Bangalore: The National Democratic Alliance (NDA) government is planning to convert 12 of the 13 ports owned by the Union government into companies to improve efficiency and competitiveness.

The ports currently operate as trusts.

The shipping ministry has initiated the process for appointing a consultant for corporatization of ports, a spokesman for the ministry said.

“We are planning to seek cabinet approval by March 2015 to enable corporatization of ports through amendments to the Major Port Trusts Act," he added.

Currently, 12 of the 13 ports controlled by the Union government are run as trusts under a law framed about five decades ago, called the Major Port Trusts Act, 1963.

Ennore Port in Tamil Nadu is the only exception. Ennore Port Ltd was formed as a company under the Companies Act, 1956, when it was opened in 2001.

The 13 ports together account for some 52% of India’s external trade shipped by sea. In the year to March 2014, these ports together loaded 555 million tonnes of cargo.

This is the NDA’s second attempt at corporatizing the ports, picking up from where it had left the initiative more than 10 years ago after losing power in the 2004 polls. The earlier NDA government led by Atal Bihari Vajpayee had introduced a Bill to amend the Major Port Trusts Act, which fell through because lawmakers were divided on the issue.

The chances of corporatizing the ports are significantly brighter this time, as the NDA government has a sizeable majority in the Lok Sabha though the Bill’s passage in the Rajya Sabha could pose a problem due to lack of numbers.

The earlier plan also failed because some 65,000 employees (now down to 48,000) and their unions were opposed to the move. Besides, the government realized that it would be impossible to convert ports such as those located in Kolkata, Mumbai and Kandla into companies due to land issues.

Labour unions are still opposed to the move.

“Corporatization is not required at all," said M.L. Bellani, secretary of the All India Port and Dock Workers Federation, the largest of the four workers unions at the 12 ports.

He said the MPT Act can be amended to make the 12 ports more efficient. “More than 50% of the port activities are already privatized. Ports are public properties sitting on large tracts of land. Why should the government corporatize the ports and give the land to private firms?"

Experts disagree with the union.

“The governance structure of major ports needs significant change," the National Transport Development Policy Committee headed by Rakesh Mohan, a former deputy governor of the Reserve Bank of India, wrote in a January report.

The current governance structure of major ports—the ‘public service port model’—lacks potential to attract private capital, the report said. While it was appropriate for a period when centralized economic planning was the norm, it does not fit well into a market-oriented economy and needs to move towards a ‘landlord model’.

In the landlord port model, the publicly-governed port authority acts as a regulatory body and as landlord, while private companies carry out port operations, mainly cargo handling activities. The port authority maintains ownership of the port, leasing the infrastructure to private companies who provide and maintain their own superstructure and install their own equipment.

Currently, most of the major port trusts in India carry out terminal operations as well, resulting in a hybrid model of port governance.

According to the Rakesh Mohan panel report, the port trusts could be transformed into publicly-owned statutory landlord port authorities by a separate law and not through the Companies Act to provide more room for socio-political objectives rather than just maximization of shareholder value. The terminal operations of these port trusts could be converted into public sector corporations, the panel suggested.

The 12 ports have also started revaluing their land to facilitate leasing and licensing in accordance with the new land policy. This is also expected to help the process of corporatization.