One, the spiralling cost of labour. Unfortunately, Mumbai port is not just overmanned, much of it is expensive and unproductive labour. Today, when labour costs in ports around the world amount to less than 10 per cent of total costs, Mumbai port's 60 per cent is an unacceptable liability. A wage revision just round the corner will make it even more so. Clearly, the port is losing money. Realising this, the port authorities have offered a golden handshake. With the port doing badly, there may be more takers than in the past. But the cost of the VRS, so far not accounted for, may widen the deficit even more in the short run, although it will pay off in the long term.

The second reason why the deficitwill continue in the years to come is the almost Rs 990 crore of investment currently underway and more than Rs 4,000 crore planned. All of this will call for for sizeable depreciation. Currently, the port is almost fully depreciated and, therefore, deductions on this count are negligible. As all the investment takes place, next year's deficit may begin to look like small change in the years to come.

The port's attempt to root out bad practices--such as, cargo lying unclaimed--by auctioning is also making it lose money. This year, the port's earnings from demurrage, which is sizeable, halved, as the port authorites cleaned out the port. This may have created more room for incoming cargo, but it dented the bottomline.

The tragedy is that none of this will result in higher volumes, currently on the decline for the first time in the century. It is not just the East Asian recession and lower international trade volumes that is causing the decline in traffic. Competition from other Indian ports, the setting upof captive jetties in large industrial complexes round the country, and the problem of evacuation of cargo from Mumbai has resulted in lower traffic for Mumbai. None of these reasons will disappear overnight. If anything, a few more reasons may spring up for cargo to go elsewhere.

Whatever steps the port managment takes today, be it pruning the work force or modernising, will cost money and, in all probability, eat into the port's considerable reserves. If it does not do anything, the port will sink even faster into obsolesecence. Uncomfortably anchored between the devil and the deep sea, the managment is in an unenviable position.