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7/31/2019 Shipping Background Paper
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National Conerence on
Ports and Shipping 2011Background paper
August 2011
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Contents
Foreword rom FICCI 4
Foreword rom Deloitte 5
PART I: Policy reorms and initiatives or developing world-class Ports 6
Ports: An Overview 7
Policies & Regulations 10
Drat Ports Bill 2011 12
Drat Ports Regulatory Authority Bill, 2011 17
Drat Captive Port Policy, 2011 18
Land Policy or Major Ports, 2010 20
PPP in Ports 22
Demand-Supply scenario o Ports 26
Corporatization o Ports 28
Financing Port Projects 30
Inormation Technology in Ports 33
PART II: Indian Shipping Industry: Progress, Issues and the Way Forward 36
Introduction 37
Shipbuilding subsidy 38
Manpower shortage in the shipping industry how to tackle it 40
Shipbreaking - Green initiatives, current developments 41
Taxation in Shipping 42
Maritime Security 43
Coastal Shipping New Policy & Issues 45
PART III: Port Connectivity 49
Introduction 50
Current Port Connectivity Scenario 51
Inland Waterways Connectivity 58
Bibliography & Reerences 66
Contact 67
Deloitte Oces in India 68
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Indian Ports and Shipping sector is going through a signicant transormation. It
is becoming increasingly competitive, which raises both threats and opportuni-
ties or the sector. There are various challenges aced due to rising trac and
constraints on inrastructure ront. The challenges also throw open several oppor-
tunities including those or investment.
To discuss some o the critical issues Federation o Indian Chambers o
Commerce & Industry (FICCI) and All India Shippers Council (AISC) are jointly
organizing the National Conerence on Ports & Shipping in Mumbai. The coner-
ence will also ocus on procedural bottlenecks & other stumbling blocks in port
inrastructure development, and brainstorm strategy options to overcome manyo the major problems.
As Knowledge Partner or the event, Deloitte Touche Tohmatsu India Pvt Ltd
has prepared a comprehensive Background Paper covering a large number o
important areas. The report has been prepared through detailed analysis o the
critical actors infuencing the sector in India. We take this opportunity to thank
them or their eorts.
At the conerence, the speakers, resource persons and delegates would debate
and discuss a wide range o topics pertaining to the ports & shipping sector. I
hope you would enjoy reading this report and o course, your suggestions and
eedback are welcome.
Mr Hemant Kanoria
Chairman
FICCI National Committee on Inrastructure
Mr Ramu S Deora
Chairman
All India Shippers Council (AISC)
Foreword rom FICCI
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The economic progress o India depends signicantly on the value addition
its trade, commerce and industry delivers in the international marketplace.
The extent o success in this regard depends on the attractiveness and
competitiveness o its products in the global arena. This competitiveness
is in turn a unction o the cost and quality o its products and services.
Transporting and delivering goods in timely, cost eective and convenient
manner is an essential dimension o such global trade. Since 90% o Indias
trade (by volume) happens through water transport, ports and shipping
companies end up being extremely critical nodes o the supply chain.
Consequently their availability, eciency, and capability have a major impact
on the competitiveness o Indias products in the global markets.
Given such ar-reaching impact that the ports and shipping industry
has on our economic progress, it is o paramount importance to have it
operate as a vibrant and healthy service industry catering to our
manuacturing sector. This requires a judiciously balanced pro-development
regulation o the sector.
In the last ew years the Ministry o Shipping has introduced several policies
and legislation in this regard. These policies would have a direct bearing
on the ports and the shipping industry and it is hence imperative or thestakeholders in this industry to assess the implications o these policies and
strategize taking the best advantage o them. The Captive Port Policy, the
Land Policy or Major Ports, the Ports Bill, Port Regulatory Authority Bill
and Coastal Shipping Policy are some very pertinent documents meriting
review and reaction. This knowledge paper discusses these and many other
similar aspects to set the tone or the FICCIs national Conerence on Ports
& Shipping 2011.
The various sections provide a very high level overview o these
developments and identiy several issues requiring deliberation and debate
as Food or Thought. Obviously this is not a comprehensive listing o all
issues and is only intended to serve the purpose o prompting a discussionon these developments at the conerence.
I am sure participants will nd the Knowledge Paper very helpul in
obtaining a quick appreciation o these important documents and acilitate
an interactive participation at the conerence. I will be happy to receive any
eedback readers might want to oer.
Best regards,
Hemant B. Bhattbhatt
Senior Director
Deloitte Touche Tohmatsu India Pvt. Ltd.
Foreword rom Deloitte
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Part I:Policy reorms and initiatives
or developing world-classPorts
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Introduction
Ports provide an interace between the ocean transport
and land-based transport. They represent a promising
sector or India, given the countrys 7500-km long
coastline, robust economic growth, abundant raw
material, cost-competitive workorce and a strategic
location on the trade map.
Indias port inrastructure constitutes o 13 major ports
and 187 non-major ports. O the non-major ports,
only about 48 are operational; while the rest are only
shing harbours. The 13 major ports are administered
by the Central Government through the Ministry o
Shipping, and non-major ports are under respective
state governments. The state wise numbers o ports are
given hereunder:
Major and Non major ports across the 11 Indian
Coastal States and Indian Islands
West Coast o India East Coast o India
Gujarat (41 ports)
Maharashtra (55 Ports)
Goa (6 ports)
Daman & Diu (2 ports)
Karnataka (11 ports)
Kerala (14 ports)
Lakshadweep Islands(10 ports)
Tamil Nadu (18 Ports)
Pondicherry (1 port)
Andhra Pradesh (13 Ports)
Orissa (3 ports)
West Bengal (2 port)
Andaman & NicobarIslands (24 ports)
Total (139 ports) Total (61 ports)
Source: Deloitte Analysis, Indian Ports Association.
Source: Deloitte Analysis, Indian Ports Association.
Perormance
On an average, port trac grew at ~ 7.66 per cent
between 2005-06 & 2010-11. More specically, non-
major ports registered a double-digit growth at 13.55
per cent as against 5.37% per cent growth in trac at
major ports. POL, iron ore, and coal
constitute a major chunk o trac at both major and
non-major ports.
India's Port Sector trafc growth (in Mn. tons)
Source: Indian Ports Association (IPA), Deloitte Analysis
Gujarat has emerged as the leading state in cargo
handling. While Kandla port in Gujarat accounted or
the highest share (~14 per cent) in major port trac,
non-major ports under the Gujarat Maritime Board
collectively boasted the maximum minor port trac
(~71 per cent). This can be attributed to its proximity to
the northern hinterland, pro-business government and a
dynamic business community.
Key issues in major ports
Although the sector witnessed signicant growth in
cargo trac, it has still not been able to optimizeoperations owing to technical and institutional
constraints as under
Capacity constraint
As per the latest statistics (2009-10), around 8 o the 12
major ports are operating at more than optimum range
o 70-75 per cent utilisation. Further, our o these,
namely, Vizag, Tuticorin, Mormugao, & Mumbai ports
are experiencing more than 100 per cent utilization.
Correspondingly, the average capacity utilization at
non-major ports was ~ 77 per cent in 2009-10. This sets
the background and imperative or aster development
o port projects to ensure smooth fow o traded goods
& growth o EXIM trade.
Inefcient cargo handling & low productivity
A study placed in the Parliament in Feb 2010 by
Ports: An Overview
423.57519.31 561.09
569.90
150.12
206.38
288.80 300.00
0.00
200.00
400.00
600.00
800.00
1000.00
2005-06 2007-08 2009-10 2010-11
Gujarat, 41
Maharashtra, 55
Goa, 6
Daman & Diu, 2
Karnataka, 11
Kerala, 14
LakshadweepIslands, 10
Tamil Nadu, 18
Pondicherry, 1
Andhra Pradesh, 13
Orissa, 3
West Bengal, 2
Andaman & Nicobar Islands, 24
:
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the Comptroller and Auditor General o India (CAG)
highlighted that cargo handling services at ports were
inecient. A predominant number o berths did not
have the dedicated acilities necessary or the quick
handling o cargo. Around 55 per cent o the equipment
available at all ports, except at the Jawaharlal Nehru Port
Trust (JNPT), were running beyond their rated economic
lives, resulting in low utilization.
Consequently, wide variations were observed in
eciency among the 12 major ports. The average
pre-berthing time on port account varies between
0.4 hours and 23 hours. The average turnaround
time also varies between two to ve days. In contrast,
the turnaround time at globally competing ports like
Singapore or Hong Kong is between our and six hours
Inadequate drats & poor connectivity with
other modes
Future shipping trends point towards larger vessels
with a minimum o 6000-8000 TEUs and a ew vessels
with 12000-14000 TEUs. These uture generation
vessels would require drats between 13 to 15.5 m.
Due to current drat restrictions, several Indian ports are
unable to handle larger vessels typically with more than
9.5 m and 12.5 m drat. This could lead to shipping
lines / large shippers moving to other ports. Thereore,
there is a need to rm up dredging plans and also
improve productivity through removal o constraints
like inadequate inrastructure, absence o seamless
connectivity with other modes, etc
Kolkata
Source: Indian Ports Association (IPA), Deloitte Analysis
Haldia Paradip Vizag Ennore Chennai Tuticorin Cochin NMPT MPT MBPT JNPT Kandla
Traffic 13.05 33.25 57.01 65.50 10.70 61.06 23.79 17.43 35.53 48.85 54.54 60.75 79.52
Capacity 20.40 46.70 76.50 62.27 16.00 71.32 23.72 30.37 44.20 37.05 49.70 64.00 85.80
Utilization (%) 64 71 75 105 67 86 100 57 80 132 110 95 93
0
20
40
60
80
100
120
140
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
%C
apacityUtilization
MillionTonnes
Capacity Utilization at major ports
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Cumbersome institutional arrangements
& other issues
Institutional and regulatory arrangements need to
be reviewed to ensure speedy development o ports.
Similarly, the procedure regarding environmental
clearances needs to be rationalized. Other issues acing
Indian ports relate to high cost structures, dierent
tari setting rameworks or major & non-major ports,
port security, land acquisition, etc. Ministry o Shipping
is taking various steps to address the aorementioned
problems. It has been quite active during the recent ew
years in promoting the development o Ports, Shipping
and Logistics sector in India.
From time to time it has issued various documents
and contributed research in the eld o maritime
development. The recently published Maritime
Agenda 2020 is one such important document. It is a
perspective plan o the Ministry or this decade which
shall act as a roadmap or the Government agencies
or development o maritime sector in India.MaritimeAgenda 2010-2020 replaces the current $30-billion
National Maritime Development Program, which was
launched in 2007 and slated to end in March 2012.
A brie summary o the Maritime Agenda summarizing
the goals to be achieved by year 2020 is detailed below:
Create Port capacity o 3200 M.T. or handling
about 2500 M.T. o cargo (This would necessitate an
investment o about Rs 3 lakhs crores)
Improve Port perormance on par with the best in
the world
Increase tonnage under the Indian fag as well asunder Indian control (This would need an investment
o about 1.20 lakh crores)
Increase Coastal shipping and acilitate hassle-ree
multimodal transport
Increase Indias share in global ship building to 5%
Promote use o the inland waterways or cargo
movement
Increase the strength o Indian seaarers to 9% o the
global strength by 2015 and sustain above this level
Policy on cargo support
Policy on liner co-operatives
Establishment o a reight exchange
Creation o an Ombudsman/Tribunals or
shipping matters
Forming an independent marine casualty cell
Establishing a P & I (Protection & Indemnity) club
in India
Opening o a second register
Review o TRANSCHART
Study o taxation systems
Introduction o passenger erry services between India
and neighbouring countries
SCI to have ambitious vessel acquisition plans and
increase container handling capacity
Promotion o building o Green ships
Grant o Inrastructure status to the
Shipbuilding industry
Developing cruise shipping and promote river cruises
Creation o a Shipping sectoral Innovation council
Establishing a National Maritime Museum
Enactment o the Shipping Trade Practices Act
Bilateral maritime agreements with selected countries/ regions or mutual benet
Establishing State Maritime Boards in all States
Besides the above, the union government has plans to
incorporate a new single regulatory body, the Major
Ports Regulatory Authority (MPRA), which would not
only x taris but also perorm the role o a regulator.
A bill has been prepared titled the Drat Port Regulatory
Authority Bill, 2011 or the creation o this authority.
Proposed MPRA will have under its jurisdiction, the
power to regulate rates and monitor the perormance
standards o port acilities and services. A synopsis o thebill has been presented in the section related to policies
in this background paper.
Another initiative being undertaken by Ministry o
Shipping is establishing maritime boards or various
states. States like Goa, Orissa, Kerala, Karnataka,
and Andhra Pradesh have shown interest in creating
Maritime Boards or their respective states which would
enable aster decision making, aster implementation
o developmental projects and promote the respective
states as destinations or maritime investment.
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The Ministry o Shipping and Directorate General o
Shipping revise various rules / regulations meant or
the promotion o the industry on a regular basis, in
accordance with the international standards. One o
the unctions o the Ministry o Shipping is to address
the issues arising in the port sector and to acilitate the
maritime development. Accordingly, various policies and
Acts are brought into existence to regulate the players in
the respective elds and protect the users o the acilities
rom unair trade practices.
The table below provides a glimpse o the several acts /
policies applicable to the Indian Maritime Industry:
Acts / policies applicable to the Indian Maritime Industry
Indian Ports Act, 1908
Enactment relating to ports and port charges. Provides or rules or the saety
o shipping and conservation o ports.
NOTE: This Act and the Major Ports Trust Act, 1963 are proposed to be
merged into a single Act. The opinions o the industry have been called upon
the Drat Bill or the ormulation o such an Act.
Major Ports Trust Act, 1963
The Act makes provision or the constitution o port authorities or certain
major ports in India and to vest the administration, control and management
o such ports in such authorities and or matters connected therewith.
Merchant Shipping Act,
1958
Ensures ecient maintenance o Indian mercantile marine. It also covers
registration o Indian ships and control o pollution rom ships and o-shore
platorms. The Act also provides or the establishment and development o
National Shipping Board and Shipping Development Fund.
Maritime Zones Act, 1976An Act to provide or certain matters relating to the territorial waters,
continental shel, exclusive economic zone and other maritime zones o India.
GMB (prevention o fre
and accidents or saety
o workers and protection
o environment duringshipbreaking activities)
Regulation, 2000
Makes regulations or saety and welare o workers during cutting operation
in ship-breaking yards and environmental measures to be taken during ship
breaking activities.
Guidelines or ship breaking
activities by Central
Pollution Control Board
Aims at minimizing the pollution impact o ship breaking activities by xing
responsibility or several authorities o state government and ship breaking
association.
Cruise Shipping Policy
Established with the prime objective o boosting cruise shipping in India.
Some other areas under mandate consist strengthening o inter-sectoral
linkages, consolidating existing ports o call and exploring other ports and
suitable anchoring sites on the Indian coast etc.
Policies & Regulations
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Policy or preventing private
sector monopoly in Major
Ports August, 2010
Ensures healthy competition and smooth award o the projects or capacity
augmentation at the Major Ports under Section 111 o the Major Port Trusts
Act, 1963 so as to avoid private sector monopoly in the Major Ports.
The primary guideline o the policy is given hereunder
I there is only one private terminal/berth operator in a port or a specic
cargo, the operator o that berth or his associates shall not be allowed to bidor the next terminal/berth or handling the same cargo in the same port
Cabotage Law
Cabotage Law in India is under the Merchant Shipping Act (section 4070
which bars oreign vessels rom carrying cargo between Indian ports;
exceptions are made i no suitable Indian vessel is available. The market
o shipping industry being highly volatile, such protection creates a certain
degree o stability or the Indian vessels.
The Land Policy or MajorPorts, 2010
Land Policy is one o the most signicant policy rameworks guiding the
overall unctioning o the Port Sector. In all major ports the world over, land
has been leveraged or optimizing the throughput and increasing revenueo ports. This policy is developed to provide guidance to the ports or the
optimum utilisation o the land.
The Drat Ports Bill, 2011
An Act to update and consolidate the law relating to Ports to meet the current
requirements and to make provision or the constitution o port authorities or
major ports in India to vest the administration, control and management o
such ports in such authorities and or all matters connected thereto.
Source: Presentation on "Review o Marine and Coastal Policies in India", By Dr. Sangeeta Sonak, Prajwal Pangam, Asha Giriyan.
The ollowing section provides highlights o some o the recently proposed Bills and policies.
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Drat Ports Bill 2011
The Ministry o Shipping elt the need to consolidate the
two separate acts existing or regulating and promoting
Ports namely The Indian Ports Act, 1908 and the Major
Ports Trust Act, 1963 into one single act which would
meet the current requirements.
The Drat India Ports Bill, 2011 was posted on the
website o Ministry o Shipping on 21 July 2011.
Stakeholders were invited to give their comments on the
Bill so as to have a holistic approach while ormulating
one o the Landmark Act which would aect uture o
the Maritime Industry.
Objective o the exercise
The basic purpose behind this exercise was to:
Identiy and amend / remove the provisions in the
existing Statute that were redundant
Identiy the changes that are required to be done in
the existing act and new provisions i any to be made
that would be in tune with the liberalization o the
economy, and;
Examine the possibility o consolidating the various
statutes into one single statute / act.
Subsequently, ater many other studies and
recommendations rom various committees, it was
decided to drat a Ports Bill which would cover both
the existing Acts and would contain provisions to
address the latest developments in the industry such as
ISPS Code, P.P. Act, 1971, Common Recruitment Rules
Head o the Departments o Major Ports, Overriding
powers o Central Govt. in respect o port limits etc. The
enactment o this Bill as an Act will require the existing
two Acts namely The Indian Ports Act 1908 and the
Major Ports Trust Act. 1963 to be repealed
The ollowing section gives the overall structure o the
Drat Indian Ports Bill, 2011.
Draft Indian Ports Bill, 2011
No provisions of the act shall be applicable to the following:
Any vessel belonging to or in the service o the Central Government or a State Government or to any vessel o war belonging to
any sovereign country, and used or the time being, only on Government non-commercial services.
Part A
The ollowing chapters are included
under the Part A:
1. Preliminary
2. Powers o Government
3. Port ofcials and their powers and
duties
4. Works and services to be provided atPorts
5. The Saety o shipping and the
Conservator o Ports
6. Port dues, ees and other charges
7. Imposition and recovery o rates at
ports
8. Hoisting Signals
9. Supplemental Provisions
Applicable to:
Allports
Allsuchpartsofthenavigablerivers
or channels leading to the ports as
notifed under either The Indian Ports
Act, 1908 or The Major Port TrustsAct, 1963
Part B
The ollowing chapters are included
under the Part B:
PART I:
10. Vesting o Ownership, Control and
Management o Major Ports
11. Penalties
12. MiscellaneousPART II:
13. Special provisions or constitution,
working and other aspects o the
Board o Trustees
14. Borrowing Powers o Board o
Trustees
15. Revenue & Expenditure
16. Supervision and Control o Central
Government
Applicable to:
Exclusively to Major Ports
Part C
The ollowing chapters are included
under the Part C:
17.Provisions with respect to penalties
Applicable to:
Allports
Allsuchpartsofthenavigablerivers
or channels leading to the ports as
notifed under either The Indian Ports
Act, 1908 or The Major Port Trusts
Act, 1963
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Overall structure o the Drat Ports Bill, 2011
The Drat Ports bill is a comprehensive Bill containing
the provisions including amendments made by the
government declared by the way o notication in the
Ocial Gazette in relation to any o the two acts
namely The Indian Ports Act, 1908 & the Major Ports
Trust Act, 1963.
It denes the terms contained in both the acts. It is
divided into three parts which are urther sub-divided
into Chapters and sections. While the Part A and Part C
are applicable to all the ports i.e. major and non-major
including the corporatized ports, the Part B o the Bill
and its provisions are applicable only to the Major Ports.
The Government may urther extend this act to any
navigable rivers and channels leading to the port.
The Bill enables appointment o a Conservator or
each port who shall act with the power to ensure
the compliance o all the regulations relating to the
operations o ports or aecting them and who isauthorized to carry proceedings or oences and to levy
penalties on the concerned oender. While the previous
Act set guidelines as to who should be appointed to the
post, the new Drat Bill states The Government may
prescribe qualications, responsibilities and conditions o
appointment and removal in respect o the Conservator
The Drat Bill also increases the amounts o penalties to
be levied on the person ound guilty o oence. These
penalties include nes o various amounts and also
various terms o imprisonment, based on the type and
seriousness o the oence.
Like the current act this Bill also builds up the power
and responsibility matrix or the protection o ports,
creeks, backwaters, estuaries, sea locks, development
o waterront, port entry and navigation channels,
protection and preservation o marine environment etc.
The Bill vests majority o powers and responsibilities on
Port Authority which is dened as thus:
Port authority in relation to a Port means an authority
on whom the ownership, control and management
o a port is transerred or vested or the time being or
notifed by the Government under this Act or any other
Act or the time being in orce.
All the port dues and charges applicable under the Bill
are proposed to be paid to the Port Authority or any
person authorized by the Port Authority.
The Government or Port Authority or any other authority
to which such powers are given by the government,
shall rame the maximum ceiling rates or the services
provided by the Port Authority.
Additionally a statement mentioning the conditions
under which the services listed below would not be
covered should also be urnished by a notication in the
Ocial Gazette:
Activities o container reight station
Tolling o Roads
Public Utilities
Internal Transport
Parking
Labour Supply
Corporatization clause under the Bill:The Drat Indian Ports Bill 2011, by the virtue o Chapter
X under Part B (relating to only major ports) empowers
the Central Government to make regulations or the
manner and mode in which the ownership, control
and management o any major port may be vested
in a company registered under The Companies Act
1956. Further it also states that the company can be a
Government Company or a Public Limited Company.
In such case all the assets, liabilities, dues, port charges,
receivables-payables, non-recurring expenditure, all suits
and other legal proceedings instituted against or by the
port, all the employees working or the port authoritywould be treated as those o the Port Trust and nothing
shall accrue to the Central Government or the State
Government, as the case may be. This means virtually
the whole port operations, obligations, rights and
receivables are to be transerred to the
Central Government.
The non-recurring expenditure made by the government
or assisting the setting up o such company, within the
period specied in the act, shall be treated as capital
expenditure / capital provided by the Government and
the Port Authority shall have to pay interest on the
Non-recurring expenditure incurred. The rate o interest
shall be decided and revised by the government rom
time to time.
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Constitution o the Board o Trustees:
The Constitution o the Board o trustees has been modied under the proposed Bill. The ollowing is the constitution
o the Board which is proposed under the Bill.
Proposed constitution o the Board o Trustees under the Drat Ports Bill 2011
Sr. Position / Authority Number Comments / remarks
1 Chairperson 1 Appointed by the Central Government
2 Deputy Chairperson 1 Appointed by the Central Government
3 16 other members rom the list below: 16
Appointed by the Central Government rom
amongst the given categories. The Board
could comprise o one or more rom the listed
categories, subject to the maximum o 16
members and also maintaining the minimum 4
number o members rom the Other Interests
group.
Note: NS = Not specied
Ministry o Railways NS
Central Government NS
DG (Shipping) NS
Indian Navy NS
Coast Guard NS
State Government NS
Department o Revenue NS
Labour employed in Port NS
Major users & Terminal operators NS
Shipowners/agents NS
Exporters / Importers NS
Other InterestsMinimum 4
in number
4 Total 18
The total number that would constitute a Board
o Trustees shall be 18 members including the
Chairperson and the Dy. Chairperson.
Source: Drat Indian Ports Bill 2011, Deloitte Analysis
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Trustees shall be disqualifed i they all under any o
the ollowing category:
Are convicteTd and sentenced to imprisonment
or an oence which, in the opinion o the Central
Government, involves moral turpitude; or
Are un-discharged Insolvent
Are Person o Unsound Mind
Have applied or insolvency and application is pending
Have deaulted the Board, Central / State Government,
central / state company, a Public Sector Enterprise
or Undertaking, Autonomous Organisations or any
Scheduled Bank under RBI Act, 1934;
Who is disqualied by the court
Who has acted against the interest o the Board
Persons who have completed 65 years o age
No business should be transacted at any o the Board
Meetings unless at least ve trustees including the
Chairperson and Deputy Chairperson are present
throughout the proceedings o the meeting.
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There are supposed to be many eatures in the
proposed enactment which will be welcomed by
the industry. For example the xation o rates by anyauthority or services rendered by BOT operators has
been removed, specic interests have been
dened to minimize the entry o the persons
who dont have much knowledge / expertise
and even interests in the Maritime sector
in the Board o Trustees.
The industry however is o the view that rather than just
the compilation o the two acts i some changes in the
existing acts would have been made then that would
also have served the purpose better.
#1: Food or thought
What is the major contribution o this Bil l other than enabling Corporatization?
