Making ports independent

1. Is the regulator independent, or is it a creature of the ministry, and does it have the capacity to determine fair tariffs?

2. The distinction between major and minor ports has to do with ownership or control by the Union and state governments, respectively, and TAMP, as a part of the Union government, determines tariffs for Union government ports only. Would states that currently notify tariffs for minor ports give away that function to the Centre? Many minor ports are privately owned and decide tariffs themselves. What would be their reaction?

3. Should governance of ports be reviewed on the basis of distinctions between major and minor ports, regulation of aspects of port functioning such as facilities, dredging, equipment and its quality, internal perimeter and hinterland, as well as coastal security and so on?

4. Decentralization of governance of ports from the overly centralized Directorate General of Shipping.

The regulator is, in my view, part of the ministry. It is not independent in the legal sense—even if the other regulatory commissions may not be functioning independently in practice, they are independent in the original intent of creating them. The ports regulated for tariff purposes by TAMP are also part of the ministry, since they are owned by the government, and the chairmen of various port trusts are usually bureaucrats appointed by the ministry. TAMP is doing what the port trusts would have done if they had retained the tariff setting authority, and is presumably able to standardize the basis between all of them.

I looked at the tariffs determined for the privately owned and operated terminals, jetties, berths and so on, in these ports. I found the tariff determination by the regulator to be fairly cursory, providing for a maximum revenue share as the basis on which the private operator was selected, with the amount of revenue share not being a pass-through for tariff determination. There was little attempt to consider whether the tariffs covered costs, what return they provided, whether equipment and other fixed costs were genuine, and so on.

Private operators of minor ports, many of which are pretty large and specialized, may be unwilling to have a body such as TAMP regulating their tariffs. Currently, they determine tariffs and the state government notifies them. State governments are likely to back private operators in their states and be unwilling to hand over authority to a Central body since it affects freedom of operation and the tariffs may not suit the operators. Unless tariff regulation is centralized under a body such as TAMP, as part of something that adds to state authority in other port matters, this proposal is likely to fail.

I am chairman of the task force on mega and infrastructure projects of the Commission on Centre State Relations. On the subject of ports, we recommended the abolition of the distinction between major and minor ports. This artificial distinction should be abolished and Centre-owned ports should be offered for private ownership and management. Our sense was that as more ports are created, they could compete with each other. This will make regulation by one independent authority easier. They could compete for traffic. Dubai and Singapore, for example, compete for traffic with other neighbouring countries.

With decentralization of the work of the ministry to state maritime boards, states might find the idea of a central ports regulator that also sets out tariff principles attractive.

S.L. Rao is former director general of the National Council of Applied Economic Research. Comment at otherviews@livemint.com

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