The Hindu Business Line : Private sailing

DP WORLD, THE Dubai government-owned port company, has emerged the largest container terminal operator in India, following its recent takeover of the UK-based P&O. The West Asian major, now among the top three world-wide, will have controlling interest in five Indian terminals accounting for close to 50 per cent of the country's container traffic. Though the emergence of multinationals overnight, through trans-border mergers and acquisitions, is normal in an increasingly globalised world, the impact of DP World having controlling interest at Indian ports needs to be viewed taking into account its long-term implications.

The Indian port scene has changed dramatically in the last five years. Until the late-1990s, berthing delays at major ports were the norm rather than an exception, and ships faced a long turnaround time. Coupled with the bureaucratic hassles at government-run ports, the operational inefficiencies made Indian facilities one of the costliest in the world. The privatisation that began towards the late-1990s brought marked changes in the working of some of the ports. The Jawaharlal Nehru Port is a good example. Competition from P&O, which was given a terminal on lease in 1997 (the first port privatisation act in the country), not only improved productivity at the government-run terminal in the port but also gave a wake-up call to the neighbouring Mumbai port.

The Government's port privatisation policy aims for efficiency and competition. Under extant guidelines, a private terminal operator cannot bid for a second one at the same port. This was why P&O was not allowed to bid for a second terminal at the JN Port; it went to Maersk. Similarly, to check arbitrary changes in port charges by private operators, the government brought them under the Tariff Authority for Major Ports, whose approval is mandatory for a revision of these levies. Notwithstanding disputes dogging TAMP, it has been able to enforce some discipline. Now, a foreign company has emerged a major player in the Indian port sector through the acquisition route. The Dubai-based operator, controlling 51 port terminals in 30 countries, will not only offer world-class services to Indian shippers, but also bring scale-economies to the domestic port sector. The cash-rich operator will not be constrained for resources to acquire modern handling equipment, unlike the government-run ports that still remain quite bureaucrati.

In India, DP World will now have control of three P&O-run terminals (at Nhav Sheva, Chennai and Mundra, Gujarat), the one it took over at Kochi early this year and another joint venture facility at Visakhapatnam. Will the company leverage its dominant position to deliver real benefits to port users or draw for itself maximum advantage, remains to be seen. TAMP has a role in determining the port tariff, but no mechanism to monitor an operator otherwise. The Government should ensure that private terminal operators act provide a level playing field to all port users. A review of the policy is called for. It must ensure that even while promoting competition, it does indeed benefit port users. At the same time, the Government should go ahead with its plan to corporatise major ports. This would provide them the strength to compete with the private operators.

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