Which other aspects o port industry should the Bill have touched / changed?
Term o Ofce o Trustees under the Drat Ports Bill 2011
Position / Authority Term
Chair Person & Deputy Chair Person As long as desired by the Central Government
Other Trustees For a period o 3 years or o the age 65 years whichever is
earlier subject to the other provisions o the act.
Provided where such a Trustee is appointed any time ater 1st
April o the year o the constitution o the Board and his term
shall expire on 31st March, the date when the term o other
Trustees also expires.
A person appointed by virtue o an oce to be a Trustee shall,
until the Central Government by notication in the Ocial
Gazette otherwise directs, continue to be a Trustee so long as
he continues to hold that oce
Reappointment o the Trustees Any trustee, unless he becomes disqualied by the provisions
o the act, is eligible or reelected as the trustee, subject tothe maximum o 2 consecutive terms. It should be kept in
mind that the Chairman and Deputy Chairman are not covered
under this provision as their term is directly decided by the
Central Government.
Source: Drat Indian Ports Bill 2011, Deloitte Analysis
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Drat Ports Regulatory AuthorityBill, 2011
The rst drat o Ports Regulatory Authority Bill 2011
was issued by the Ministry o Shipping in March 2011 to
invite comments rom the stake holders. The ollowing is
a brie overview o the bill:
The purpose o the Ports Regulatory Authority Act
2011 is to provide or the establishment o Regulatory
Authorities to regulate rates or the acilities and services
provided at the ports and to monitor the perormancestandards o port acilities and services.
Constitution o Major Ports Regulatory Authority
The Major Ports Regulatory Authority shall be a body
corporate having perpetual succession and a common
seal with power to acquire, hold and dispose o
property, both moveable and immoveable and to
contract including sue and be sued.
Functions o the Regulatory Authority
(1) Subject to the provisions o this Act, the Major
Ports Regulatory Authority shall have jurisdiction
over all the major ports and a State Port RegulatoryAuthority shall have jurisdiction over all the
ports, other than major ports, located within the
concerned state.
(2) The Appropriate Regulatory Authority shall discharge
the ollowing unctions, namely:
(a) To ormulate and notiy tari guidelines, rom
time to time, prescribing the methodology,
approach and other conditions governing
setting o rates or dierent acilities and services
by the Port Authorities and Private Operators
unctioning therein.
(b) Laying down the perormance norms and
standards o quality, continuity and reliability o
services to be provided by the Port Authorities
and Private Operators and monitor actual
perormance and services provided with a view
to secure compliance o the prescribed norms
and standards by the Port Authorities and
Private Operators.
(c) To discharge such other unctions as may be
assigned under this Act.
(3) The appropriate Regulatory Authority shall advise the
appropriate Government on all or any o the ollowing
matters, namely:-
(a) Promotion o eciency and competition in the
Port Sector
(b) Promotion o investment in the Port Sector
(c) Any other matter reerred by the concerned
appropriate Government
(4) (a) The Major Ports Regulatory Authority shall
speciy the common principles, approach and
methodology to be adopted by the State Ports
Regulatory Authorities in their tari guidelines
and prescribe perormance standards.
(b) The Major Ports Regulatory Authority shall
urnish necessary clarications on implementation
o the tari guidelines and enorcement o
perormance standards based on a reerence
made to it by a State Ports Regulatory Authority.
Coordination Forum
(1) The Central Government shall constitute a Forum
o Regulators consisting o the Chairperson o the
Major Ports Regulatory Authority and Chairpersons
o the State Ports Regulatory Authorities.
(2) The Chairperson o the Major Ports Regulatory
Authority shall be the Chairperson o the Forum o
regulators reerred to in sub-section (1).
(3) The oce o the Major Ports Regulatory Authority
shall act as the secretariat o the Forum.
(4) The Forum shall meet at least once in six months to
discuss and evolve suitable approaches to raming oTari Guidelines and setting Perormance Standards
and issues arising rom implementation o these
besides any other common matter relevant to the
ecient discharge o the unctions assigned to the
Regulatory Authorities under this Act.
#2: Food or thought
Is this an attempt o the Centre to acquire control over state government ports?
The industry had some issues with TAMP and its cost plus tari setting process. Does this bill addressthese issues?
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Drat Captive Port Policy, 2011
The Drat Captive Port Policy is also termed as Captive
User Policy or award o ports land / waterront on
Nomination Basis. This policy has been ormulated or
empowering the major ports and making them more
competitive to attract large and dedicated cargo.
The policy recommends the ways and procedures or
handing over the water ront or land or other port
acilities to the private / public enterprise on nomination
basis or a maximum period o 30 years or development
o port related acilities.
The Sanctioning Authority or such captive acility
development is an Empowered Committee consisting
o the ollowing members: (i) Secretary, Ministry o
Shipping, (ii) Secretary, Planning Commission (iii)
Secretary, Department o Economic Aairs (iv) Secretary,
Department o Expenditure and (v) AS &FA (Ministry o
Shipping)- Member Secretary, (vi) Joint Secretary (Ports),
(vii) Chairman Port Trust and (viii) Development Adviser
(Ports) shall be co-opted.
The steps or award o development project or the
proposed captive acility is depicted in fowchart below:
In the EOI notice it must be indicated that Minimum
**Guaranteed Throughput (MGT) should be at least
50% o the capacity o the project within two years o
Commercial Operation. In case more than one eligible
response is received, bids will be invited rom eligible
applicants or quoting MGT (in MT or each year) and
revenue payable to the port or the corresponding year
or the 30 year concession period.
#The ormula or evaluation o the bids is as under:
NPV = { (Quoted MGT in each year x Quoted revenue
in corresponding year) / (1+R) }
Where, R = 10 year G. Sec% + 5 %
Important points to be considered:
(i) The quoted revenue should not be less than 50% o
(Wharage + Handling Charges) as per schedule o
rates.
(ii) In case o no competition or the proposed captive
acility or i the application is rom the existing captive
acility user or expansion o operations, the applicant
should be awarded the project development on the
basis o highest o the ollowing:
(a) 50% o (Wharage +Handling Charges)
OR
(b) Return on Investment (as per TAMP order or
Actual whichever is higher) @15% per year
OR
(c) A negotiated rate between the Port and theentrepreneur
I the actual trac handled is less than 90% o the MGT,
as oered in the bid, continuously or two nancial
years, the port shall be entitled to terminate the
Concession ater making payment equal to Depreciated
value o Estimated Cost o Project OR Investment made
by the private party whichever is lower
The Port Authority
receives request to allow
development of facility for
captive usage
The authorities check the
availability of the facility for
captive development
The party offering
maximum NPV should be
awarded the development
of facility
Port asks for submission
of Feasibility Report and
on submission does Proof
Checking and assesses
Estimated Project Cost
Port shall invite EOIs from
other interested parties in at
least 1 National Daily and on
Ministry Website**
The bids so received shall
then be evaluated as per the
prescribed formula below #
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Key provisions o the proposed Drat Captive Port Policy, 2011
ParticularsResponsible
Captive User Port
Construction costs
Repair & Maintenance, Management costs
Compliance with Navigational saety during operations
Compliance with MARPOL, ISPS code etc.
In case o non-utilisation o captive acilities, right to approve the use o
acility to another user (on nomination by captive user)
Right to assign the use o acilit ies to other users (on sel-nomination by Ports)
Duty o collection o port charges rom such other users (i sel-nominated
by port)
Industry views:
The views o industry are mixed as ar as the captive
port policy is concerned. While there are joyous
exclamations, there also exist conficts o interest in the
industry which may make the government rethink about
the policy. Some o the major issues identied with the
policy are:
The policy would negatively aect the nearby
developed terminals on BOT basis. I a private
player constructs his own captive berth near to its
own terminals, then it would denitely aect theoperations o the private terminal constructed on BOT
and thereby even render the acility unviable.
The proposed policy is in direct contradiction to the
BOT policy wherein the most ecient and eective
bid gets selected rom the shortlisted to develop and
handle a port acility. There is also an allegation that a
particular party may get avoured treatment.
There seems to be vagueness in the denition o
port-based industry as it does not include the other
inrastructure and transport based industries which are
dependent on the port acilities or their operations.
The captive port policy charges the operator, a royalty
on only Wharage and Handling charges while theBOT operators pay royalty on gross revenue.
#3: Food or thought
Is this policy more vulnerable to abuse at the hands o bureaucracy and business men?
