Explained: Why The Draft Indian Ports Bill 2021 Should Be Welcomed By States

Decades ago, the former Left Front government in West Bengal, entered a concession agreement with a small local business group to develop a private port on the Ganges, at Kulpi in South 24-Parganas, bang opposite to the Haldia Dock Complex of Kolkata Port Trust (KoPT).

The private port didn’t come up. But, the initiative raised some crucial questions. The Central government-controlled Kolkata port spends thousands of crores in maintaining the river channel. How will the risks and investments be shared between the two?

The reference may come in handy in analysing the recent Centre-State controversy regarding the Draft Indian Ports Bill 2021. The bill proposes to replace the Indian Ports Act, 1908, and introduce some central regulations in the affairs of minor ports, which is now an exclusive domain of the State governments.

For starters, the major-minor classification is merely a legacy of the pre-liberalisation era. Major ports are central government-controlled and notified. They were indisputably big in the past. Today Adani’s “minor” Mundra Port handles more traffic than most “major” ports.

The draft bill, which is now in the consultative stage, aims is to fill this gap by adding regulatory teeth to the toothless Maritime State Development Council (MSDC) that now merely ‘advises’ the state maritime boards.

States are opposing the proposal on the ground of federalism. