Logistics

New port law to open floodgates for privatisation of operational cargo berths

P Manoj Mumbai | Updated on January 13, 2021

Move essential for successful transition to the landlord model of port governance

The imminent transition of 11 of the 12 ports owned by the Central government and run as ‘trusts’ into ‘authorities’ will clear the decks for the biggest privatisation of cargo handling terminals operated by the State itself.

This is because the ‘port authority’ formed under the proposed Major Port Authorities Bill (awaiting Rajya Sabha nod) will play the role of a landlord — a model widely followed globally wherein the publicly governed port authority acts as a regulatory body and as landlord while private firms carry out port operations, mainly cargo handling activities.

The landlord port, in return, gets a share of the revenue from the private entity.

The 11 port trusts (Kamarajar Port Ltd is run as a company) widely follow a hybrid format of the long obsolete service port model and the globally preferred landlord model of port management. This has resulted in a conflict of interest between the port trusts and the private sector, with the former acting both as port regulators and providers of commercial services in many instances.

Privatising cargo berths run by the state-owned ports themselves has thus become imperative for a successful transition to the landlord model of port governance, said a port industry consultant.

Also read: Ahead of turning ‘landlords’, 11 major ports to roll out special VRS

The Maritime India Vision 2030 document, drafted by the Ministry of Ports, Shipping and Waterways, has endorsed the plan to move major ports to a landlord set-up.

The document has prioritised 38 operational cargo berths for privatisation through the public-private-partnership (PPP) route by 2024.

Anticipating the passage of the Bill in the Rajya Sabha during the forthcoming Budget session of Parliament, the Ministry has directed all major port trusts “to prepare a plan to take up new and existing terminals in PPP mode or landlord model”.

Responding to the directive, the board of trustees of Jawaharlal Nehru Port Trust (JNPT) has cleared a proposal to privatise the container terminal run on its own.

The New Mangalore Port Trust (NMPT) has called expression of interest for privatising Berth No 9 of its oil dock arm on operate, maintain and marketing basis for handling POL and LPG cargo.

The vision document has suggested increasing the share of cargo handled at major ports by PPP/other operators to more than 85 per cent by 2030, from the existing 54 per cent.

It seeks to promote PPP for port development by adopting new formats such as operate, maintain and transfer (OMT) and operate and maintain (O&M).

The OMT mode of privatisation can be deployed for berths with high cargo potential and low CAPEX and for existing berths where the PPP operator can just install and operate the equipment.

The O&M method is suited for berths with low cargo potential and low CAPEX and where berth and equipment exist, leaving the PPP operator to run the equipment.

Of the 240 cargo berths operating at major ports, about 70 berths are on PPP model while 174 berths are run by the state-owned port authorities.

The PPP potential for the 174 state-owned berths can be gauged on parameters such as traffic projections/cargo growth for next 10 years with berths registering steady cargo growth of more than 6 per cent becoming preferred choices for privatisation, the port industry consultant mentioned earlier said.

Currently, more than 100 of the 174 state-owned berths load multiple or general cargo. To increase financial returns, berths with dedicated cargo have greater potential for PPP, he said.

Besides, mechanised berths as well as berths with scope for mechanisation have more potential for PPP since it ensures larger cargo handling and throughput, he added.

Published on January 13, 2021

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