Would the captive policy discourage big industrial groups rom participating in PPP bids and encourage them to
strategize capacity creation through this non-competitive route?
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managements o major ports reedom to lease out landbelow market price. As reported in sections o the press,
the move had been triggered due to unearthing o a
land lease scam at the Kandla Port Trust, which could
have caused a loss o up to Rs. 2 lakh crore to the public
exchequer. In the said scandal, Kandla Port authorities
had allegedly leased out 16,000 acre o prime land to
salt manuacturers at a paltry sum o Rs. 149 an acre as
rent in 2004, which was way below the market price.
Kandla Port has land area o 2.2 lakh acre, maximum
held by any single port in the world.
The new Land Policy or Major Ports 2010, requires landin custom-bound areas to be leased out either on scale
o rates approved by competent authority or land
rate in adjacent areas o the concerned port. Since, it is
dicult to ascertain whether the rate so determined is
current market value or not the minister seems to avour
a transparent auction process to be ollowed to know
the market rate o land in every case.
#4: Food or thought
Will this policy result in centralisation / decentralisation o land allotment power?
Will this enable superior utilisation o port land?
Will it protect ports nancial interest?
Will this revenue have a tari implication?
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PPP in Ports
It is known that all Indian Ports are governed directly
or indirectly by various laws and regulations passed
rom time to time by the Central Government o India
in accordance with the Ministry o Shipping. The
Government has been encouraging private sector
participation in port development since1996. The
major areas which have been thrown open or private
investment, mainly on Build, Operate and Transer
(BOT) basis with revenue sharing mechanism include
construction o cargo handling berths, container
terminals and warehousing acilities, installation o cargo
handling equipment, construction o dry-docks and
ship repair acilities, etc. The preerred route or private
sector participation is through open competitive bidding
Additionally FDIs upto 100% is permitted or
construction and maintenance o ports. The
Government has also standardized the PPP process
by foating the model RFQ & RFP documents to bring
uniormity and transparency in the process. Tari settingmechanism or PPP projects have also been modied to
herald upront tari xation beore the projects are
bid out.
Bringing the public and private resources together or
the development o ports and related inrastructure
acilities like rail-road connectivity to ports, warehousing
and storage acilities etc. was an initiative led by the
state o Gujarat. The success o the PPP model in
the Gujarat ports sector was immediately welcomed
by other coastal states thus augmenting the use o
PPP model in the ports. Public-Private model o Port
development has signicant advantages over the
traditional model. Some o them are increase in the
pace o the development o project, quick decision
making, better operational and technological aspects,
lesser legal hassles due to the involvement o the
government etc.
There are signicant opportunities available to ports
authorities in outsourcing which involves transer o
specic port activities rom the public sector to the
private sector while permitting the port to unction as
an operating port. The port reduces operating costs
and increases eciency by utilizing private companies
to supply labor and equipment and to perorm specic
services like pilotage, towage, anchorage,
bunkering, etc.
Status o Port PPP projects:At present, 20 projects with private sector participation
(BOT basis or on captive use basis) are under
consideration by the Major Ports. The projects would
cost Rs 10348.29 crores and are expected to add
around 171.45 million tonnes to the capacity at
Major Ports
The status o these projects as well as the likely date o
completion as presented by Ministry o Shipping in the
Rajya Sabha on 4th o August, 2011 is given here under.
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Status o Port Projects as presented at Rajya Sabha on 4 August 2011
Sr. ProjectName o Dept. /
Agency
Estd. Cost
(in Cr.)Structure Date o Award
Likely date o
completion
1Development o Container Terminal at
Ennore.Ennore Port 1407 BOT 13 August 2010 Feb, 2014
2 LNG Re-gasication Terminal at Cochin. Cochin Port 3500 Captive 13 March 2009 March, 2012
3
Construction o Oshore Container
Berths and Development o terminal
on BOT basis at Mumbai Harbour at
Mumbai Port
Mumbai Port
1460.52
(I.R 445, Pvt
Inst.1016) Rs.
1460.52
BOT 1 April 2009 Sep. 2012
4Construction o Captive Jetty or
handling Coal by M/s. NPCL at NMPT
New Mangalore
Port230 Captive 9 May 2008 March, 2011
5Construction o Coal Berth at NBW or
NLC TNEB at TuticorinVOC Port, Tuticorin
49.50
(Captive)Captive January 2010 Nov,2011
6Construction o North Cargo Berth-II at
TuticornVOC Port, Tuticorin 332.16 BOT 12 August 2010 Oct, 2012
7Construction o Deep Drat Iron Ore
Berth at Paradip.Paradip Port 591.35 BOT 1 July 2009 July 2013
8Construction o Deep Drat Coal Berth
at Paradip.Paradip Port 479.01 BOT 21 August 2009 July 2013
9
Multi-purpose Berth at Paradip
to Handle Clean Cargo including
Containers
Paradip Port 387.31 BOT 5 July 2010 July 2013
10Setting up o Mechanised Iron OreHandling Facilities at Berth No- 14 at
New Mangalore
New Mangalore
Port296.03 BOT 23 September 2009 Oct. 2011
11Development o Coal Handling Teminal
at Berth no- 7 at MormugaoMormugao Port
252 (406 as
per Financing
Plan)
BOT 7 August 2009 May 2013
12
Development o 13th Berth other than
liquid and container cargo berth) at
Kandla.
Kandla Port 188 BOT 19 September 2009 March, 2013
13
Development o 15th multipurpose
cargo berth at Kandla. Kandla Port 188.87 BOT 7 December 2010 July, 2013
14Development o 16th multipurpose
cargo berth at Kandla.Kandla Port 188.87 BOT 7 December 2010 July, 2013
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Sr. ProjectName o Dept. /
Agency
Estd. Cost
(in Cr.)Structure Date o Award
Likely date o
completion
15Setting up o Captive Barge Jetty at Old
Kandla (IFFCO)Kandla Port 27.00 Captive 17 February 2011 Aug,2013
16
Development o Western quay(WQ-6)
in the northern arm o Inner harbour oVPT or handling Dry bulk cargo
at Vizag
Visakhapatnam Port 114.50 BOT 28 December 2009 Dec. 2011
17
Development o EQ-10 berth in Inner
Harbour or handling liquid cargo at
Vizag
Visakhapatnam Port 55.38 BOT 2 March 2010 Aug. 2012
18
Mechanised Coal handling acilities at
General cum Cargo Berth(GCB) in the
Outer Harbour at Vizag
Visakhapatnam Port 444.10 BOT 1 March 2010 Dec, 2012
19
Development o EQ-1 by replacement
o Equity EQ-1 and Part o EQ-2 in
Inner Harbour to Handle Steam Coal at
Visakhapatnam Port
Visakhapatnam Port 323.18 BOT 19 March 2011
Aug. 2013
(not rmed
depending
upon signing
o CA)
20
Development o EQ-1A on South side
o EQ-1 or Handling Thermal Coal
and Stem Coal in the inner harbour o
Visakhapatnam Port
Visakhapatnam Port 313.39 BOT 19 March 2011 - do -
Total 10348.29
Source: PIB
Despite various measures and initiatives, the overall
progress in ports sector has been much below
expectations. The investments during the Eleventh
Plan are now projected at a level o Rs. 40,647 crore
which is less than hal o the original projection o Rs.
87,995 crore. Private investment in the port sector is
also expected to be almost 40.31 per cent lower as
compared to the projections made at the beginning
o the Plan. This is because very ew PPP projects have
been awarded by the respective Port Trusts in the rst
two years o the Eleventh Plan. Ministry o Shipping has
revised the original target o 545 MMT o additionalcapacity or the major ports downwards and now
proposes to develop only 48 projects with a capacity o
393.27 MMT costing Rs. 29,905 crore over the Eleventh
Plan period.
Compared to the slow progress in capacity addition in
major ports, the private sector ports have done relatively
well. Out o the total private investment o Rs.32,517
crore projected or the Eleventh Plan, the share o
private investment in the state sector is Rs. 26,370 crore.
The ollowing table gives us an overview o the
actual investments in the ports sector in the
11th Five Year plan:
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Sector
Ports
X Plan
(Actual)
XI Plan
(Original
projections
2007-08
(Actual)
2008-09
(Actual)
2009-10 (RE/
BE/ Proj.)
2010-11
(BE/ Proj.)
2011-12
(Proj.)
XI Plan
(Revised Proj.)
