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Govt’s slow pace hinders development at JN Port

Govt’s slow pace hinders development at JN Port
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First Published: Thu, Jun 12 2008. 12 15 AM IST

Project delayed: The Jawaharlal Nehru Port in Mumbai
Project delayed: The Jawaharlal Nehru Port in Mumbai
Updated: Thu, Jun 12 2008. 12 15 AM IST
Bangalore: The Jawaharlal Nehru Port, or JN Port, India’s biggest container port, is in a hurry to deepen its channel so bigger ships can call, but the government’s sluggish pace of work has left the project on hold for nearly a year.
Project delayed: The Jawaharlal Nehru Port in Mumbai
The project is key to the port’s plan to develop a new container terminal, its fourth, to overcome capacity constraints in handling more container cargo. The other 11 major government-owned ports, too, have plans to become world-class facilities and compete with new private ports.
But, the slow decision-making, political and bureaucratic interference, and the lack of autonomy have delayed implementation of projects and purchase of equipment to replace old and insufficient cargo handling systems.
JN Port, for instance, had in August 2007 submitted the lowest bid received for its channel deepening project to the government for approval. This is still pending clearance.
Dutch dredging firm Van Oord Dredging and Marine Contracting Co. NV had made the lowest bid of Rs970 crore.
Also, a Bill to convert 11 of India’s 12 major ports, which together handle 75% of the country’s overseas cargo, into corporate entities has been stuck in Parliament for more than a decade as lawmakers are divided over the issue. A parliamentary standing committee is yet to give its recommendations on the proposed Bill.
The 11 ports are run as trusts under the Major Port Trusts Act, with their charges set by the Tariff Authority for Major Ports. The only exception is Tamil Nadu’s Ennore Port, which was set up under the Companies Act in June 2001. It has more autonomy and operates as a landlord port.
“Corporatization of major ports could be a viable option to improve the operational efficiency of these ports,” said Priya Safaya Fotedar, director in charge of policy at the Federation of Indian Export Organizations, a body of export organizations.
India expects to raise its share of the world trade to 5% by 2020 from 1.2% now, but is hampered by low efficiencies at its major ports, she added.
Corporatization would allow the ports to distance themselves from direct government control, access commercial funding for expansion, and revamp balance sheets in favour of commercial accounting. It would also allow prompt decision-making, improve efficiency, increase competition and make the ports accountable for their performance.
Labour unions, however, are not in favour of converting major ports into corporate entities, fearing this would lead to a cut in jobs. “Under the present set-up, the ports are doing very well. All of them are making profits. So, why change the model?” asked M.L. Bellani, secretary of All India Port and Dock Workers Federation, whose nearly 35,000 members make up about half the total workforce in the major ports.
The 12 major ports employ about 68,000 people, of which almost one-third are cargo-handling workers.
These ports earned a combined net profit of about Rs1,494 crore in the year to March, and that is projected to rise to about Rs3,950 crore by 2014, according to the shipping ministry.
If corporatized, the major ports will “outsource all port activities, engage cheap labour to earn more profits. This will lead to retrenchment and exploitation of labour,” said Bellani, who is also a labour representative on the board of trustees of Kandla port in Gujarat.
The unions also fear losing representation on the board of directors if the ports are converted into companies. The 11 major ports run as trusts have two union representatives each on their boards.
Bellani suggested that the port trust boards could instead be given more financial and operational autonomy.
The port trusts have financial powers to clear amounts up to Rs50 crore. Anything above this needs the shipping ministry’s clearance.
The labour unions also see corporatization as a precursor to eventual privatization. “Disinvestment of government-owned major ports will not be possible as long as they remain as trusts,” Bellani pointed out.
“We are of the opinion that a clear division of responsibilities and tasks, taking into account an optimal (not maximum) level of autonomy, will form the foundation for the future of the major ports in India,” said the Port of Rotterdam Authority, which was hired by the Indian government to prepare a development plan for the major ports.
Port of Rotterdam Authority manages Europe’s biggest port, located in the Netherlands. Among other recommendations, it has suggested delegation of powers and responsibilities from the ministry. “There should be an incentive to more competition amongst the major ports, delegation of powers and responsibilities from ministry to the ports, autonomy in tariff setting and investing, fast decision-making process, operational freedom and professionalism,” its report said.
Through their business plans, the 11 major ports have made known their intention to shift towards the landlord port management model. Under this, the port trust will contract out non-core businesses and port operations will be transferred to the private sector, which would be responsible for investments in superstructure (mainly equipment), maintenance and hire its own labour, pilotage and stowage.
The port trust will invest in basic infrastructure such as land, and look after nautical safety and environment, and handle strategic long-term port planning.
India’s major ports are run as public service ports with private firms running berths and terminals in them.
Commercialization is indispensable to the landlord port model, says the Rotterdam authority. Rotterdam is run on the landlord port model. So is its nearby rival Antwerp port, Europe’s second biggest by cargo handled.
Antwerp is 100% owned by the city of Antwerp and some members of the city council are on the board of the port. “But, we enjoy quite a high degree of autonomy in the decision-making process,” said Luc Arnouts, chief commercial officer, Antwerp Port Authority.
Due to scarcity of port facilities, India’s port sector is a demand market. Minor ports— public ports owned by state governments such as Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu—are becoming prime competitors for the major ports.
The biggest threat to major ports is the private ports. Unlike major ports, both minor ports and private ports are not subject to tariff regulations and are free to set their rates.
“It takes a minimum of 18-24 months to bring a new cargo handling project on stream,” Ramnath Iyer, director, Crisil Risk and Infrastructure Solution Ltd, said at a recent seminar in Delhi.
Major ports are gearing up to face competition, but face delays in getting the projects sanctioned, said R. Radhakrishnan, president of the Bombay Customs House Agents’ Association. “By the time the shipping ministry clears a proposal, the project would have become outdated.”
The result: congestion at ports, longer delivery times and additional costs for exports and imports and longer turnaround time for ships (time taken to unload and load cargo and sail off).
India’s 12 major ports handled 519 million tonne (mt) of cargo in fiscal 2008 as against a capacity of 528.75mt. They are looking to raise capacity to 1,016mt by 2012 with an investment of Rs55,401 crore.
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First Published: Thu, Jun 12 2008. 12 15 AM IST