The government has decided to bring the port sector on a par with other public sector enterprises who assign a certain portion of profits for social development. All major ports will now have to shell out up to 5% of their net surplus towards development of adjoining areas through discharge of what is commonly known as corporate social responsibility. The new rule, which will take effect from the current financial year, is part of the guidelines issued by shipping ministry for mandatory CSR by major ports that are controlled by the Centre.
CSR will be one of the main performance indicators for major ports and may impact their annual appraisal. The country has a dozen major ports that are rated less competitive than minor ports in terms of pre-berthing time and turnaround time. Latest data from shipping ministry show that major ports witnessed around 30% increase in average pre-berthing time and 4% rise in average turnaround time during April-September 2011 against same period last year.
A letter written by the ministry to chairmen of all major ports stated that the ministry will monitor the CSR performance of ports and an external independent agency will be appointed for continuous evaluation of projects taken up under the initiative.
?Major ports were doing CSR activities earlier but questions were raised that they were operating beyond their jurisdiction as Major Port Trust Act doesn’t allow them to spend money on activities other than core operations. We have now issued guidelines as a corollary to the Act,? shipping secretary K Mohandas told FE.
The ports have to spend on CSR activities based on their net surplus. For ports that earn a net surplus of less than R100 crore in the previous year has to spend 3-5% of that amount. If a port earns a surplus of R100 crore but less than R500 crore, CSR expenditure will be 2-3%.
In case the surplus is R500 crore or more, the applicable rate will be 0.5-2%. Loss making ports will have to undertake activities that don’t involve monetary outgo.
Based on this criteria, an analysis done by FE (see chart) show that 12 major ports will have to spend R57.49 crore in 2011-12 based on surplus earned in 2010-11. Cochin Port Trust and Mumbai Port Trust will be exempt from any expenditure as they had net deficit of R86 crore and R43 crore, respectively.
Indian Ports Association managing director A Janardhana Rao said, ?Major ports like Kandla had built hospitals and schools that could be utilised by people from adjoining areas. But that was without any directions. Now they will spend as per guidelines of the ministry?.