Centre4051
(17.62)
29,889
(33.97)831 1040 1076 1152 1268
5366
(13.20)
States619
(2.69)
3627
(4.12) 223 375 654 719 7912763
(6.80)
Private18327
(79.69)
54479
(61.91)3888 5733 6593 7582 8720
32517
(80.00)
Total 22997 87995 4942 7148 8323 9454 10779 40647
Note: Figures in brackets indicate sectoral shares (as %) compared to total investment.
Source: Investment in Inrastructure during the 11 th Five year Plan, Secretariat or Inrastructure, GOI
Currently the ailure o PPPs in port projects in India
is at the outset start up stage itsel. This is due to
bureaucratic delays and hesitancy, environmental
clearance problems, local community opposition, site
squatting by concession holders and overcrowding by
small scale proximate port acilities.
#5: Food or thought
What changes, to the current ramework and approach to PPP, are required to enable meet the targets or
capacity creation through PPP in the ports sector?
Is government leaning excessively on PPP or creating capacity and in the process conusing the discussion
around its responsibility to deliver the needed inrastructure to the country?
Will the high revenue shares oered by bidders to win PPP concessions likely to drive up the port service costs
to Industry and trade? Is there hence a case or revisiting the award criteria or PPP projects?
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Demand-Supply scenario o Ports
Trafc projections or Indian ports as given in Maritime agenda 2010
Ports
Projections CAGR between 2009-10 & (in %)
2009-10 2011-12 2016-17 2019-20 2011-12 2016-17 2019-20
Major Ports 561.09 629.64 1031.5 1214.82 5.93 9.09 8.03
Non-major Ports 288.8 402.5 987.81 1280.13 18.05 19.21 16.06
Overall 849.89 1032.14 2019.31 2494.95 10.20 13.16 11.37
Source: Maritime Agenda 2020, Deloitte Analysis
Capacity Addition plans o Indian ports
Ports
Projections CAGR between 2009-10 & (in %)
2009-10 2011-12 2016-17 2019-20 2011-12 2016-17 2019-20
Major Ports 616.73 741.36 1328.26 1459.53 9.64 11.58 9.00
Non-major
Ports346.31 498.68 1263.86 1670.51 20 20.31 17.04
Overall 963.04 1240.04 2592.12 3130.04 13.47 15.19 18.34
Source: Maritime Agenda 2020
Indian ports have ormulated ambitious plans or
development o new ports, augmentation o existing
acilities, mechanisation o ports, purchasing o modern
cargo handling equipments and improvement in logistics
to meet the challenges emerging rom the anticipated
growth in trade.
The capacity at 13 major ports is likely to increase
to 1459.53 million tonnes by 2020 rom the level o
616.73 Million Tonnes in 2009-10. The capacity at
non-major ports is expected to increase by 2020 to
1660.02 Million Tonnes rom the level o
346.31 Million Tonnes in 2009-10. Thus, a surplus
capacity o above 25% over the projected demand is
what is targeted by the Indian ports. This will enable
the ports to provide berthing acilities on arrival o the
ships, thus achieving zero pre-berthing detention or
the vessels. The proposed investment during the next
ten years is expected to be Rs. 2.77 lakh crore - 1.09
lakh crore or Major Ports and Rs.1.68 lakh crore or
non-major ports. The table below depicts the estimated
trac projections and capacity expansion plans.
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90.98%
84.93%
77.66%
83.23%
70.00%
75.00%
80.00%
85.00%
90.00%
95.00%
20 09- 10 20 11- 12 2 016 -17 2 019 -2 0
% Capacity utilization by Major Ports
83.39%
80.71%
78.16%
76.63%
72.00%
74.00%
76.00%
78.00%
80.00%
82.00%
84.00%
20 09- 10 20 11 -12 2 016 -17 2 01 9- 20
% Capacity utilization by Non-major ports
#6: Food or thought
When it is generally accepted that there is signicant need or port capacity augmentation, is poor easibility
a tenable reason or poor capacity creation?
As observed rom the above table, Indian ports have planned adequately to meet the projected increased trac. The
graph below depicts the planned percentage utilisation o the ports as is derived rom both the tables above:
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Corporatization o Ports
Corporatization o ports is about changing the status
o Major ports rom Port Trusts to Port Companies with
Limited Liability and getting registered as a corporate
body so as to unction more eciently.
The idea o corporatization in India is almost more
than a decade old but the implementation is at a very
slow pace. While JNPT, NMPT and Tuticorin Port Trusts
were the ones originally considered or corporatization,
the rst corporatized port o India is Ennore Port.
Currently JNPT is expected to be corporatized ollowed
by the other two ports ater analyzing the success o
corporatization.
The drat Indian Ports Bill, 2011, posted on the website
o the shipping ministry, provides the ollowing enabler:
It shall be open to the central government at its
discretion with eect rom such dates as notifed in the
ofcial gazette, rom time to time, to divest ownership,
control and management o a major port rom the
board o trustees and vest in a company, whether in a
government company or a public limited company,
The Bill,, thus seeks to enable the conversion o Union
Govt. controlled ports into corporate entities.
The industry is divided in its views o corporatization o
ports. Some sections o the industry such as the port
users, the management etc. are (in general) in avour
o the corporatization while other section namely the
workers and other parties dier in their opinion and say
that the corporatization is just another method o the
bourgeois to seek ways and avenues to expand its ambit
o exploitation and nd new avenues to raise the rateo prot.
Amongst the varied views o the industry let us take a
look at the anticipated advantages and disadvantages o
the Corporatization.
Advantages o Corporatization:
Corporatization o ports will bring with them a lot o
advantages to the maritime community as a whole.
Some o them are discussed as under:
Transparency and Flexibility: The companies
registered under the Indian Companies Act, 1956
have to comply with many disclosures and report
minute details o operations in their Annual reports.
The Directors o the company are responsible or the
unctioning o the company. Further the Income Tax
Act and the other laws also require transparency in
the aairs o the company. Raising o nances and
issuance o debt instruments also require various
rules and regulations to be ollowed. Due to all these
the Company gets regulated to be transparent in its
aairs. Superior corporate governance presumably
ensues.
Acquisition o immovable property: Currently
the process under the Act is that the Board o
Trustees have to request the acquisition o the
immovable assets such as buildings etc. rom the
Central Government which ater due consideration
will start the process or the same. This process is
rather cumbersome and involves a lot o time and
paper procedures. Corporatisation o the port trusts
will remove this process and instead an appropriate
majority decision in the meetings would be sucient
to start the acquisition process.
Adoption o corporate planning practices:
Several practices like nancial risk management, yearly
business plans and the perormance measurement,
target oriented planning, more ocus on costreduction and protability improvement measures etc
are some o the corporate planning practices which
expectedly will be applied in the daily operations
o the ports resulting into greater operational and
nancial discipline.
Application o Human Resources Development
(HRD) planning: We have discussed in the previous
sections and it has been known rom quite some
time how the need or the development o skilled
manpower and technologically updated workorce will
drive the competition. To cater to the requirements
o developing the manpower adequate assessmento the required human resources needs to be done,
mapping those requirements as against the current
employees, planning on the trainings and capacity
building exercises. These all are the unctions o the
HR Department which will be more ocused than they
are now.
Career planning and management development are
important elements in a port modernization strategy.
Many ports have ailed to introduce career planning
and career development in the organization, or
omitted to link the two activities. As a result, such
organizations are characterized by low employee
motivation levels, high absenteeism, and high turnover
rates at management level positions
Eorts to improve the administrative environment
and perormance should include the rational use o
computer applications and the application o modern
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communication technologies. The use o technology,
computer applications and Management Inormation
Systems (MIS) is enhanced. Even in the Public Sector
Units, the bare minimum education relating to the
particular industry is maintained.
Development o Electronic Data Interchange (EDI) and
inormation and communication technology
Disadvantages or Corporatization
The move has created a lot o discontent among
the port workers. It is seen as the rst step or
privatization. They see the changing institutional
structure o the port as the greater involvement o
the private sector in exploitation and nancing o port
acilities, terminals and services.
The undue involvement o the private and the oreign
investors in managing the Indian Ports will lead to
threatening o the internal security. There are two
threats to be considered under this issue. The rst
one is the threat o terrorist groups and second is the
attitude o the private companies towards the saetyo the ports and port workers.
The private companies tend to use machineries &
other expensive items beyond their replaceable lie
spans, even i these damage the environment o the
port or the health o workers. Government controlled
management have their duties and are bound to
ollow the laws set or operations while the private
management will have autonomy in day-to-day
operations and other similar decisions. This may cause
the workers and environment to suer.
