules and regulations of the central government.

Will Maritime Agenda 2020 be able to attract private investment in coming years?

Pandiyan
One can only hope that the Maritime Agenda 2020 will be able to attract private investments. However, a lot depends on removing obstacles and fast-tracking of projects which will help to attract private investments.

Agrawal
The future entirely depends upon clearing the clouds of uncertainty in major port regulations. The evolving regulatory environment thus presents quite a few challenges and risks for the industry participants and would be a key event risk from industry growth perspective. The growth in major ports will greatly depend on the regulatory framework. However, there is immense scope in non-major ports. Unless and until port policies are modified and made investor-friendly, the situation will remain the same.

Kulkarni
Attracting private investment is incumbent upon offering investor-friendly policies. If the government delivers what it has promised, it will help restore investor confidence which would in turn attract fresh investment and capacity development as envisaged in the Maritime Agenda 2020 could happen. Of course, it is essential that the economy is also back on rails sooner.

Existing private players are not satisfied with the current stringent rules and regulations. What will be the way forward? How will India be able to support port capacity utilisation without private sector investment?

Pandiyan
It is absolutely true that private players are not satisfied with the current stringent rules and regulations. The current policy tends to tie down the investor. There should be an exit clause for BOT agreement which will also help in more availability of funds for future investments. The capacity utilisation can be supported only with private sector investment which will be able to bring in best international practices.

Agrawal
All agree that the projected investments in the port sector should come predominantly from the private sector through PPP model. There is very limited scope of investments without private sector involvement in the current scenario.

The following steps can be taken to make PPP framework in ports to be more viable:

• Tariff settings should be left to market forces in major ports. TAMP’s role can be changed to have different industry functions but not to fix tariff.
• The clearance processes may be simplified in order to speed up project execution. Reasonable rate of return to private investors is necessary to maintain interest of private sector in PPP projects.
• A single ministry/agency should be made responsible to undertake port connectivity projects including road/rail/water ways and dredging.
• Ministry/Ports Trusts should float new projects of reasonable size with all requisite clearance on hand which can be bankable.
• The government should create favourable investment environment under which private sector can benefit from adequate legal and regulatory frameworks, coordinated and supportive regime and suitable concession.

Kulkarni
Government has been announcing about making the investor climate favourable, yet action is to be seen on many fronts. At the same time, the PPP route at least for development of commercial infrastructure like ports has proved to be beneficial. So the only way forward is to relax the stringent rules and regulations without losing control.