We need a national policy on ports

Jose Paul | Updated on June 29, 2021

A file picture of Mundra Port which handles the highest volume of cargo   -  AFP

A string of large, medium and small ports along the coast will create a competitive port services market

India has a coastline of 7,517 km situated in the 10 maritime States and union territory. Article 246 of the Constitution confers exclusive powers to make laws with respect to the matters enumerated in the union list, contained in the seventh schedule thereof, on the Parliament. Entry 27 of the union list mentions ports declared by or under law made by Parliament or existing law to be major ports, including their delimitation and the Constitution and powers of the Port authorities therein a responsibility of the Centre.

All other ports fall within the jurisdiction of the authority of the State governments where the respective State Assemblies have powers to legislate. There are 12 major ports and 187 non-major ports and these ports are governed by the Major Port Trusts Act 1963 and the Indian Ports Act 1908.

Major and non-major ports

The Union government under the provisions of the Indian Ports Act 1908 declares a port as a major port. But there is no mention in the Act on the qualifying conditions or criteria to declare a port as a major port. Deenadayal Port in Kandla, Gujarat — a major port handled 123 million tonnes of cargo in 2020 whereas the Mundra Port — a non major port in the same State handled the highest volume of cargo 137 million tonnes in the same period. The Centre cannot declare Mundra as a major port as that would bring the port under the Central jurisdiction.

Moreover, Mundra is managed by Adani ports in the private sector under a concession granted by Gujarat Maritime Board. The real distinction between a major port and a non-major port lies in ownership, control and management of that port — not related to cargo volumes, port facilities or connectivity. The Centre can declare a port a major port even before that port commences commercial operations.

For example New Mangalore port was declared 9th major port in India on May 4, 1974 before completion of the construction work. JN Port in New Mumbai was declared a major port on May 28, 1982 whereas the actual commissioning of that port took place only on May 26, 1989. Kamarajar Port in Ennore was declared a major port on March 23, 1999 before commencement of commercial operations.

In the Indian context, declaration of a port as a major port would mean that the ownership, control and management of that port will fall exclusively under the jurisdiction of the Central government whereas maritime State governments have the power to develop non major ports either directly or by granting concession to private terminal operators.

In the US there is no categorisation of ports as major, non-major or minor ports. The US has a coastline of 19,924 km with 361 ports and their sea ports are under the state or other local jurisdiction and ownership.

In Canada, there are four types of ports — the corporation ports, ports Canada federal system, the commission ports with a strong degree of autonomy and a large number of public ports under the control of the department of transport.

In Australia seaports are a state matter. The port administrative systems vary from state to state and the Federal government has only very limited role in the administration of seaports. In Japan the seaports are grouped in their order of importance as specially designated major ports, minor ports, local ports and ports of refuge.

In France ports broadly come under the category of autonomous ports, non autonomous ports and local ports depending on their importance and the vital role they play in the national economy. The UK has a coastline of 12,429 km with about 300 ports out of which only about 44 are commercially significant ports. There is no categorisation of ports in the UK and port ownership patterns vary from Municipal, Private, Joint sector to public trust ports.

The policy of the British government has been one of encouraging free competition in the port sector where port managements under different ownership patterns are allowed to compete with one another without any monetary support from the national government or any subsidy explicit or implicit.

With the enactment of Major Port Authorities Act 2021, the Indian ports scenario will present different patterns. Eleven major port trusts will get transformed into Port Authorities. One major port namely Kamarajar Port (Ennore) will continue to function as a major port under the Companies Act 2013 and all the other commercially significant non major ports under concession to the private sector will function under the Companies Act.

When Kamarajar Port (Ennore) was declared a major port in March 1999 it was incorporated as Ennore Port Ltd as a company under the Companies Act. The track record of the company for the last 22 years has been so impressive that it has emerged as an exemplary major port. In 2020 Kamarajar Port handled 31.7 million tonnes with a total strength of just 102 employees, an operating ratio of 27 per cent and a net profit of ₹249 crore.

All the 11 major ports will have a new institutional outfit as port authorities in the near future but should function as landlord ports — leaving all cargo handling operations to the terminal operators in the private sector as in the US and European ports. The next institutional transformation should be from port authorities to public limited companies to enable them to function efficiently as business enterprises.

As corporate entities such ports will have easy access to financial markets, take management decisions with speed and efficiency and will have greater commitment and flexibility in implementing development projects.

A string of large, medium and small ports working under the Companies Act along the Indian coast will create a highly competitive port services market. Such ports along the East and West coast of India will compete intensively in the port services market based on price, quality and performance. This will result in lower port charges and help promote Indian exports and reduce the landed cost of imports at Indian ports.

The writer is former Chairman of Mormugao Port Trust and Adjunct Faculty of Indian Maritime University, Chennai

Published on June 29, 2021

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