There are various discussions on the implementation
o the corporatization projects. Several Labor unions
and welare associations have suggested measures
to strengthen the current institutional structure o
the port trusts so that there is no need to convert
them into companies. Suggestions like (i) Allocation
o ull unctional and operational autonomy to the
port trusts, (ii) The Chairman and Executive body o
the port trust having deep experience and sucient
knowledge o the unctioning o the ports, (iii)
Empowering the ports to dene the tari regimes
themselves, (iv) Relaxation o Cabotage law or someacilities etc. have been submitted to government
or consideration.
#7: Food or thought
Can corporatisation objectives be achieved dierently? I so, why have they not been achieved so ar?
Is corporatisation a preclude to privatisation?
Is corporatisation o port trusts desirable rom port sector reorm perspective?
How should labour issues be dealt with in this context?
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Financing Port Projects
The Maritime Agenda 2020 lays down investment
plans worth Rs. 167,931 crores, to create an additional
capacity o 1293.56 million tonnes, to be made over the
decade o 2010 to 2020. Largely, the ollowing areas o
investment have been identied
Investment areas in the maritime sector as per
Maritime Agenda 2020
A = Deepening o channel/berths
B = Construction/reconstruction o berths/jetties etc.
C = Procurement o equipment etc.
D = Rail/road connectivity works
E = Other works
O this, 20% investment is to be made by the end o
nancial year 2012, 57% between 2012 and 2017 and
the remaining 23% ater 2017.
The Maritime Agenda has identied sources o unding
or the planned investments as ollows
A = Deepening o channel/berths
B = Construction/reconstruction o berths/jetties etc.
C = Procurement o equipments etc.
D = Rail/road connectivity works
E = Other works
As can be noticed, a substantial part (more than Rs.
160,000 crore which is above 96%) o the planned
investments is planned to be pulled in rom the private
sector. This section, determines the extent to which
investment in the ports sector is lucrative or private
players and tries to throw light on the ways and means
o making investment.
Foreign Direct Investments
100% FDI is allowed in the ports sector in India. Taking
advantage o this, several global giants including
Maersk, Dubai Ports World, P & O ports and PSA
Singapore operate terminals on Build-Operate-Transer
basis across several major ports o the country includingJNPT, Mumbai, Chennai, Cochin, Vishakhapatnam
and Tuticorin. The countrys largest FDI in this sector
is expected to fow in when PSA Singapore, which has
entered into a consortium with India based ABG Ports
Private Limited, invests Rs. 2000 crore or the ourth
container terminal at JNPT.
Public Private Partnerships
Potential investors generally ollow either o the
ollowing structures in the PPP model
Landlord model: The government builds all the inra-
structure nanced by public unds and then leases ito to the private concessionaire who invests in and
operates the terminal.
11,468.40
124,782.43
10,276.18
9,338.56
12,065.27
A
B
C
D
E
0%
10%
20%
30%
40%
50%
A B C D E
Private sector
External Borrowings & Others
Gross budgetary support
Internal Resources
Source: Maritime Agenda 2020, Deloitte Research
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Joint venture model: The government takes a minority
stake in a JV entity, with the private party taking upa majority stake and management control. The JV
undertakes construction and operation o the port.
Private Service model: The government grants an all-
inclusive concession to the private party to build and
operate the port. Government may provide additional
support through grants or loans to the private entity.
The model that has to be chosen changes rom case-
to-case. The choice must be made so as to arrive at an
optimal mix o public and private sector participation in
the project so as to maximise public value.
Initial Public Oers and Private Equities Several port promoters are choosing the IPO route or
getting unds or executing mega port projects. The IPO
o Gujarat Pipavav Port was oversubscribed 20 times and
got a listing premium o 20%. Private equity investors
invest in the startup ventures and then exit through the
IPO route and make substantial prots.
Other Sources o fnancing
Inrastructure bonds
In Budget 2011, the government has provided or issue
o tax-ree inrastructure bonds worth Rs. 30,000 crore
and o which Rs. 5,000 crore is reserved or the ports
sector. Indian ports would be raising bond nance or
the rst time. There have been reports that the Shipping
ministry has given the nod to JNPT to raise Rs. 1000
crore and Ennore port to raise Rs. 1100 crore worth o
bonds to und its development projects. Such bonds will
enable ports to raise nance at low interest rates andwill be attractive or the investors as well as they shall
enjoy tax benets.
Viability Gap unding (VGF)
In PPP projects, which have a long payback period with
low commercial returns are supported by VGF. The
Department o Economic Aairs announced the scheme,
particularly to support projects having high economic
returns and result in creation o substantial value or the
public. The Scheme provides nancial support in the
orm o grants, one time or deerred, to inrastructure
projects undertaken through public private partnerships
with a view to make them commercially viable. TheScheme provides total Viability Gap Funding up to 20%
o the total project cost. The Government or statutory
entity that owns the project may, i it so decides, provide
additional grants out o its budget up to urther 20% o
the total project cost.
Forming o High level committee on fnancing o
inrastructure projects
To evolve a policy responses to enable the fow o large
capital resources into inrastructure projects, review the
existing ramework and to make recommendations,
in November, 2010, the Government o Ind ia has
constituted a High Level Committee on Financing o
Inrastructure under the chairmanship o Shri Rakesh
Mohan, ormer Deputy Governor o the Reserve Bank
and ormer Secretary, Department o Economic Aairs.
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#8: Food or thought
What are the key challenges to enthusing private sector investment in the port sector?Can such planning, relying so enormously on private nancing, be depended upon to ructiy the target
inrastructure? What happens i private sector does not invest at the anticipated scale? Should the government
have a Plan B ready?
Given such emphasis on role o private sector on nancing inrastructure has the concept o inrastructure led
development been rendered hypothetical and irrelevant?
1. To assess the investment required to be made by
the Central and State Government, Public Sector
Undertakings (PSUs) and the private sector in the
ten major physical inrastructure sectors during the
Twelth Five Year Plan.
2. To identiy areas and activities to be nanced by the
government, public sector undertakings and the
private sector respectively.
3. To suggest ways to enable the requisite fows o
private investment in inrastructure including the
creation o a supportive investor-riendly environment.
4. Make recommendations on the role government
could play in developing the capital markets or
intermediating long term savings or investments
in inrastructure projects, including the ostering o
appropriate institutional arrangements.
5. Examine the role o international capital fows in
inrastructure nancing and development, assess the
nature o projects likely to receive such capital, and
consider how such nancing can be obtained, in a
sustainable manner.
6. Identiy any regulatory/ legal impediments
constraining private investment in inrastructure,
and make specic recommendations to acilitate
their removal.
The committee will unction through the Planning
Commission and the Inrastructure Development Finance
Company (IDFC) and will be based in New Delhi. The
tenure o the committee will be 18 months.
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Inormation Technology in Ports
Ports can be termed as the points o convergence o
many trade centered activities. They are not only the
hubs o the cargo export-import but are at the center o
the most complex logistics networks.
Numerous goods like coal, bulk, dry bulk, iron ores,
ertilizers, ood grains etc. are stored and transported
across the country rom the ports. Thus ports infuence
both, Industrial and agricultural, industries. We can airly
say the ports have a great responsibility as they deal
with lot o money, lot o goods and a lot o people.
Functionally, the ports provide a wide gamut o services
right rom the movement o ships & cargoes by various
modes o transport till the compliance with various
customs procedures and clearances. Ecient allocation
o jetties, berths, allowing anchorage to ships, storage
o unloaded cargo to warehouses and recording and
maintenance o the details o personnel working or the
port etc. are some o the complex and time consuming
activities which are perormed by the port. Thus portsare required to coordinate, collate and disseminate a
huge amount o inormation that too with accuracy and
within the required time.
With the increase in the projected trac volume in the
ports more challenges lie ahead in terms o handling o
all the above mentioned activities. The question then
arises as to how to eciently provide all the services
so that they rival the global standards, and maintain
a smooth fow o inormation relating to the services
both at a time? One o the answers to these questions is
inclusion o the Inormation Technology in the ports.
The Ministry o Shipping has targeted the ollowing
developments or meeting these challenges:
Ports to use inormation technology or quality
perormance
Port Community System (PCS) to be ully integrated
with all stakeholders
Non-major ports also to have PCS
Introduction o modern security systems in the ports
including surveillance, CCTVs etc.
