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Monday, May 27, 2002

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Port privatisation: Running into rough weather?

T. R. Bhat

PORTS in India handle about 92-95 per cent of foreign trade and play a vital role in the national economy. The Ministry of Surface Transport (MoST) announced the policy of privatisation in the port sector in 1992. According to studies carried out by MoST, the total traffic to be handled by ports over the next 20 years is shown in the table. . Matching port facilities will have to be provided, both in major and minor ports. In 2000-01, the traffic handled by major and minor ports was 272 million tonnes per annum (mtpa) and 490 mtpa respectively. Due to the rapid changes foreseen in coming years, the share of major ports in the total traffic is expected change significantly, from 77 per cent in 2001-02 to 40 per cent in 2021-22 .

The expectation, thus, is that the minor ports, post-development, will handle about 60 per cent of the total traffic in about 20 years time. The capital investment required to create matching port facilities is indicated in the table. Naturally, most of this capital investment must come from the private sector. Does the private sector get the support and guidance from the Government departments and ports to reach the above investment targets?

The answer is No. In spite of the policy of liberalisation, the bureaucratic mindset of those at the Government and the port levels is yet to change.

Lack of professional management: In spite of repeated recommendations by the such bodies as World Bank and Asian Development Bank and Parliamentary Committees for the introduction of professional management in ports, most major ports are administered by IAS officers.

These officials are posted as Chairman/Deputy Chairman of a major port for a fixed time of three to four years.

They do not have any port experience.During their stints they administer the ports as per the rules and. regulations approved by the Government.

Mindset of bureaucracy: The first and most important reason for the slow progress of port privatisation is the rigid mindset of the bureaucracy, both at the port and the Government levels, due to lack of professional management. Private investors who come forward to invest in a port project are viewed with suspicion and are harassed by queries at every level.

Rigid rules and regulations: The second factor militating against privatisation is the inflexibility in rules and regulations. Given the rapidly changing economic environment, the guidelines also require periodic modifications.

But all guidelines and agreement forms are rigid and any change requires the approval of higher authorities which may take time.

The Government policies on licensing, excise duties and tax structures change from year to year, and the industrial sector suffers due to these changes, if matching changes are not made in the agreements.

Private ports are in a better position to negotiate and attract new cargo traffic compared to government-owned ports. Restructuring of port trust boards: At present, the major port trust boards have 18-19 trustees, consisting of government nominees, political appointees, representation from user organisations and companies, labour trustees, and so on, apart from the Chairman and Deputy Chairman. Unless the boards are made up of a smaller number of professional trustees/directors, productivity and efficiency will suffer.

Other factors: Private investors also face a number of other difficulties in trying to gain a stake in major ports. These include:

  • Multiplicity of clearances to be obtained before starting work.

  • Inordinate delay in getting clearances'

  • Ports not allowing adequate time to get the clearances.

  • Frequent change in Government guidelines and rules

  • Non co-operation from labour

    The frequent changes in Government, guidelines and regulations affect the time schedule and viability of a project. TAMP: It is a welcome sign that the Government has appointed the Tariff Authority for Major Ports (TAMP), which investigates and hears various problems and complaints received from the private parties independently. But the decisions given by TAMP are again challenged.

    This has negatived the very purpose of formation of TAMP.

    To achieve the target of creating additional port facilities in the coming years, it is essential that:

    The bureaucracy at port and Government level changes its attitude and treats the private sector as a partner in port development.

    The guidelines and agreement formats are modified to suit the ground realities and changed circumstances.

    Witch-hunting and harassing of port officers and private agencies is stopped.

    Quick clearances are facilitated by simplifying procedures and guidelines.

    Professional management is introduced in ports.

    It is hoped that the ports and the government departments will rise to the occasion and achieve the targets of capacity expansion without any cost or time overruns.

    (The Mangalore-based author is a former Chief Engineer.)

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