Indian ports are often criticised for their higher container handling costs and slower ship turnaround times. This, according to some, drives away major container operators operating mainline (mother) vessels to India. Efficiency of the Indian ports is, therefore, considered as absolutely necessary and as some advocate this can only be achieved by privatisation. Moreover, it is said that at a conservative estimate of cumulative growth of nine per cent per annum in term of traffic, Indian ports must be capable of handling a traffic of approximately 850 million tonnes by 2012. This would require 300 to 400 additional berths to handle cargo of different kinds. The creation of additional port capacity of this magnitude at the current costs would require an investment of over Rs 40,000 crore. Projections undertaken by the Ministry of Surface Transport indicate that not more than Rs 12,000 crore would be available from plan funds and the internal resources of the ports for investment in port development and the balance would have to come from the private sector or from the capital market.

Privatisation

The primary focus is, therefore, on privatising the provision of all port services. New capacity addition, according to advocates of privatisation, should come entirely through the private sector. The government should refrain from deciding on the nature and extent of new capacity addition. This also implies that the government would progressively exit from its position of being a “service provider” and pave the way for private players to take over the operation and management of port-related services. The “landlord port” model, however, allows the government to retain the ownership of land occupied by ports and certain other custodial functions.

To this effect the Government of India has adopted policies that open up ports to private investors and operators. These policies have been made explicit in the official guidelines on privatisation that provide a more precise framework for private participation in major ports. The objectives include improving efficiency, productivity, and quality of service and management techniques, while, reducing project gestation periods and bringing in new technologies. Private sector participation in the development and operation of port infrastructure is the key feature of these documents. The port policy identified the areas for private investment and established procedures for inviting private participation as well as the criteria for evaluating various bids. For the major ports, the areas identified include leasing out existing assets of the ports, construction/creation of additional assets such as container terminals, specialised cargo berths, warehousing and storage facilities, cranage/handling equipment, setting up captive power plants and dry docking/ship repair facilities, as well as leasing of equipment for port handling. State governments have also undertaken the development of minor ports. Most of them have thrown open the development of such ports to the private sector. Several port sector development projects involving private sector participation are already underway or are in the advanced stages of preparation or negotiation. Container terminals have been handed over to the Port of Singapore Authority (PSA) at Tuticorin and P&O Ports at Chennai, and a consortium which includes the Dubai Ports Authority at Visakhapatnam.

Further, the government wants to make corporatisation a reality. Corporatisation, according to the government, would enable the major ports to become companies under the Companies Act, 1956. It would involve abolition of the present system of trustees by de-notification of major ports from the purview of the Major Port Trusts Act, 1963.  This structural re-organisation of Major Port Trusts is called for to increase the operational freedom and flexibility enjoyed by the management in taking commercial and investment decisions, and facilitating their quick response to the market conditions or the need of the trade. The ports will become more independent and less subject to the direct control of the government. They will also become more commercial and more financially savvy.

The privatisation policy does not stop at mere corporatisation or even privatisation, it endeavours to introduce competition as it is believed that without the introduction of competition, efficiency will not be achieved. This may jeorpardise the very existence of some of the ports as the existing capacity is more than the current demand. The total capacity in the major ports exceeds the cargo handled by them. The capacity created in the ports as on March 2002 was around 344 million tonnes against the traffic of 288 million tonnes. Thus, the existing capacity was more than the traffic attracted to the port which may lead to rampant cost cutting resulting in poor conditions for labour in future. This is clear in the case of the Mumbai port where its ability to face competition is itself under question. The decline in container traffic at Mumbai Port can be attributed to the establishment of JNPT as a modern port across the harbour with adequate open storage area.  Similarly, the granting of Manakkodam area the status of a minor port, which would have enabled Kochi Refinery Limited (KRL) to set up the Single Buoy Mooring (SBM) project, would affect the very existence of Cochin Port. Only when the union leaders threatened to impose a blockade against oil tankers carrying crude oil to KRL that the proposal was withdrawn. The threat form minor ports seems to be real as the share of minor ports in the total traffic went up during the Ninth Plan. The growth of traffic at the major ports, minor ports and overall traffic was 4.9 per cent, 27.9 per cent and 8.5 per cent respectively.

Labour Response

Responding to the above changes, the representatives of different port unions/federations oppose the amendment to the Major Port Trusts Act.  According to them it is a  unique legislation through which various interests are directly represented. The unions also argue that the proposed corporatisation amendment stipulates that the service of the port employees would be transferred to the new company that would be formed after corporatisation. At the same time, the amendment states that under the new provisions of the proposed Bill, the new company will be at liberty to terminate the services of labourers whenever they would like to do so. Moreover, the Bill does not mention anything about the representation of labour in management decision making. The employees’ unions/federations are also apprehensive about the terms and conditions of services of the employees after the ports are corporatised and converted into successor companies. Therefore, before corporatisation of the major ports, as envisaged in the Bill, the employees need to be taken into confidence.             

The present port policy clearly states that there will be no adverse effects on port labour and all the labour laws will bind the lessee of the country.  No retrenchment will be performed without the concurrence of labour and will be only in accordance with the Industrial Disputes Act and relevant labour laws. The very process of privatisation has affected labour. Not only is informal sector labour increasingly used but private parties also use their own pool of labour rather than drawing their workforce from the existing pool of port labour. Unions are not against the full functional autonomy of the major ports but want a suitable authority to be set up to prevent unhealthy competition among the ports. The port unions are not against the privatisation of minor ports but are against the privatizstion of the existing facilities. For instance, in Cochin, the Thuramukha Samrakshana Samity opposes only the RGCT’s privatisation and not the proposed setting up of a trans-shipment terminal at Vallarpadam with private participation.

Finally, though unions have accepted the role of the private sector in setting up new facilities  it should be noted that against the ninth plan outlay of Rs. 9,428 crore, only an amount of Rs. 4838.92 crore was spent.  The main reasons for shortfall included delays in sanctioning the schemes, slow progress of work by contractors, contractual disputes/litigation, delays in tender finalisation and weeding out of some schemes.   It will be important for  the unions to consider even these issues while arguing against privatisation.