Regular review o saety systems in the ports
Vessel Trac Management Systems (VTMS) or all
ports handling EXIM cargo
Integration o e-modules on COC, CDC, RPS, INDOS,
SPFO etc or the benet o seaarers
Establishment o AIS network along the coast
Completion and operationalization o the VTS in the
Gul o Kutch
Establishment o Real Time Kinematic (RTK) system in
the Gul o Kutch and the Gul o Khambat
Indian ports are rapidly moving towards the Paperless
& Computerized status. Usage o integrated Port
Operation System and internet is also proposed. A quick
assessment o the current level o IT absorbed in the
industry (particularly ports) would be adequate at this
stage to gauge the implementation o the initiatives by
MoS.
Current status o IT/computerization at ports:
Under this section we have tried to give a glimpse
o the overall major IT initiatives undertaken by the
government. In a separate section we have also
brought out the salient eatures o the Port
Community System (PCS)
Vessel Trafc Management System (VTMS): Alreadyimplemented at JN Port, Kolkata Port, Chennai Port,
Cochin Port, New Mangalore Port, Mormugao Port, the
gul o Kutch (which provides coverage to Kandla port
and other non-major ports o Gujarat along the
gul line).
Operational and Non-operational Areas: Latest
modules like Integrated Vessel Services and Control
Management, Integrated Cargo Management and
Accounting System, Integrated Container handling and
Tracking system, Enterprise Resource Planning, Terminal
Operating systems, modern Hydrographic Survey unitsetc. have been brought to use by the ports. Areas like
payroll processing, accounting unctions, Provident
Fund accounts, Income Tax and Materials Management
systems are some o the areas in which IT is integrated
or better perormance.
Surveillance System and Security system: To counter
the terrorism threat a number o new technologies were
introduced so that the ISPS code would be properly
implemented. Besides the bio-metric based access
control management system and CCTVs, the RFID
and Optical Charter Recognition (OCR) is also being
used at ports. IT is used in newer areas or example
to speed up the process o containers movement in
and out. Container scanning systems are the next
level o technological advancement proposed to be
implemented at ports.
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E-Commerce / Electronic Data Interchange (EDI):
Eective Data fow between various Port communities
/ stake holders orms the base to perorm unctions
eciently. Unless the data can be exchanged between
the various port users reely and with complete /
near complete accuracy, the optimal unctioning and
throughput improvement o the ports would not be
possible. EDI has thereore become an essential part o
the ecient operation o not only ports. As the name
suggests, through EDI (Electronic Data Interchange) the
ree fow o inormation has been made possible.
The Way Forward
Technological changes like creation o the Port
Community System (PCS) and implementation o various
IT initiatives are under proposal or the port sector. The
creation o Integrated Port Management System (IPMS)
by Gujarat Maritime Board (GMB), development o IT
Strategy & Program Management by JNPT etc. are some
noteworthy examples o the Indian ports upgrading
themselves to meet the technological challenges. Thenext level o IT in ports is the Port Level Automation and
the Port Community System (PCS).
Port Level Automation
In the Maritime Agenda the Ministry o Shipping has
identied the ollowing as steps to infuence the IT
changes.
Enterprise Resource Planning: ERP is a sotware system
that allows companies to integrate all their opera-
tions and resources and manage them through one
program. Each port should take up implementation othe ERP systems to. Cochin Port and Mormugao port
have already implemented the ERP systems and New
Mangalore Port is in the stage o implementation o the
same. Integration o all the unctional areas including
port operations would help the ports achieve
greater eciency.
Non-ERP solutions Land/Estate Management, Vigilance
systems, Legal systems, Employee Welare systems etc.
are proposed or implementation. Computerization o
Land Management processes is one o the areas on
which the Ministry has given more weightage
The automated/mechanized equipment or cargo /
container handling, weigh bridges etc. is to be linked
with centralized systems.
A comprehensive database creation is advised which
would contain o all the perormance eatures and data
o the port and thereby speed up the decision making
or the authorities.
Port Community System
To integrate the electronic fow o inormation between
the various stake holders like ports, shipping lines/
agents, surveyors, stevedores, banks, CFSs, governmentregulatory authorities, CHAs Importers & Exporters etc.,
a centralized system is proposed to be implemented
across India. This system is Port Community System
(PCS). Like the usual systems, the PCS would be
accessible through web browser.
The system has inherent advantages like saving o
time and money and improving the speed o services,
improve tracking o the shipment / service visibility. The
status updates o the tracking services would be reely
downloadable by interested parties.
Progress has already been made to start the PCS at all
Major Ports and it is proposed to be deployed at all the
operational non-major ports as well.
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Advantages o the PCS system:
PCS system is expected to provide global visibili ty and
access to central database through internet based
interaces as detailed below:
1. Availability o messaging system or the stakeholders.
The users can exchange messages in dierent
languages like XML, UNEDIFACT
2. A centralized database providing track & trace acilityto the stakeholders
3. Single electronic window or ports and stakeholders to
access and maintaining the central database.
4. E-commerce portal or the port community
5. Standardization o procedures and data availability
24 x 7
6. Online payment system or better and quick transer
o money or the services requested online on the
same portal
7. Eective and quick MIS reporting ensuring quick
decision making and cost saving
While we take quick steps towards growth, we must
also consider the act that or making the Balance
Sheets Green our actual Green Resources i.e.
(natural resources) should not be damaged. The climate
change, global warming and carbon ootprints etc. are
some o the issues that should be kept in mind while
developing measures to reduce cost and enhance
productivity/operational eectiveness o the ports.
#9: Food or thought
Given that we are a leading provider o inormation technology to the world, is the level o IT adoption at our
ports satisactory and refective o our countrys capability in this regards? Why / Why not?
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Part II:Indian Shipping Industry:
Progress, Issues and theWay Forward
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Introduction
Shipping is a global industry and its prospects are closely
tied with the global economy. Any fuctuation in the
global economy has a direct and indirect impact on
the shipping industry. The industry is highly cyclical in
nature and is today struggling to navigate through the
changing economic context. Supply pressure is making
matters worse. Indian shipping industry is also not
unaected by the changing macro -economic actors.
India has one o the largest feet and is ranked 16th in
the world. The total feet size o the Indian shipping
industry is 10 million GT. Still it orms a marginal share o
only 1% o the global feet. On the other hand, Indias
seaborne trade has been growing at a rate o over 12%
in the last 10 years. Consequently, the share o Indias
vessels in carrying countrys cargo has been declining
and is currently only around 8%.
Above statistics raises serious concerns about the
problems aced by the Indian shipping industry. One
o the main reasons or the declining share o Indias
feet is the tardy growth in its size. The Indian shipping
tonnage needs to grow at a much aster pace and
match the growth o countrys seaborne trade.
Government o India has envisaged an ambitious plan to
grow the Indian shipping feet rom 10 million GT to 40
million GT by the year 2020. Various initiatives are being
taken by the government to address the challenges
and promote Indian shipping. Following sections give
an overview o the problems plaguing the industry and
the proposed solutions. It also discusses at length the
proposed policy changes.
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Shipbuilding subsidy
The shipbuilding subsidy was introduced in 1993 and
revised several times upto 2002. The latest scheme
allowed a subsidy o 30% to both public and private
sector shipyards on all ship sales to oreign rms and on
ocean-going merchant vessels o more than 80 meters
length to domestic clients.
Owing to the subsidy, the order books o major
Indian shipyards grew to over Rs. 20,000 crore in the
period o 2002 to 2007 and Indias share in the global
shipbuilding industry grew rom a meagre 0.1% in 2002
to 1.3% in 2007 o the global order book. However,
post 2007 when the subsidy scheme came to an end,
Indias share in new orders placed has been declining
rom 1.3% in 2007 to 0.01% in 2009 and 0.13% in
2010. This is depicted in the ollowing chart:
The abolition o the subsidy scheme, according to
Shipyard Association o India, has adversely aected
new orders, as Indian vessels are now pitched
unavourably against those rom Korea, Japan and
China, where subsidies are as high as 40%. Shipbuilders
are intensely lobbying or extension o the scheme with
the Ministry.
The Maritime Agenda has identied capital investment
worth Rs. 10,785 crore to be made in the shipbuilding
and repair sector. I India is to tap the potential
opportunity and be one o the top players in the world
in shipbuilding, the subsidy scheme needs to be revisited
and extended or a sucient period o time.
The Maritime Agenda has estimated the present value
o amount