A regulatory threat to ports

A regulatory threat to ports

It is not a secret that India’s major ports are congested places. With high turnaround times for ships, creaking facilities and bottlenecks, these ports require big investment before fortune favours them again. Yet, the shipping ministry has some strange ideas to improve the situation.

As reported in Mint on Wednesday, the growth in cargo handled by the major ports, owned by the Union government has increased by just 1.6% in 2010-11. Their market share has also fallen considerably over the years: they have lost a significant share to “minor" ports. The latter account for nearly 33% of the country’s external trade from a low base until five years earlier.

The interesting aspect of the situation is that rates charged by many minor ports are higher, often double, than those at the major ports. This has, however, not dampened their business prospects in any way. If anything, their business has grown. The reason for this is simple: the average turnaround time for a ship at major ports in 2009-10 was 4.38 days, rising from the 3.87 days the year before. Minor ports on the other hand have better cargo handling facilities that save time and costs. Clearly, a tradeoff between rates and the time lost for a ship to unload cargo and move out is at work here.

The ministry is now proposing a new legislation, The Ports Regulatory Bill 2011-the draft of which is now being debated. This will bring in minor ports within the ambit of a new regulatory architecture. These ports-Mundra, Pipavav, Gangavaram and Krishnapatnam being some examples-are not regulated. Under the proposed Bill, they will be regulated by state-level authorities that will frame tariff guidelines for these ports, the purpose being to “safeguard" the interest of port users and ensure a fair return to private operators. The draft Bill also has provisions that enable the superseding of these regulatory authorities by the appropriate government. All in all, the plan is to install a thick bureaucratic layer in a system that has worked well so far. The growth in the business of minor, private, ports proves this amply. If even after charging higher rates these ports continue to generate business, then the problem lies elsewhere. Regulation can only throw a spanner in their works.

Sure, this is one way of providing a “level playing field" for the major ports, but the thinking behind the Bill can hardly be termed positive. If, in an unregulated environment, minor ports are working well, then it goes to show that their business practices are acceptable to their users. The government should steer clear of them.

Is there any need to regulate minor ports? Tell us at views@livemint.com