Five government-run ports ripe for corporatisation

Experts say two ports on the west coast, one down south and two on east will be a good spread of corporate structured ports to begin with

Five of India’s 12 government-run major ports seem to be ripe for corporatisation, given their capacity-expansion plans and cargo growth through the past few years. Experts say these ports — Kandla, Jawaharlal Nehru Port, V O Chidambaranar (formerly Tuticorin), Paradip and Visakhapatnam — are best suited to come under the Companies Act.

India’s 7,500-km coastline has 13 major ports. Of these, Tamil Nadu-based Kamarajar Port is the only one following a corporate structure; the others are under the Major Port Trust Act.

In his Budget speech, Finance Minister Arun Jaitley had announced the government would encourage major port trusts to turn into companies, under the Companies Act, paving the way for these entities to become autonomous.

“All these five ports have the potential to double or even triple their cargo traffic. Connectivity to the hinterland, the trade spread-out and the not-so-huge labour force are some of the factors that make it easier for these entities to switch to a corporate structure,” said Ramesh Singhal, chief executive officer at i-maritime Consultancy.

Jawaharlal Nehru Port, for instance, has staff strength of about 1,800, of which only 900 employees are part of the labour union. "Since the workforce at JNP (Jawaharlal Nehru Port) is already small, it (the port) is not going to cut staff post corporatisation,” said N N Kumar, former chairman of the Mumbai-based port. "Job security has been a major concern of the unions, as corporatisation could lead to retrenchment. But in the case of JNP, there is no such issue. Due to this, the way towards corporatisation is quite smooth for this port.”

The east coast-based Visakhapatnam Port is set to offer a voluntary retirement scheme (VRS) to 1,500 of its 4,500 employees. “Modernisation of the entire port has been undertaken, along with construction of new berths,” said M T Krishna Babu, chairman of the Visakhapatnam Port. “Thrust will be laid on carrying out activities without any manual interface. More, since the port will be handing over one of its iron ore berths to Essar Group soon, the requirement of workers at the port will come down. That is why we are offering the VRS,” Babu said.

Following the retrenchment, Visakhapatnam Port was expected to have about 3,000 employees, which could ease the road to corporatisation, said Babu. Paradip, like Jawaharlal Nehru Port, had a small labour force -— about 1,800 — and so, had no plans to cut staff, said Babu, also acting in-charge of Paradip.

Apart from job security, labour unions have been seeking representation in the company boards, once a corporate structure is in place. “Though the government is yet to issue the guidelines, it has been conveyed that only those with requisite expertise will be independent directors on the boards. There is clear indication from the government that while job security of port workers will be looked into and service conditions will not change, labour unions should also keep expectations in tap,” said Babu of Visakhapatnam Port.

Early this month, workers of all major ports had planned an indefinite strike against the government's plan to corporatise the sector.

While trade-spread and cargo growth prospects are visible at most of these ports, authorities are trying to plug the gaps wherever needed. For instance, to increase the contribution of container cargo to Paradip's total revenue (in FY14, it was only one-two per cent), the port is investing about Rs 16,000 crore through the next 10 years in raising overall capacity to 270 million tonnes (mt) from the current 100 mt.

“Paradip has good potential to capture the growing container traffic, given its well developed hinterland. The port could tap container cargo such as prawns and aluminium ingots.”

Currently, most container cargo from Bhubaneswar flows to the Visakhapatnam Port, 450 km from the city, primarily because of the lack of relevant infrastructure at Paradip, which is only 125 km from Bhubaneswar. Development of a container facility at Paradip is expected to result in cargo diversion to this port and, consequently, competition for Visakhapatnam Port, say officials.

The Chidambaranar port has been improving its operational performance, through the past few years. Last year, the port recorded 29 mt of cargo. "Efficiency has helped the port get fresh business, leading to cargo growth on a year-on-year basis," said S Anantha Chandra Bose, chairman of the Chidambaranar port.

During April-September 2014, of the 13 major ports, Kandla accounted for the largest share of traffic handled; it contributed 46 mt to the total cargo of 288 mt. In terms of capacity utilisation, it was the second best among the five ports in FY14, after Jawaharlal Nehru Port.

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• Kandla, Jawaharlal Nehru Port, V O Chidambaranar (formerly Tuticorin), Paradip and Visakhapatnam ports are best suited to come under the Companies Act, say experts
  

 

According to experts, all these five ports have the potential to double or even triple their cargo traffic
 

Among the 13 major ports in the country, Kandla Port accounted for the largest share of traffic handled during April-September 2014
 

From these ports, Tamil Nadu-based Kamarajar Port is the only one following a corporate structure; the others are under the Major Port Trust Act