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Can Ballu do more before his time is up?

Can Ballu do more before his time is up?

Thalikottai Rajuthevar Baalu, or T.R. Baalu, Dravida Munnetra Kazhagam president M. Karunanidhi’s trusted man in Delhi, is India’s shipping minister.

Baalu’s reign as the shipping minister began on 22 May 2004 and coincided with the beginning of a boom in the economy. The cargo handled at India’s 12 major ports owned by the Union government and located at strategic centres grew from 383.77 million tonne (mt) in 2004-05 to 519mt in 2007-08, on the back of strong demand for importing raw materials and exporting finished goods.

India’s shipping capacity also rose from 6.94 million gross tonnage (a measure of a ship’s weight used to calculate the charges to be paid to a port for calling) four years ago to 9 million gross tonnage, a growth that was encouraged by the introduction of a new tax called tonnage tax from April 2004 based on the cargo carrying capacity of ships. Prior to that, shipping firms paid a corporate tax much like others.

Yet, Baalu will be remembered more for the zeal with which he pursued the Sethusamudram Ship Canal Project. The implementation of the project, which is stuck in the face of litigation and opposition from environmental groups and outfits such as the Vishva Hindu Parishad, is sure to be scrapped by the Bharatiya Janata Party if it comes to power in the next general election, given its stand on the issue.

Baalu will be equally remembered by the country’s maritime fraternity for not attending to key development projects with the same zeal as Sethusamudram.

Take, for instance, the project to deepen and widen the channel of the Jawaharlal Nehru (JN) Port, India’s biggest container cargo-handling port, in Navi Mumbai. JN Port authorities last week scrapped a four-year tender to award a contract for the port’s channel just because the lowest bid of Rs920 crore quoted by a Dutch dredging firm was higher than the ministry’s estimates of Rs800 crore.

While Baalu is willing to spend Rs2,427.40 crore on Sethusamudram, he seems unwilling to spend Rs120 crore on a project which will bring significant benefit to India’s exporters and importers. The retendering process will take a minimum of another three years, going by the government’s track record. It is now expected to be completed in 2014 instead of in 2010 as estimated earlier. And, that too, if the lowest bid for the contract comes within the government’s estimates—something that looks difficult given the fact that the global dredging market has firmed up due to shortage of equipment to carry out the work.

Baalu also did little to facilitate and speed up capacity addition work at the 12 ports he oversees. These ports handle around 75% of India’s booming external trade. Privatecargo-handling firms and global investors are chasing projects in India’s major ports that will boost cargo-handling capacity to 1,016mt by 2102 from about 528.75mt now, requiring an investment of Rs92,269 crore.

But a recent rule to shortlist only six firms for each such project and the new eligibility criteria for qualification have dampened the mood of these entities, apart from exposing the tendering process to litigation. The result: further delay in adding capacities, congestion at ports and higher costs to exporters and importers, eroding India’s competitiveness in the global market place.

Baalu also failed to push a long-standing plan to convert 11 major ports into corporate entities from the existing set-up wherein they operate as trusts. Corporatization would have given major ports operational and financial autonomy, flexibility in taking speedier decisions and made them more accountable without the need to look to the ministry or minister for approval.

Baalu can argue that labour unions were torpedoing the plan fearing that corporatization would lead to loss of jobs. But it is also a fact that corporatization of major ports would loosen the grip and power that he wields over major ports.

The shipping minister gave scant attention to India’s shipbuilding sector, which is beginning to have a place of its own in the sun, thanks to the booming global demand for new ships to carry more cargo, shortage of shipbuilding berths in traditional strongholds such as Japan, South Korea and China, and abundant supply of cheap labour in India.

A subsidy given to local shipbuilders on export as well as domestic orders ended on 14 August after a five-year run. India’s shipbuilders, who have lined up funds worth about Rs20,000 crore to expand existing facilities and erect new ones, are asking for continuance of government subsidy to help them compete with yards in Japan, Korea and China, which also are supported by their respective governments.

A helping hand from Baalu will go a long way in India’s aspirations of becoming a major shipbuilding nation, lead to the development of ancillary industries that support shipbuilding and create thousands of semi-skilled and skilled jobs. Yet, almost a year after the earlier subsidy scheme ended, a proposal to extend it is stuck in government files.

Can Baalu take a few decisive steps to put some life back into India’s maritime sector, a backbone for the country’s external trade, before he demits office in May or evenearlier?

P. Manoj is Mint’s resident shipping expert and writes on issues related to shipping and logistics every other Friday.

Respond to this column at allaboveboard@livemint.com

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