CEA says Kolkata port great example of infrastructure draining public money

The port of Kolkata is a good example of an infrastructure draining public money while exiting the business is problematic, says the central government's chief economic advisor.

Referring to a finding cited by Devesh Kapur - who co-authored a book with him - Arvind Subramanian, the CEA, said: "There ought to be exit from this (Kolkata Port) but it hasn't been and I really don't know what its (Kolkata Port's) prospects are."

Drawing a parallel with the Singapore port, he said the Kolkata port's TEU (a unit of measurement for container ships) per acre was only about 60 units, while the same for Singapore stood at 20,000 units. Furthermore, Kolkata's TEU traffic is no match to that of Singapore.

"Kolkata port is using too much land," he said on Sunday at an Indian Statistical Institute event here. Traffic handling in the British-era port has been steadily declining, while the government since 1990 has spent about Rs 11,000 crore for subsidising it.

In 1960, the Kolkata port handled 28 per cent of total traffic which has declined to merely eight per cent now. On the "very high opportunity cost for land", the official said subsidies are used to "keep alive a river-based port in an era of very large ships".

"I think it is a great example where exit is a problem in West Bengal and as much in India," he added.

Noting West Bengal had slipped for quite a while in terms of gross domestic product growth when compared to other states, Subramanian said the state's strong literary culture, enrolment rate in the schools and opportunities in the industrial sector, backed by the Union government's Act East policy, might help it regain momentum.

"West Bengal, backed by its strong literary traditions, can use the $900-billion global printing and publishing industry to its advantage. Opportunities are also there in garments, electronic assembling and the foundry & forging sectors," he said.

He also pointed to Bengaluru, Chennai, Mumbai and Delhi facing high real estate costs and human congestion as a reason why new avenues could get opened for Bengal.

As for the proposed national goods and services tax (GST), though the central government has agreed to bring petroleum products under it, the existing tax regime will continue for a "certain period" which will be decided by the proposed GST Council, he said.

Under the current tax structure on petroleum, the Centre levies 32 per cent tax and states another 20 per cent.

"Constitutionally, it'll be part of GST, but for a certain period the states will have the power to determine the rates on petroleum products," said Subramanian.

An earlier report from a panel he'd chaired on GST rates and structure had recommended exclusion of intermediates such as petroleum and power.

Noting alcohol and petroleum were the highest revenue earners for states, the report said the latter could retain the right to levy top-up excise on these goods.

However, the government later opted to include petroleum under the GST model, but excluded alcohol.

"There are many core benefits of GST and growth is one of them. It'll help Make in India, it'll improve compliance, it'll give a tax base for the future," said the CEA. Adding: "No one reform is going to determine long-term growth."