Revenues, dividends, boards: What India’s major ports can learn from Antwerp

P Manoj Mumbai | Updated on January 08, 2018

Smooth sail The Antwerp Port Authority is a fully autonomous body paying a yearly dividend to the city of Antwerp   -  REUTERS

As the Narendra Modi government sets about transitioning 11 of the 12 major ports that are now run as trusts into authorities, the ports can take a lesson or two from Antwerp port in Belgium.

The Antwerp Port Authority pays a dividend to the City of Antwerp, its sole shareholder. Contrast this with India’s major ports — those owned by the Centre — which don’t pay any dividend to the government, even after being converted into authorities.

Revenues and expenses

Antwerp, Europe’s second biggest port, earns its revenues from some 14,500 ships calling at the port every year and the land lease rentals from concessions awarded to private cargo handlers. The port authority is not involved in cargo handling.

The expenses on dredging the Scheldt river are paid by the Flemish government; in India, this is funded by the major port trusts.

The port authority invests in the infrastructure of the port such as in bridges, docks and locks together with the Flemish government. On average, the port authority invests close to €100 million a year in port infrastructure.

“We make a profit every year, so we have the money to reinvest. We also pay a dividend to our shareholder, the city of Antwerp — it’s a small portion of the money that we don’t have to reinvest in infrastructure. We pay 20 per cent as dividend every year. That’s reasonable,” said Jacques Vandermeiren, CEO of Antwerp Port Authority.

The stakes are high because the port contributes 4.7 per cent of GDP of Belgium, generating some 60,586 direct jobs and 82,068 indirect jobs.

Till last year, the board of directors of Antwerp Port Authority comprised politicians from the local city council.

Diverse board

To make the port future-ready, the board composition was changed to include top executives from private companies, who now occupy six of the 12 board seats.

Marc Van Peel, vice-mayor of Antwerp, is the president of the board.

“We felt that inducting private people who are into daily business and operations on the board would benefit us,” said an official.

Antwerp Port Authority is now a fully autonomous body. “We don’t have to ask permission from the city for anything,” the official said.

The Port Authority also has a management committee led by CEO Vandermeiren. In comparison, the board of trustees of major ports here belong to disparate interest groups.

Concessions are awarded not on the basis of the highest revenue share offered, as is prevalent in the major ports. “That’s not the best model,” said Vandermeiren.

Bidding process

Lease rentals are set ahead of inviting proposals for a project, which is applicable uniformly to all.

The rates are different for front quay, back quay, paved, non-paved, water-connected and non-water connected land. Bidders hand in their proposals, with details such as the business plan, investments, employment generation, volumes to be handled and sustainability.

All the projects are carefully scrutinised by the port authority and points given for each proposal — the proposal with most points wins the tender.

There is no bidding on the lease rentals, which are adjusted to inflation during each year of the concession, typically lasting 30 years.

But if the investments are huge, the period can go up to 40 years.

The CEO explained that new investment proposals are often put on a long waiting list because of the existing operators wanting to continue.

So the decisions on new investors or continuing with existing players are made based on their investment plan, ability to create value and employment generation.

“Otherwise, how do you make the choice — who is welcome and who is not?” pointed out Vandermeiren.

(The writer was recently in Antwerp at the invitation of the Antwerp Port Authority)

Published on October 22, 2017

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