The cargo volume share of India’s 12 major public sector ports has nose-dived from 72% in FY2007-08 to 55% in FY2013-14

Manish K. Pandey | The Dollar Business

There has been a great hue and cry since the day the Union Finance Minister Arun Jaitley pitched for the corporatisation of state-run ports in his Budget speech in the Parliament. The proposal has been opposed and criticised by almost all trade unions in the port sector. Their argument: “Corporatisation would not be suitable in the Indian scenario.” But, is it really so?

Although a similar policy was proposed a decade ago, it never saw the light of day. Raison d’être: Opposition from political beneficiaries and trade unions. Result: The only major port functioning as a company today is the Kamarajar Port (erstwhile Ennore Port). And that too because it was incorporated as one! No doubt, the process of corporatisation is not going to be quick, as an amendment will have to be made to the Major Port Trust Act 1963 that allows state-run ports to do away with port trust model and get registered as a company. But then, we all have to start somewhere. And the faster the change comes in, the better it is for the Indian port sector.

Corporatisation will not only accelerate the decision-making at India’s major ports, but will also improve their governance structure and help them raise funds from the financial markets. Apart from fund-raising, ports will also have the choice of growing inorganically through mergers and acquisitions, an option that is missing under the current port trust model and an advantage the corporate peers of major ports have.

The August 2014 issue of The Dollar Business featured a field report on Kamarajar Port – India’s first and only corporate major port. One of our Assistant Editors Sisir Pradhan had spent three days at the Port. All we wanted to figure out was: if corporatisation was just cosmetic or has it actually brought in some real changes. What we found was – professionalism, efficiency, and the potential to excel! In fact, our recent visit to Gateway Terminals India (GTI), a 74:26 joint venture between APM Terminals and Container Corporation of India (CONCOR), at JNPT only reconfirmed our belief that corporatisation is the best way forward for India’s port sector and, of course, foreign trade fraternity [for details, refer to story titled “The Gateway (Terminal) of India” on page no.78 of this issue].

Statistics too favour corporatisation. As per the Shipping Ministry data, the cargo volume share of India’s 12 major public sector ports has nose-dived in the last six years – from 72% in FY2007-08 to 55% in FY2013-14. Even in FY2015 (till January 31, 2015), the growth in cargo volumes at private ports was more than double (11.1% y-o-y) the growth rate recorded by the 12 major public sector ports (4.85%). Interestingly, Kamarajar was the only major port that saw traffic double to 27.34 million metric tonnes (MMT) in FY2014 as against previous year figure of 17.89 MMT, which is a staggering 53% increase and the highest amongst all major ports. The credit, perhaps, goes to its corporate identity.

Congestion has been a salient feature of major ports. Ships that come calling in have to wait long hours, sometimes for days, for a berth. Corporatisation can not only shorten this waiting time, but also pave way for the new-age efficient ports that adhere to global standards. Kamarajar Port is yet again a case in point. As per the Shipping Ministry’s data, the average turnaround time at Kamarajar has been consistently the lowest (0.09 days) for the last two years, as against days at its public sector peers.

Corporatisation will also give state-run ports the much-needed flexibility in terms of pricing as they will no longer remain under the ambit of the Tariff Authority for Major Ports (TAMP), a major reason why private ports today have an edge over public ones. Further, all major ports are sitting on huge land banks. And the process of corporatisation will only allow the ports to leverage the resource for their own benefit. For instance, as per an estimate, over 800 acres of land is lying unused at JNPT. Going by the government’s circle rate for the area, it’s valued at about Rs.56,000 crore – much higher than the value of land holdings by some of the biggest real estate companies in India. Need I say more?

What has been proposed by the Finance Minister is a rough plan to overhaul the functioning of state-run ports. A lot needs to be done to actually make it happen. More than anything else, the government needs to ensure the proposal doesn’t take a back seat once again. And that will require a very strong political will!