Indian Ports Bill 2021 is a step in the right direction

Pratim Ranjan Bose

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The initiative of the central government to amend the Indian Ports Act, 1908, to introduce dual control – by both the State and the Centre - on private ports, has kicked up a storm. So far private port regulations were the exclusive domain of States. Naturally, they are averse to the proposal. 

A considered assessment of the draft bill, which is now in the consultative stage, will prove that the proposed law will plug major loopholes in the sensitive areas of marine pollution, safety and security. Additionally, the amendment aims to reduce unbridled competition, which is not in the interest of the economy as well as investors. 

States will be the biggest gainers of this initiative. They are expected to hive off their responsibility in areas of strategic and international ramifications while enjoying the right to maximize commercial and economic interests from private ports. 

 

Unbridled Competition

The market operates best when regulated. Unfortunately, the prevailing scenario didn’t guarantee that. 

Available information suggests, nine coastal states have as many as 180 private ports along the 7500 km coastline. Averaged out, there is one private port in every 41 km of coastline. Add a dozen of central government-run ports and the average distance between them will be down to 38 km. 

The unfortunate truth behind these numbers is, barely 10-15 private ports attract traffic. The rest are mostly idle. 

There is no list of dormant ports. The popular guess is, many ports are not operating for years. They came at the lure of concessions by the State government, built the port using bank finance and are now looking for a buyer. The sector is suffering from serious overcapacity. 

 The cost is huge on the national economy. Low utilization of the port facility means, low utilization of the road and rail infrastructure which came up at the cost of the national exchequer. Banks are missing repayment of the loan and when the assets will be sold, they have to take a haircut. 

But that’s not stopping States from entering new concession agreements. Odisha has three large ports on a 485 km coastline. This includes two private ports and one central government-run port. 

In 2019, the Odisha government told the legislative assembly that they are trying to develop 12 more private ports. This is irrespective of the fact that the existing private ports are suffering from huge overcapacity. This insane competition must stop. 

The proposed bill wants to plug this loophole by ensuring the right of the Centre in notifying a new port, the channels it will use and limiting the boundary of the port. Presently, the Centre notifies only government-run “major” ports. 

 

Environment, safety, security

The proposed bill is aiming for a consolidated approach in handling maritime environment and safety issues, which is in line with global practices. The issue is not about who owns a port, but about the accountability, in the case of an accident or calamity, and contingency planning. 

 

Let’s assume a hypothetical scenario where a ship sinks while approaching a barely operational port, blocking the way to a major popular port. Who will take responsibility for the financial loss to the popular port? 

The situation will be more critical if the second port is owned by the Centre, as two ports are governed by two different regulators. Add to this the concern of oil spill or other such environmental damage, and the issue may transcend State and even national boundary.  

No State government is equipped to handle such emergencies. Firstly, it lacks capacity and resources. Secondly, the national government is a signatory of various global conventions regarding maritime pollution, safety etc. States have no role there. 

Security issues are even crucial. The world of shipping is big and bad. Security concerns are rising. But the multiplicity of State regulators and wide gaps in their capacity are making private ports susceptible. This is an issue that must not remain unaddressed. 

 

Synergy helps

No one can deny the merits of federalism. There is also no denying that many states, including Prime Minister Narendra Modi’s native state of Gujarat, made the most of the prevailing situation, in attracting huge private investments in the port sector. 

 But that’s no excuse to continue with such glaring loopholes in port regulation. A cohesive approach with clear responsibilities to State, central government and the private investor is a welcome step for all. 

The goal is to treat all ports in equal measure irrespective of their ownership status. That will help business.  

The Indian Ports Act, 1908, was not conceived to deal with today’s context. It was not designed to attract huge private investments. If we do not change it now, we might invite trouble. 

**Pratim Ranjan Bose is a commentator, researcher and corporate consultant. He is an  an expert on India’s eastern neighbourhood.) He is an advisor to Iravati Research and Communication Centre**

Disclaimer: views expressed in the content belong to the content author and not the organization

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