 "Ennore's success can be a blueprint for corporatising ports")
Ports are set to get a refreshing new identity with Finance Minister Arun Jaitley announcing in his Budget speech that he proposes to convert them into corporations. The move aimed at boosting efficiency is expected to make ports more competitive. Experts have naturally welcomed the news in the hope that the government-operated ports will now be run more like profit-oriented private enterprises.
The Centre manages 12 major ports, which together handle nearly 95 per cent of the export-import traffic in the country. Since the mid-1990s, the private sector has been allowed limited access to port projects through public-private-participation or build-operate and-transfer schemes after the government felt that private participation would ease the traffic burden of these heavily-congested ports. A private container terminal at the Jawaharlal Nehru Port Trust in Mumbai was the first to come up under the initiative, and soon world-class privately-built terminals that handled cargo came up at nearly every major port in the country. These new terminals have not only helped reduce the berthing time, but the long waiting period at the anchorages has also become a thing of the past.
Now with plans to incorporate the ports, the government is taking their aspirations a step further. Will corporatisation bring about change? The answer to this can be gauged from the operations at Tamil Nadu's Kamarajar Port, or Ennore Port as it was earlier called. It was the first port in the country to be corporatised back in 2001. The port has over more than 2,000 acres of land and handles cargo ranging from iron ore and chemicals to automobiles and container services. In the 14 years since the port started operations, it has grown consistently, and this year it surpassed the target the shipping ministry had set for it: against a proposed 28.5 million tonnes, it handled 28.59 million tonnes between April 1, 2014 and March 13, 2015, with the tonnage at the end of the financial year likely to touch 30 million tonnes.
The port has companies such as Toyota, Nissan, Ford, Renault and Ashok Leyland among its customers, and an employee strength of only 100. In contrast, the Chennai Port Trust employs nearly 7,000 people and handled 48.1 million tonnes of cargo between April 2014 and February 2015.
Experts attribute the success of the port to its corporate structure that has ensured it remains lean and is managed by people with relevant experience in the field, be it at the management or the board level. The port trusts, on the other hand, are bloated and run by officers of the Indian Administrative Service who have little or no experience in shipping. Its governing structure also gives a corporate port the freedom to take quick decisions. "The port doesn't need to run to the government for every little thing, be it the signing of a memorandum of understanding or the appointment to a post," says a port official who doesn't want to be named.
In other ports, most decisions require the approval of the government through gazette notifications. An official concedes that on average it takes 6-8 months for MoU documents to be approved, and between one year and a decade for appointments to fill various vacancies. These contrast vastly with the swiftness with which decisions can be taken under a corporate structure - one reason why Ennore has managed to grow so quickly, the official adds.
Another big advantage for a corporate port is the ease with which funding can be arranged. Ennore Port plans to upgrade its cargo handling capacity from the existing 30 million tonnes to 100 million tonnes by 2020-21. The bulk of the money for expansion, about Rs 5,000 crore, will come from private investors. Such ports can access the financial markets and need not depend solely on the government for funding. Last year, for instance, Ennore Port raised around Rs 360 crore through tax-free bonds to fund its infrastructure development. It also paid the Centre Rs 96 crore as dividend.
However, adequate autonomy in functioning is a prerequisite for a corporatised port to achieve its financial objectives. Unless the port is given a free hand, mere incorporation will not yield the desired result. That is why there are people who sound a note of caution. "Corporatisation will not bring in all-round efficiencies," says one expert. "A corporatised port could become an island of efficiencies and move away from the core concept of public utility services." He adds that private operations tend to focus on select areas that are commercially viable while ignoring the non-profitable business, which may be just as necessary for the economy.
The Centre manages 12 major ports, which together handle nearly 95 per cent of the export-import traffic in the country. Since the mid-1990s, the private sector has been allowed limited access to port projects through public-private-participation or build-operate and-transfer schemes after the government felt that private participation would ease the traffic burden of these heavily-congested ports. A private container terminal at the Jawaharlal Nehru Port Trust in Mumbai was the first to come up under the initiative, and soon world-class privately-built terminals that handled cargo came up at nearly every major port in the country. These new terminals have not only helped reduce the berthing time, but the long waiting period at the anchorages has also become a thing of the past.
Now with plans to incorporate the ports, the government is taking their aspirations a step further. Will corporatisation bring about change? The answer to this can be gauged from the operations at Tamil Nadu's Kamarajar Port, or Ennore Port as it was earlier called. It was the first port in the country to be corporatised back in 2001. The port has over more than 2,000 acres of land and handles cargo ranging from iron ore and chemicals to automobiles and container services. In the 14 years since the port started operations, it has grown consistently, and this year it surpassed the target the shipping ministry had set for it: against a proposed 28.5 million tonnes, it handled 28.59 million tonnes between April 1, 2014 and March 13, 2015, with the tonnage at the end of the financial year likely to touch 30 million tonnes.
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Experts attribute the success of the port to its corporate structure that has ensured it remains lean and is managed by people with relevant experience in the field, be it at the management or the board level. The port trusts, on the other hand, are bloated and run by officers of the Indian Administrative Service who have little or no experience in shipping. Its governing structure also gives a corporate port the freedom to take quick decisions. "The port doesn't need to run to the government for every little thing, be it the signing of a memorandum of understanding or the appointment to a post," says a port official who doesn't want to be named.
In other ports, most decisions require the approval of the government through gazette notifications. An official concedes that on average it takes 6-8 months for MoU documents to be approved, and between one year and a decade for appointments to fill various vacancies. These contrast vastly with the swiftness with which decisions can be taken under a corporate structure - one reason why Ennore has managed to grow so quickly, the official adds.
Another big advantage for a corporate port is the ease with which funding can be arranged. Ennore Port plans to upgrade its cargo handling capacity from the existing 30 million tonnes to 100 million tonnes by 2020-21. The bulk of the money for expansion, about Rs 5,000 crore, will come from private investors. Such ports can access the financial markets and need not depend solely on the government for funding. Last year, for instance, Ennore Port raised around Rs 360 crore through tax-free bonds to fund its infrastructure development. It also paid the Centre Rs 96 crore as dividend.
However, adequate autonomy in functioning is a prerequisite for a corporatised port to achieve its financial objectives. Unless the port is given a free hand, mere incorporation will not yield the desired result. That is why there are people who sound a note of caution. "Corporatisation will not bring in all-round efficiencies," says one expert. "A corporatised port could become an island of efficiencies and move away from the core concept of public utility services." He adds that private operations tend to focus on select areas that are commercially viable while ignoring the non-profitable business, which may be just as necessary for the economy.