In Port News 02/03/2015
The Narendra Modi government and port workers’ unions are headed for a confrontation over a budgetary proposal to convert 12 of the 13 ports owned by the Indian government and operating as trusts into corporate entities. The plan, which seeks to alter the structure of major ports (those owned by the Union government), was flagged off by the National Democratic Alliance government led by Atal Bihari Vajpayee.
It lost steam after the NDA government was voted out in the 2004 polls. Corporatization of ports is back on the NDA agenda with finance minister Arun Jaitley making a policy statement on the issue while presenting the budget in Parliament on Saturday. “As the success of so-called minor ports (those owned by the state governments) has shown, ports can be an attractive investment possibility for the private sector.
Ports in the public sector need to both attract such investment as well as leverage the huge land resources lying unused with them. To enable us to do so, ports in public sector will be encouraged, to corporatize, and become companies under the Companies Act,” Jaitley said in his budget speech. “This is a clear-cut policy statement from the government,” said M.L. Bellani, secretary of the All India Port and Dock Workers Federation, the largest of the five workers’ unions at the 12 ports.
“It came as a surprise to us.” On 20 February, the representatives of the five workers’ federations had met shipping minister Nitin Gadkari to convey their opposition to the corporatization plan. The ministry is ready with a proposal to amend the Major Port Trusts Act, 1963, to facilitate corporatization. “Gadkari asked us to give our views on corporatization in writing for the consideration of the government,” Bellani said.
The unions have already served a notice on the government to go on an indefinite strike at the 12 ports from 9 March urging the government to drop the plan. “We will hold protest demonstrations against the announcement on Monday,” Bellani said. “We will stop functioning of the ports and, if necessary, we will go to the Supreme Court against the plan.”
Currently, 12 of the 13 ports controlled by the Union government are run as trusts under the 1963 law. Ennore Port located in Tamil Nadu is the only exception in this regard. 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 58% of India’s external trade shipped by sea. In the year to March 2014, these ports together loaded 555.49 million tonnes of cargo. “Corporatization is not necessary,” says Bellani.
The government, he said, can amend the Major Port Trusts Act to achieve the objectives of corporatization without converting them into companies. “More than 50% of the port activities mainly cargo handling 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?” he asks. The ports are not getting any funds from the government, not even for dredging. The ports are funding dredging from their own internal resources. Hiring has stopped, Bellani noted. However, experts disagree with the workers. “The governance structure of major ports needs significant change,” the National Transport Development Policy Committee headed by Rakesh Mohan, a former deputy governor at Reserve Bank of India, wrote in report finalized last year.
The governance structure of major ports—the public service port model—lacks potential to attract private capital. 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 hence the need to move towards a landlord model. To implement the strategic institutional shift, the panel recommended a three-step approach. First, transform the current port trusts into publicly-owned statutory landlord port authorities through a new law to impart functional and financial autonomy.
Secondly, unbundle all major ports (those owned by the Union government) and corporatize terminal operations of these port trusts as public sector corporations. Third, the corporatized public sector terminal operators could potentially be disinvested, listed and possibly privatized at a later stage. The port authority could be corporatized as a statutory authority by a separate Act and not through the Companies Act to provide more room for socio-political objectives rather than just maximization of shareholder value, the panel wrote in the report.
