More than a decade after it was recommended, the Centre has decided to corporatise all the ports owned by it, as announced in Saturday’s Budget. Of the 12 government ports, known as Major Ports, except Kamarajar Port at Ennore, all the others are run by a board of trustees. Kamarajar Port, set up as a company, is managed by a board of directors.
The Government now wants the others too, incorporated under the Major Ports Act, to become companies under the Companies Act.
As board-run entities, port managements are expected to enjoy more operational freedom and decision-making power, which are crucial for the efficient running of ports.
In his speech, the Finance Minister said the success of the so-called Minor Ports has shown that ports can be an attractive investment possibility for the private sector.
“Ports in the public sector need to both attract such investment as well as leverage the huge land resources lying unused with them. To enable us to do so, ports in public sector will be encouraged to corporatise and become companies under the Companies Act,” the Minister said.
Small and nippyNon-Major Ports such as Mundra and Krishnapatnam have been growing faster than their much older public sector counterparts.
Two years ago, Mundra, in Gujarat, became the first Indian port to handle 100 million tonnes of cargo in a year while Kandla, a Major Port located in the same State, reported a drop in volume. Non-Major Ports, which handle over 42 per cent of the overall cargo, have been eating into Major Ports’ share.
Union Shipping Minister Nitin Gadkari has already initiated a move to leverage the large parcels of unutilised land owned by Major Ports. A committee, appointed by him to suggest ways to develop the Mumbai Port land, has submitted its report.
Corporatisation is expected to help port managements make faster decision on issues such as land development, raising resources and expansion and modernisation. However, some analysts say that merely converting public sector ports from trust-managed to board-managed will not make them efficient. It depends on how much control New Delhi wants to exercise in their day-to-day operations.
Stiff opposition likelyOur Chennai Bureau reports : Corporatising Major Ports is a good move but its implementation is likely to face stiff opposition from the labour force, said K Ravichandran, Senior Vice President, Co-head, Corporate Sector Ratings, ICRA Ltd.
The only Major Port functioning as a company is the Kamarajar Port in Ennore in Tamil Nadu.
This had the benefit of being the youngest, having commenced operations a decade ago, unlike other Major Ports that have been around for several decades and are bogged down by legacy issues.
Corporatising Major Ports will speed up their decision-making process, improve governance, standardise their financial accounts on par with the rest of the industry and help raise funds from the capital markets.
However, the labour force will oppose the move, fearing loss of jobs and privileges.
The port sector will also be benefited by several measures announced to make funding easier for the infrastructure sector, Ravichandran said.
“It is a disastrous move,” T Narendra Rao, General Secretary, Water Transport Workers’ Federation, said. If ports are privatised, national safety and security will be at stake, he said.
Land resourcesThe Government is eyeing 2.65 lakh acres of land owned by these ports as they cannot be sold whereas they can be leased as long as they continue under the Major Ports Act, 1963.
But under corporatisation, the land can either be sold or utilised for smart cities.
Ports are in the service sector. Converting them into companies entails maximising profit and minimising expenditure.
Jaideep Ghosh, Head of Transport and Logistics, KPMG India, said he did not expect corporatisation of ports to be “implemented in the near term.”
Corporatisation of ports is a good attempt to bring professionalism and increased efficiency to compete with the privately-owned ports, said T Shivaraman, immediate past president of the Madras Chamber of Commerce and Industry.