Infrastructural Develoment PORTS International trade is expected to play a larger role in driving the Indian economy in future. Consequently, the demand for cargo handling is expected to increase to about 400 million tonnes by 2000-01 and 650 million tonnes by 2005-06. Currently, the total volume of cargo handled by India’s 11 major ports is 227 million tonnes. Clearly, new facilities will need to be created to meet the projected growth in cargo demand. The funds required for this are estimated to be around Rs. 25,000 crore. In contrast, the total plan allocation for the sector was only Rs. 4,240 crore between 1990-97. Since Government funding will clearly not be sufficient for the creation of port infrastructure, private investment will be required to bridge the gap. However, today this investment is deterred primarily by restrictive conditions imposed by the Government in areas such as employment of labour and by the lack of a clear commitment to restructuring the sector. Apart from creating new facilities to meet the growing requirements of the economy, India also needs to bring about a major improvement in the overall use of port resources. The current performance of Indian ports is significantly below international benchmarks of port productivity. For example, the average ship turnaround time at Indian ports is approximately seven days whereas the comparable figure for Singapore is six to eight hours. In addition, the cargo handling performance of Indian ports needs to be improved. For instance, the number of containers handled per ship per hour ranges between seven to fifteen at most Indian ports. The comparable figure for Colombo is around 25 and that for Singapore is approximately 30. The inefficiency of India’s ports leads to colossal losses at the national level. The World Bank has estimated that delays in container handling alone cost the country around USD 70 million per annum. Improvement of performance benchmarks to international levels should, therefore, be a target for all Indian ports. The four main recommendations of this document, therefore, focus on expanding port infrastructure and improving the effectiveness of their management. These are spelt out the sections that follow: 1. Set-up a clear policy making and regulatory structureAs in other infrastructure areas, the Government has traditionally been the only player in the ports sector. In the past, port development has been undertaken almost entirely by the Government or Government controlled organisations, except for the creation of a few captive facilities by large users. The Government, therefore, played the role of policy maker, regulator and developer or operator simultaneously. Looking forward, the Government needs to attract investment from the private sector. This calls for a new approach to this sector. Going forward, the Government would need to take the following measures: (a) Clearly segregate the roles of the policy maker, the regulator and the operator. If the private sector is to play a large role in the development of port infrastructure, redefining and clearly segregating these roles will be essential. This would ensure a level playing field for all participants, and facilitate the effective regulation and monitoring of the sector. Policymaking should continue to be the responsibility of the Ports Wing of the Ministry of Surface Transport (MOST). This body should also identify national priorities for the sector. The MOST’s policy should highlight the Ministry’s commitment to the corporatisation of the major Port Trusts, the involvement of the private sector and the creation of "Landlord Ports" where the port authority is involved in the overall planning and co-ordinating functions while port services are concessioned to private operators. A broad time frame for the achievement of these objectives should also be indicated. The State Governments should continue to formulate policy at the State level for all minor ports. (b) Make the Tariff Regulatory Authority for Major Ports (TAMP) the sole regulatory agency for all major ports. A number of issues related to the current development and management of ports make it essential to set up an independent regulatory authority to oversee development. First, the 11 major ports in India are currently operating at widely varying levels of efficiency. There are no benchmarks for productivity and tariffs are not based on economic costs. Further, financial norms followed by the Port Trusts also vary widely and most ports have not provided for future investments.Second, the creation of ports is expensive and usually ports are regional monopolies the world over. Furthermore, the Government accounts for a vast majority of port infrastructure available today. To facilitate private investment in ports, it is necessary to lay out the Government’s plan for capacity development. This would give developers the information they need to plan their investments and thereby facilitate the flow of funds into port development. The Regulatory Authority should be constituted with representation from the Port Trusts, the MOST, State port authorities and user associations. It should:
Over 90 per cent of freight traffic through ships is handled by the 11 major ports. However, these ports are extremely inefficient when compared to global benchmarks for ports. As mentioned earlier, ship turnaround times at Indian ports are very high in comparison to world standards. To improve their performance the following measures need to be taken: (a) Corporatise major ports over the next 3 years. To ensure that the port trusts start operating along more commercial lines, it is necessary to corporatise them. This would give them greater autonomy and flexibility in decision-making. It would also encourage them to adopt more prudential norms for financial management. Corporatisation will also allow ports to raise capital from the market for future investments and hence make them more accountable. It would spur them to improve their overall efficiency levels and adopt global benchmarks of port productivity. The important steps in the corporatisation of ports are:
(b) Convert all major ports to Landlord Ports by 2005. Most ports in India are service ports, i.e. they provide their own pilotage, towage, and other marine services, including cargo handling. International experience shows that port productivity rises with commercialisation and concessioning of all cargo handling activity, leading to the functioning of the port as a "Landlord Port". In this model the port authority is involved in planning, lease negotiation, safety, navigation and overall co-ordinating functions. Annexure 6.1 describes the experience of some developing countries in restructuring their ports. To achieve these benefits, the Government should aim to reorganise the current vertically integrated model by redefining the role of the port trusts along the lines of a Landlord Port. The port trusts should evolve into local regulatory entities with clearly defined roles in planning, concession negotiation, safety and overall co-ordination at the port, within the framework defined by the TAMP. Privatisation of port services should go hand in hand with private participation in the creation of port infrastructure such as berths, container terminals, loading/unloading equipment, storage facilities etc. For example, the Jawaharlal Nehru Port Trust has already concessioned one container terminal and one liquid cargo berth to some private players. (c) Divest a part of the Government's stake in the port trusts. The Government should aim to bring in fresh investors from the capital markets. This would introduce greater accountability in the port trusts. Bringing in a foreign port as a partner would also help bring in the best practices in port management from around the world. The Government could retain strategic stakes in some or all of the existing ports since these could be considered strategic assets. 3. Mandate Labour Reform at Major Ports Labour reform is an important element of the reorganisation of the major ports. Today, almost all major ports have excess labour. For instance, in the New Mangalore Port, cargo handling workers have only 13 days’ work but get wages for 27 days. The provisions of the Dock Labour Board Act, and the conditions of contract of the local Port Trust, govern organised labour in major ports. These do not permit any reduction of the labour force except through expensive voluntary retirement schemes. The conditions of employment and operation are also very rigid, with job classifications being unnecessarily specialised. The productivity benchmarks are low and there is no incentive for better performance due to the monolithic wage structure.To enable corporatisation and privatisation at the major ports, it is imperative to remedy this situation through labour reform. Reforms need to be made mandatory at all major ports in line with the blueprint developed by the TAMP. The main elements of these reforms would be: (a) Providing incentives for improving productivity. The wage structure needs to be modified to provide an incentive to improve productivity. This could be achieved by switching to a piece based wage structure as against the current monolithic structure, as has been suggested by the Rakesh Mohan Committee. (b) Setting targets for the retraining and redeployment of labour. In view of the induction of new technologies for loading and unloading at the ports as well as the steady containerisation of break bulk cargo, existing labour needs to be redeployed. Each major port should, therefore, set targets for the training and redeployment of labour, e.g., to switch from general to container cargo handling. (c) Raising productivity benchmarks and incentives simultaneously.Organised labour at the ports has historically resisted most schemes for the improvement of productivity. The Mumbai and Paradip ports have, however, made some progress in redefining productivity norms for cargo handling. This was achieved by simultaneously raising the incentive levels so that the workers did not suffer in terms of their total earnings. A similar approach could be taken at all major ports. (d) Allowing private operators to employ labour on less restrictive terms. During the restructuring phase, all facilities created through or concessioned to private operators should be permitted to employ labour on less restrictive terms than the port trusts. 4. Develop Supporting Infrastructure for New Ports Ports cannot operate effectively without the creation of an adequate inland network of supporting infrastructure, such as roads, railway linkages, power facilities, etc. It is often not financially viable for the private operator to develop this infrastructure. The regulatory authority needs to lay out the plan for creation of this infrastructure and clearly assign responsibility for its development. In Maharashtra, the State Government has taken the responsibility for creating supporting infrastructure for the privatisation of minor ports in the State. This should be by emulated all the State Governments.Summary In summary, the Group's major recommendations for the Ports Sector are: Set-up a clear policy making and regulatory structure.
Reorganise the Port Trusts.
Make labour reforms mandatory at all major ports.
Develop supporting infrastructure at new ports.
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Source : UN, World Bank, Interviews
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