Cargo traffic in India has grown slowly over the last 4-5 years. The government’s focus on developing shipping as a mode of transport is key to reducing the over-dependence on roads as a mode of transport. In light of this, the government recently announced the Major Ports Authorities Bill, 2016 as a long pending reform of the Major Port Trusts Act, 1963—the Bill has been introduced in the Lok Sabha. It aims to empower major ports by giving them full autonomy and ensure transparency in operations by decentralising decision-making. It will also aid in the expansion of port infrastructure.
The Bill has been made precise in comparison to the 1963 Act, by removal of overlapping or obsolete sections. In terms of provisions, the new law shall assign full authority to the Board of Port Authority to enter into contracts, on planning and development, fixing of tariffs, etc. Decisions on reference tariff for bidding on PPP projects, on lease rates etc. would also be taken by the Board of Port Authority. The Bill also aims to reorganise the existing hybrid governance model at major ports, to put it in line with the global practice of using the landlord model, wherein the public port authority acts as a regulatory body/landlord while the private companies carry out the operations.
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The Bill has proposed a simplified structure for the board by bringing its membership down to 11 members (including 3-4 independent members) to help streamline decision-making and strategic planning. The board shall include members from the Defence ministry, Ministry of Railways, department of Customs, department of Revenue, Major Port Authority and from the state government in which the Major Port is situated. A swift and transparent decision-making process shall help in project execution and further ease of doing business, while a reduced gestation period shall help keep costs under check.
In terms of tariffs, the rates fixed by the board-appointed panel would have to be ratified by the board prior to implementation. However, the government will continue to exercise control with the right to frame rules or issue directions to the port authorities for fixation and implementation of rates. Additionally, the port authorities have been assigned the task of setting rates for private facilities, which may lead to unfair competition as these ports also run cargo terminals that compete with private facilities therein. The Bill is also mute on the inclusion of labour provisions, which is key to handling of port operations.
Overall, the Bill is aimed at greater efficiency in the functioning of major ports and ensuring rapid and transparent decision-making. In keeping with the international best practices in port management, the Bill shall ensure timely project implementation and cost reductions. It shall thus provide an impetus to the government’s Sagarmala Project and port-led development of India, leading to inclusive growth in the sector.
The author is Jaideep Ghosh, Partner and Head of Transport and Logistics, KPMG in India. The views do not necessarily represent the views of KPMG in India