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TIN news:   The government has dropped a plan to convert 11 of the 12 ports it owns into corporate entities from a trustee set up, bowing to sustained opposition from the workers’ unions. The decision to drop the proposal, first flagged off by the Atal Bihari Vajpayee government in early 2000, is revealed in a draft bill written by the shipping ministry to overhaul the institutional structure of these 11 ports.
These so-called major ports—Chennai, Cochin, Jawaharlal Nehru port, Kandla, Kolkata, Mumbai, New Mangalore, Mormugao, Paradip, V.O.Chidambaranar and Visakhapatnam—are proposed to be brought under a new law called Major Port Authorities Act.
Currently, these 11 ports function as trusts under a law framed more than five decades ago called the Major Port Trusts Act 1963. Kamarajar Port Ltd is the only exception in this regard. Kamarajar, which runs the port at Ennore near Chennai, was formed as a company under the Companies Act 1956 when it was opened in 2001.
Consultations with representatives of trade and industry have been completed. A note for the cabinet for seeking approval of the proposed Bill will be prepared by the first week of June 2016. Thereafter, the Bill shall be introduced in Parliament, the shipping ministry said in a statement on Thursday.
“The port authority of each major port operating as a trust may change its structure and become a company subject to prior approval of the central government and passing of special resolution through its board in that behalf,” according to section 24 of the final draft of the Major Port Authorities Act written by the shipping ministry on 6 November 2015.
“In the event of conversion of the Port Authority from trust to company under section 24, the Board of that Port Authority may raise additional capital over and above the Capital Reserves and holdings of that Port Authority from any person resident in India by way of sale or disinvestment of the holdings in the Port Authority subject to prior approval of the Central Government as per the applicable disinvestment policy,” according to section 25 of the draft bill.
Both these sections does not figure in the revised final draft of the Major Port Authorities Act written by the ministry on 30 March 2016 and which is being sent to the cabinet for approval.
Mint has reviewed both the versions of the draft bill. “These sections were deleted following opposition from the workers unions,” said T. Narendra Rao, general secretary of the Water Transport Workers Federation, one of the five recognized port labour unions.
The November draft of the proposed bill revealed a government strategy to work around opposition from workers unions while at the same time acknowledged the political compulsions in Rajya Sabha where the government is in a minority and cannot pass the legislation for direct conversion of port trusts into companies.
While the earlier unsuccessful plan revolved around amending the Major Port Trusts Act framed in 1963 under which these 11 ports currently function to help convert them into companies, the strategy in November was to bring them under a new law which will have provisions to facilitate this task.
Instead of a direct conversion into corporate entities, which would have beeen opposed by the workers’ unions, the plan was to enact a Major Port Authorities Act to operate and manage these harbours.
“If you straightaway go for corporatization, it will not work out as seen in the past,” said a chairman of one of the 11 ports. He declined to be named because of the sensitivity surrounding the issue.
“Once the Major Port Authorities Act comes into force after ratification by Parliament, then the board of each of these major ports can convert themselves into companies at any time by a special resolution. The Act empowers the board of each of these ports to change to a company without the need to go back to Parliament. The boards will be empowered by the Parliament to do this by itself,” he explained.
Each of these 11 ports will be operated, regulated and administered by a professional board comprising at least nine members, including a chairman, functional heads looking after operations, finance, and business development, three independent members, one government nominee and one representative from the labour unions, according to the March draft.
This will end the existing system where the ports are managed by a large board of trustees comprising representatives from disparate interest groups, including port users, labour and trade associations which make decision-making cumbersome.
Simultaneously, the shipping ministry is seeking cabinet approval to wind down the rate regulator, the Tariff Authority for Major Ports (TAMP) by amending the Major Port Trusts Act (MPT Act) to facilitate market driven pricing at these ports.
Port experts and private developers have been clamouring for de-regulating rates at the 11 ports to boost investor sentiment given the fact that non-major ports, which are under the overall jurisdiction of the respective state governments, are not bound by any such rate regulation.
At the time of constitution of TAMP in 1997 when public private partnerships (PPPs) were in their nascent stage, it was intended to ensure fair competition and level playing field between port owned berths/terminals and privately operated facilities therein.
“However, with the passage of time and maturing of PPPs and also the advent of highly competitive non-major ports, the existing regulatory regime has severely constrained the growth of major ports,” the shipping ministry said in the statement.
“The overall capacity utilization of berths in major ports has come down to around 67.70%. As such, it is felt that the steps to deregulate the tariff regime would help to correct the mismatches in the berth capacities and present requirements for some commodities. This will also create a level playing field between major and non-major (private) ports,” it said.
After abolition of TAMP, the major port trusts would determine and notify the tariff for the services rendered by them, scale of rates for assets and utilities and tariff for port-owned berths. As far as PPP berths are concerned, the port trust boards would fix reference tariff for bidding purposes. Subsequently, the PPP operators would be free to fix market-oriented tariff.
While closing down TAMP would bring much-needed clarity on user charges, there are doubts about how the government will manage the rate-setting process for port projects operating since the early days of the public-private-partnership (PPP) regime as that have provisions for such a task to be performed by a competent authority written into the contracts.

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