Post Date : August 18, 2020
Deemed to be a step towards corporatisation of ports, the Major Ports Authorities Bill, 2020 was introduced in the Lok Sabha by the Minister of State for Shipping, Mansukh Mandaviya, on March 12, 2020. By replacing the Major Port Trusts Act, 1963, the Bill aims to provide for regulation, operation and planning of major ports in India and provide greater autonomy to these ports. We delve into the many facets of the Bill and why it is relevant in the context of India’s Shipping and Maritime Industry amidst the compliments and the criticism that it has invited.
Earlier this year, the Indian government gave a nod to the long-awaited reform bill designed to revolutionise the country’s major public port entities, by bringing prolonged delays and fickleness led by labour pressure and stakeholder consultation to a complete end. The proposal for the said Bill was first tabled in the parliament in 2016, but the members of the Parliament sought a review from the Parliamentary Standing Committee (PSC) prior to the enactment.
The modified “Major Ports Authorities Bill 2020” legislation is now set to replace and invalidate the existing law of 1963. The Bill will apply to the major ports of Chennai, Cochin, Jawaharlal Nehru Port (JNPT), Kandla (renamed Deendayal), Kolkata(renamed Syama Prasad Mukherjee), Mumbai, New Mangalore, Mormugao, Paradip, Tuticorin (renamed VO Chidambaranar) and Vishakhapatnam.
Will The Major Ports Authorities Bill contribute to greater autonomy?
The bill is proposed to grant operational and financial autonomy to government establishments that have been dormant owing to years of underinvestment and bureaucratic controls that have led to loss of market share to minor contenders who have an edge over them, with pricing and infrastructure advantages.
While speaking about the impact of the Bill on the maritime and containerised trade of the industry, Sanjam Gupta, Director, Sitara Shipping offers her two cents. She writes, “The logistics cost in India is very high, estimated at 13-14% of gross domestic product (GDP), very high compared with more efficient global systems. Currently, the vessel & container-related charges at Indian ports are much higher than foreign ports. This adds to the cost of logistics of the country. Add to that the longer turnaround time and low output per ship berth and lack of adoption of advanced technologies. The Bill seeks to provide greater autonomy to major ports”.
Battling high costs
The government has been relentlessly pursuing its goal of bringing down the logistics cost to give the impetus needed to enable India to stand at par with other countries. In the US and Europe, logistics accounts for 9-10% of the GDP while in Japan, it stood at about 11%. Bringing down the logistics cost is the need of the hour for India’s Logistics and Supply Chain Fraternity and the Shipping and Maritime Industry has a major role to play in it.
India plays a prominent role in global maritime trade due to its strategic location and accounts for over 2.1% of global trade. Maritime trade contributes over 95% of trade by volume and over 70% by value in India. The Union Minister of Shipping Mansukh Mandaviya had recently shared that the Centre was in the final stages of rolling out a National Logistics Policy that would bring down the logistics cost to 9% of GDP. While the policy is still in the process of being implemented, Indian ports continue to struggle to compete with lower costs in other countries.
According to data by Container Shipping Lines Association (CSLA), the total port call cost at the Nhava Sheva terminal at JNPT, Mumbai stood at $64,592. This is significantly higher when taken in comparison to the cost of Singapore ($17,235) and Malaysia ($12,043). Higher costs at major ports such as JNPT lead to ripple effect as non-major ports use these costs as a benchmark for their own tariffs, thus resulting in higher tariffs. This adds to the overall cost of logistics of the country.
Replacing the old with the new
The Tariff Authority for Major Ports (TAMP) regulates terminals at major ports. The new Bill seeks to do away with TAMP in tariff setting and replace it with a market-driven pricing environment to encourage greater competitiveness and grant equal opportunities to minor port operators. “The board of the Port Authority has delegated the power to fix the scale of rates for other port services and assets, including land,” the amended provision stated.
“An Adjudicatory Board has been proposed to be created to carry out the residual function of the erstwhile TAMP for major ports, to look into disputes between ports and PPP [public-private-partnership] concessionaires, to review stressed PPP projects and suggest measures to review stressed PPP projects and suggest measures to revive such projects, and to look into complaints regarding services rendered by the ports or private operators operating within the ports would be constituted,” it added.
“The greatest benefit the Major Ports Authorities Bill would be that it will assist in market-determined fixation of tariff rather than regulated tariff which will help boost investment in the sector. It will thus be beneficial for the stakeholders, customers and end-users.”~ Sanjam Gupta, Director, Sitara Shipping
Fixing of rates
Currently, the Tariff Authority for Major Ports, established under the 1963 Act, fixes the scale of rates for assets and services available at ports.
Under the Major Ports Authorities Bill 2020, every port will now be governed by a Port Authority which will have the powers to fix reference tariffs for various port services. They may determine rates for:
- services that will be performed at ports,
- the access to and usage of the port assets, and
- different classes of goods and vessels, among others.
This is an abridged version of the original story that appeared in the August issue of the Logistics Insider magazine. Click here to read the complete and unedited story.