The old mindset

The government's new dredging policy that perpetuates the monopoly of the state-owned Dredging Corporation of India (DCI) is quite amazing in this day and age, considering that the policy in most areas is to allow more competition, so as to bring in more efficiencies as well to drive down prices.

According to the new policy that came into effect on April 1, the Kolkata port will continue to be a DCI monopoly (40 per cent of DCI's business comes from this single port).

While other ports will be free to call for bids, DCI will have the right of first refusal if its bid price is less than 10 per cent higher than the lowest bidder "" how important this is to DCI can be seen from the fact that, during presentations made to analysts last December, this was a part of the slide show.

While this policy, at one level, is nothing more than the existing price preference policy for public sector undertakings, the PSU preference policy itself has come in for flak for many years for precisely the reason that it creates an unfair advantage for PSUs and hinders competition.

And, each time the price preference policy has been renewed in recent times, the government has indicated it will be just for two years. It is of course obvious that the policy has had almost no impact in rescuing inefficient PSUs, but has succeeded in raising prices for user industries.

This is not the first time the government has come up with such reservations for its PSUs. It assured business for VSNL before it was privatised, and did the same for Hindustan Teleprinters a few years ago.

While it might be argued that this was done to make the companies look attractive till such time as a new owner is able to restructure operations, this is clearly not an argument that can be made for DCI considering that it is not up for sale.

Interestingly, DCI's slide show admits that since 1995-96, its capacity was found to be inadequate to meet the needs of Indian ports, and so foreign dredging companies were allowed into the market.

Since then, however, DCI says it has augmented capacity and can meet the entire industry's demands "" the presentation makes no comment on the pricing structure of DCI versus the competition.

The fact that the association of private ports in Gujarat has protested against DCI's monopoly powers shows just what the industry thinks of its claims.

At a time when the economy needs to augment its port capacity and reduce shipping costs, the emphasis has to be on increasing competitiveness and lowering maintenance costs "" dredging is a very significant part of any port's costs, and so logically, it needs to be a thrust area as far as improving operations is concerned. Any policy that seeks to restrict this by mandating certain suppliers can only be a bad policy.