With the government moving a bill in the Lok Sabha on Thursday to convert the 11 major port trusts into port authorities, and the announcement in the Union Budget that at least one major port would be corporatised and listed on stock exchanges, all eyes are on how this will be carried out.
Shipping Minister Mansukh Mandaviya told lawmakers in the Lok Sabha that the Bill was “not aimed at privatisation of government ports”.
The biggest structural reform of the 11 state-owned port trust has been in the works since the NDA government rode to power in 2014 and retained power last year for another five-year term.
The Bill is a compromise plan drafted by the Mandaviya-led Shipping Ministry after workers unions opposed their conversion into companies, which was the preferred choice of the ministry to modernise the institutional structure of these ports.
The logic behind this thinking then was that attempting corporatisation straight away would be unworkable given the belligerent stand of the unions against such a move.
By adopting this strategy, India is following the Singapore model of port corporatisation. The island nation first converted its harbour board into a port authority and later into a commercial entity through a Parliamentary Act, after separating the regulatory functions of the former port authority. PSA International Pte Ltd is now the world’s top container port operator.
Unless the ports are converted into companies, the government cannot list them on the stock exchanges and potentially disinvest or privatise them. Corporatisation will also help the government receive dividends from these ports.
This is where Section 53 of the Major Port Authorities Bill, 2020, comes in handy.
“Without prejudice to the foregoing provisions of this Chapter, the Board (of each port authority) shall in discharge of its functions under this Act, be bound by such directions on question of policy as the Central Government may give in writing from time to time,” says sub-section 1 of Section 53 of the Bill.
“Provided that the Board shall be given an opportunity to express its views before any direction is given under this sub-section. The decision of the Central Government on whether a question is one of the policy or not shall be final and binding on the Board,” it said.
This Section replicates Section 111 of the Major Port Trusts Act, 1963.
But, to be sure, successive governments did not use the power vested under Section 111 of the Major Port Trusts Act,1963, to issue directions to major port trusts on matters such as corporatisation. This could be partly because of the composition of the board of trustees, which comprised political appointees and labour unions, making the task difficult.
But, with political appointees not being considered for board seats and the government holding sway over nomination of two labour representatives on the board of each port authority under the new set-up, unions fear that there exists a strong possibility of the government issuing an order using clause 53 for corporatisation of these ports.
“Thousands of acres of land were handed over by the State governments while building these ports. A port is a national property and meant for public and social benefits; to change them into companies’ and then hand them over to private investors would not be in the public interest,” says T Narendra Rao, general secretary of the Water Transport Workers’ Federation of India.
“The government says the Bill seeks to give greater autonomy to the ports. But, there will be no autonomy due to Section 53,” Rao added.
Standing committee backing
The Unions’ stand was backed by the Parliamentary Standing Committee that vetted the Bill.
“Retaining Section 111 of the MPT Act in the new Bill may be intentional to use it at the appropriate time by the government and may endanger the very interest of the major ports, particularly when the ongoing policy of privatisation is aggressively pursued by the central government,” the panel wrote in its July 2017 report.
“The power given to the central government under clause 50 (as per the earlier version of the Bill) to issue directions to the directors of the board may lead to converting the port authorities into companies through an executive order of the central government. The committee recommends that the government should not misuse the provision given under this clause for any such activities,” it wrote.
“There are some clauses which give the impression that the proposed Bill provides the Government more teeth to allow private players in the port sector, which may, in future, take full control over the port activities. The Committee recommends that the Ministry in the first instance, should remove the fears of the stakeholders on the issue of ‘privatization of ports’ and ensure that the administrative, managerial and financial control of the Port will remain with the port managements”.