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Government to adopt corporate model for two new major ports

Government to adopt corporate model for two new major ports

Bangalore: Two ports India intends to build in Andhra Pradesh and West Bengal will function as companies and not trusts as 12 of the 13 federal government-controlled ports operate.

The two proposed ports will be established through a special purpose vehicle (SPV) with 26% equity from the respective state governments and 74% from the Union government, a shipping ministry spokesman said. This is a new development because until now all such ports are fully owned by the Union government. The SPV will invite bids to set up cargo-handling facilities at these ports that would be partnerships with private companies.

The shipping ministry will seek approval for the new ports from the cabinet by 30 September, the ministry spokesman said. Building a new port will cost as much as 2,000 crore.

Currently, 12 of the 13 major ports function as trusts under a law framed about four decades ago called the Major Port Trusts Act, 1963. Ennore Port Ltd located in Tamil Nadu is the only exception. Ennore Port was formed as a company under the Companies Act, 1956, when it was opened in 2001. The 13 ports together account for about 63% of India’s external trade shipped by sea. For over a decade beginning 1998, the Union government tried converting the 12 ports into corporate entities. A draft law to amend the Major Port Trusts (MPT) Act fell through because lawmakers were divided on the issue.

“The government is of the view that under the restrictive ambit of MPT Act, major ports have little flexibility of commercial operations and are ill-equipped to operate in a market-oriented situation. After corporatization, the ports will get converted into companies and have a professional management, which will have greater financial and operational autonomy," the spokesman said. The earlier plan to convert the ports into companies also failed because about 65,000 employees opposed the move.

“The trade unions feel that major ports do not require corporatization, but modernization to make them perform efficiently. The unions are seeking amendment to the MPT Act to give them full operational and financial autonomy," the spokesman said. Workers’ union said their opposition to the plan will continue. “We are against corporatization; it is not necessary," said M.L. Bellani, secretary of the All India Port and Dock Workers Federation, the largest union.

“Corporatization would make ports much more efficient, more economically-oriented and financially-oriented," the Port of Rotterdam Authority said in its 2010 report on the business plans of the 13 ports. “The purpose is to distance the enterprise from direct government control."

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