Corporatisation of ports back on track

Cabinet to be soon asked for amendment to enable corporatisation

The Union government has renewed moves to corporatise major ports in order to streamline their functioning. While the two new major ports would be corporate entities from the outset, an enabling provision in the Major Port Trusts Act is now being planned to facilitate conversion of trust into companies.

Permission from the Cabinet is soon to be sought for this, a senior government official told Business Standard. The decision would spell out the mechanism for valuation and transfer of assets, including land, when a port trust structure is changed into a company. For instance, the Mumbai port has rights to a lot of township land which would also be transferred to the new entity. Pension liability would also have to be settled, he said.

STREAMLINING MAJOR PORTS

MAJOR PORTS WHICH ARE RUN AS TRUSTS

• Kolkata, Paradip, Visakhapatnam, Chennai, Tuticorin, Cochin, New Mangalore, Mormugao, Jawaharlal Nehru Port, Mumbai, Kandla, Port Blair

PORTS RUN AS COMPANIES

• Ennore
• Sagar Island*
• Durgarajapatnam*

POTENTIAL BENEFITS ACCRUING OUT OF CORPORATISATION

• Access to private capital market
• Market-driven rates
• Greater accountability, flexibility, autonomy
• Minimum red tape to respond to competition
• Corporate governance structure

*yet to be incorporated under the Companies Act

Corporatisation of ports has been on the agenda for more than a decade but there has been opposition from interest groups. An earlier National Democratic Alliance government under Atal Bihari Vajpayee had looked at such a model for the Jawaharlal Nehru Port Trust. The previous UPA government had moved to corporatise Kochi Port Trust but the proposal could not go through.

“We have almost finalised the Cabinet proposal and are hoping that an amendment sails through in the winter session of Parliament,” said the official. New ports would be registered under the Companies Act, as is the one at Ennore, close to Chennai city.

India has 13 major sea ports, 12 of which function under the aegis of the Major Port Trusts Act, 1963. These are under the control of the Union government. Major ports are on the Union list of the Constitution; also, the Centre may declare any port as a major one by official notification.

There are two additional major ports whose development plans are in the pipeline. One is at Sagar Island in West Bengal. The other will come up at Dugarajapatnam, in Andhra Pradesh’s Nellore district. Both, like Ennore Port, will be formed under the Companies Act. The official said the process of incorporating these new ports as companies was under way. Issues on land acquisition was holding up the incorporation of Dugarajapatnam. The cost implication of building a breakwater and conducting dredging is delaying progress on Sagar Island, said the official.