Date: 16/09/2022

Relevance: GS-3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc. Investment models

Key Phrases: Indian Ports Act of 1908, Maritime state development council (MSDC), Centralizing tendencies, International Experiences.

Context:

• The Indian Ports Act of 1908 is obsolete in many respects and needs a complete overhaul.
• Let us look at various contentious provisions of the draft bill in a bit detail.

Background

• The Ministry of Ports, Shipping and Waterways has released a draft to amend the Indian Ports Act, 1908.
• The Indian Ports Act, 1908 needs relook to reflect the present-day frameworks, incorporate India’s international obligations, address emerging environmental concerns, and aid the consultative development of the ports sector in the national interest.
• The draft aims to bring in sweeping reforms in the sector by bringing non-major ports into the national fold, creating a new mechanism for resolution of disputes, and empowering maritime state development council (MSDC).
• Union Ministry of Ports, Shipping and Waterways held four rounds of consultations on the draft as a part of Pre-legislative consultation yet the draft doesn’t address fully the main issue of disagreement between the Centre and the maritime States.

Ports in India

• India has 12 major ports and 212 non-major ports. Most of the non-major ports are small fishing harbours and only a few of them cater to international shipping.
• Major ports figure in the Union List and come under the jurisdiction of the Central government.
• Non-major ports are in the Concurrent List and come under the respective State governments, but the Center has overriding legislative and executive powers.

Problems of the 2021 Draft Bill

• In 1997, a Maritime State Development Council (MSDC) was created by an executive order, with the Union Minister of Shipping as chairperson and the Ministers in charge of ports of the maritime States/UTs as members.
• The MSDC serves as an apex advisory body for the coordinated development of major ports and non-major ports. It has met only 18 times in the last 25 years.
• What made the 2021 draft of the Indian Ports Bill controversial were the provisions of Chapters II and III.
• It sought to give statutory status to the MSDC along with wide-ranging powers and functions and make it a permanent body with its own office, staff, accounts and audit. Such a status does not match the nature and
• Maritime States suspect that the real aim of a statutory-cum-permanent MSDC is to curtail their powers to develop and manage non-major ports; it is less about efficient allocation of resources and more about control by the Centre.

Provisions of 2021 draft

• It sought to empower the MSDC:
  • To formulate a national plan, to be notified in the official gazette, for the development of major and non-major ports;
  • To monitor the development of non-major ports and ensure their integrated development with major ports and the national plan; and
  • To order an appropriate inquiry if any port contravenes the national plan.
  • It also empowered the Center to make a port non-operational if it was not in consonance with the national plan.
  • It prescribed draconian penalties including imprisonment for non-compliance with the MSDC’s directions by port authorities, port officials and other persons.

Centralizing tendencies

• The 2022 draft Bill has dropped or toned down many of these provisions, but it has retained the MSDC as a statutory-cum-permanent body.
• It has also retained open-ended provisions like Section 10(c) that authorizes the Central government to entrust any administrative and financial functions to the MSDC.
• In order to ensure that the composition of the MSDC is in favour of the Centre, the draft Bill makes five Secretaries and one Joint Secretary to the Government of India, besides the administrators of the coastal UTs, as members.
• This is a bad precedent wherein the vote of an officer would count the same as the vote of a Minister.

Way forward

• Like the Goods and Services Tax Council, the MSDC should consist only of the concerned Ministers of the Union and maritime States/UTs; officers should only be special invitees.
• A fair arrangement would be to give 50% weightage to the votes of the Ministers representing the Centre and 50% weightage to the votes of Ministers representing the maritime States/UTs in proportion to the number of functioning non-major ports.

International Experiences : Best Practices

• In contrast to the centralizing tendency reflected in the draft Bill, most U.S. ports are owned and managed by counties and municipalities with port operations largely in private hands.
• Ports in Germany are managed at the municipal and regional levels.
• Even in China, ports are managed at the municipal level with the local authorities having a substantial stake in corporatized ports.
• Thus, international experience shows that ports are best managed by local and regional governments.

Performance of ports

• There could have been a case for the Centre/MSDC to play a more active role with regard to non-major ports if the latter had been performing poorly. But data show that non-major ports have fared much better than major ports.
• Between 1993-94 and 2021-22, the share of the total cargo of non-major ports went up from 8% to 45%, and the CAGR of cargo traffic of non-major ports was 14% compared to the 4.8% of major ports.
• While major ports performed the various port functions with their own staff and equipment and with all the usual shortcomings of public sector enterprises, maritime States developed non-major ports almost entirely on a public-private partnership (PPP) basis.

Gujarat was the trendsetter

• It developed India’s first private port at Pipavav.
• The largest captive port at Sikka (with Reliance Industries).
• The largest commercial multipurpose port at Mundra (with Adani).
• The first two LNG Terminals at Dahej and Hazira; and
• The first dedicated chemical port terminal at Dahej.
• Other maritime States — Maharashtra, Andhra Pradesh, and Tamil Nadu — followed suit.
• From 1996 onwards, the Centre also adopted the PPP model but the process of awarding concessions has been rather slow.

2011 World Bank Report

• A 2011 World Bank Report, ‘Regulation of the Indian Port Sector’, observed that non-major ports are perceived as “more business oriented, customer friendly, cheaper and in general more efficient” whereas “unnecessary regulatory and financial burdens are imposed upon Port Trusts, private terminal operators and investors” by the Central government.
• So, the last thing we should be doing is saddling non-major ports with the same handicaps as major ports.
• A statutory-cum-permanent MSDC will do precisely that. It will choke future development of non-major ports and stifle novel initiatives by the maritime States of the kind that Gujarat did on its own.
• Central planning has no place in a market-oriented economy where non-major ports (and now even major ports) are developed almost entirely through private investments.

Conclusion

• It is, therefore, recommended that Chapters II and III of the draft Bill relating to the MSDC be scrapped and that the MSDC remain an apex advisory body.
• In keeping with port reform strategies worldwide, the Centre should work towards greater decentralization, deregulation, corporatization and private sector participation.
• It should give the concerned maritime States and city municipal corporations a substantial equity stake in corporatized major ports.
• It should limit itself to overseeing only the ‘higher functions’ of border control, competition policy, port security, and environment protection and hinterland connectivity.

Source: The Hindu

Mains Question:

Q. Discuss the contentious provisions of the draft to amend the Indian Ports Act. Suggest measures to bring consensus among various stakeholders. [150 Words].