A question of overreach

Adani Ports' selective shipment ban oversteps its mandate

The Rs 6-trillion asset monetisation plan, which the government announced in August, represents one of the biggest leasing of public assets into the hands of the private sector, giving new owners unprecedented powers over national infrastructure. The nature of this power depends on how far the government aligns its regulatory institutions with the new operational ownerships. The critical need for institutional clarity on regulatory reach and the limits of private power were highlighted last week over the decision by Adani Ports and Special Economic Zone (APSEZ) to stop handling export-import containerised cargo originating from Iran, Afghanistan, and Pakistan at its ports from November 15. The origin of this decision lies in a haul of almost 3,000 kg of heroin about a month ago by the Directorate of Revenue Intelligence from a shipment from Afghanistan routed through Iran at Adani’s Mundra Port.

The APSEZ announcement said the trade advisory would apply to all terminals, including third-party terminals, at the APSEZ ports. This is a significant unilateral decision that goes beyond the realm of commerce for any private operator. Even a public sector port, for that matter, would not be authorised to take such a decision. Bureaucrats in New Delhi confirm that only government agencies such as the Directorate General of Foreign Trade, the customs department, or the shipping ministry are entitled to take such a decision. The fact that no government agency, let alone any minister, has sought to contradict this announcement is unusual. This silence is all the more eyebrow-raising because Iran, with which India enjoys cordial relations, has officially expressed its displeasure over the decision. More than anything else this episode offers a disturbing precedent of the powers that private sector infrastructure players can potentially wield over national policy.
 

APSEZ is India’s largest ports company with 13 ports in seven states. Mundra is the country’s largest container-handling port. Its decision has implications not just for international relations but also impinges on the country’s export competitiveness. Diverting shipments bound for Iran, for instance, to, say, government-owned JNPT would increase export costs as much as 20 per cent. And Iran is a major buyer of India’s agri-exports. More importantly, such unilateral corporate decision-making confers an undesirable degree of power on private infrastructure players to shape policy. Imagine if one telecom operator blocked calls from another — a situation that cannot arise because of regulatory intervention — or if an airport operator declined to allow landing rights to a particular airline or a road operator declined access to a competitor’s cargo. The question is relevant to the Adani group in particular — it not only owns the largest private port network but bids fair to become one of the country’s largest airport operators (with Mumbai airport in its kitty) and has a major presence in the power sector. But the issue also transcends the monopoly power of one group. The Adani group has described this decision as one taken in the “national interest”. This may sound unexceptionable, but in a democracy, questions of national interest are best left to elected representatives, not to the subjective decisions of business groups.