BackThe sordid saga of turning India’s state-owned ports into firms
Shipping ministers from whichever political party they belong to, are not serious about turning the port trusts into firms despite public posturing and going by the complicated way they pursue the goal
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Sometime in 2000, when he was the shipping minister for a brief while in the Atal Bihari Vajpayee-led National Democratic Alliance (NDA) government, Arun Jaitley, now India’s finance minister, once asked me during an informal chat what I thought of the board of trustees of the major ports (a term used to refer to ports owned by the Union government).
“A little suspect," I replied with the relatively little knowledge of reporting on the maritime sector for about three years then.
“A little?," Jaitley retorted. “They are fully suspect."
It was Jaitley who set the ball rolling for the structural reform of 11 of the 12 ports owned by the Indian government into companies from a trustee set-up under which they are being governed for several decades.
A bill to facilitate the transformation of these major ports into companies by amending the Major Port Trusts Act framed in 1963 fell through because lawmakers were divided on the issue. The bill languished for many months and later lapsed. A belligerent workers’ union also forced the government to retreat.
The United Progressive Alliance (UPA) government, which was elected in 2004, did not pursue the matter vigorously during its 10-year reign. It did make a half-hearted attempt, but a lack of clarity on the way forward, coupled with workers’ opposition, ensured that these ports continue to function as trusts.
Between 2000 and now, many private ports that are fitter, leaner and nimble-footed emerged on the country’s maritime landscape, snatching away cargo from the major ports, demonstrating what ports can achieve when they are run as companies.
Major ports run as trusts just could not compete with these new-generation ports. The board of trustees of these major ports comprised disparate interest groups who were more keen on pursuing their own interests in the board rather than the interests of the port.
Although more autonomy was given to these ports every now and then, the fact of the matter is that they continued to look up to the shipping ministry for direction to avoid being questioned by oversight agencies for their actions.
Once again, it was Jaitley who was called upon to announce the Narendra Modi government’s intention to undertake structural reform of the major ports by converting them into companies in his budget speech to Parliament on 28 February.
Following the budget announcement, shipping minister Nitin Gadkari set out to accomplish the task. He held talks with the workers’ unions to win them over to his side on the plan. When this didn’t work, he decided to rewrite the Major Port Trusts Act to change the management structure of major ports by incorporating Companies Act-like provisions into the Trusts Act, thinking that this would be politically palatable.
However, during the course of this exercise, Gadkari changed track and hit upon a novel idea to enact a law—the Major Port Authorities Act—to operate and manage these harbours that ship about 57% of India’s external trade sent by sea. The new Act will repeal the Major Port Trusts Act after ratification by Parliament.
Under the new law, each of these major ports will be operated, regulated and administered by a professional board comprising at least nine members, including a chairman, functional heads looking after operations, finance, works and business development, two independent members, one government nominee and one representative from the labour unions (nominated to the board more to soften and appease the workers). The new law will have no room for user groups and trade associations on the board.
The plan to enact a new law has multiple objectives. One is to give full powers to the board of a port authority similar to that enjoyed by a company. This will ensure that whatever powers are available to a company under India’s Companies Act will be made available to the major ports also without actually converting them into a corporate entity.
The shipping ministry reckons that the new law would be a workable proposition with the eventual aim of converting the major ports into companies without rubbing political parties and workers’ unions the wrong way. Though the government has a simple majority in the lower House, it would be difficult to win the support of lawmakers in the upper House, where it is in a minority.
The key feature of the proposed law is that it empowers the board of a port authority to change its structure and become a company, subject to prior approval of the central government, and after passing a special resolution. Such a plan cannot be blocked by a lone labour representative on the board even if he votes against the resolution.
So, once the Major Port Authorities Act is approved by Parliament and the board of a port authority decides to convert into a company at a later date, the government need not go back to Parliament to get it ratified. The board is empowered by Parliament to do it on its own.
Of course, given this controversial provision, the government may have to cajole and convince lawmakers in the upper House to back the plan. The government’s strategy managers could argue in the House that this was just an enabling provision to be used only when a review concludes that the major ports are not able to perform better even under the new Act, necessitating a conversion to companies.
Looking back all these years, I get the impression that shipping ministers from whichever political party they belong to, are not serious about turning the port trusts into companies despite their public posturing and going by the complicated way they pursue the goal. After all, for shipping ministers, port trusts are their fiefdom. If these ports become companies and are privatized later, as the draft of the new Act suggests, there will be nothing left in the shipping ministry for them to lord over.
The current plan, more in the form of a via media instead of direct corporatization, is worth the trouble if it clicks. Because it could well be the best opportunity and the last chance to alter the structure of major ports in the current political climate.
P. Manoj looks at trends in the shipping industry.
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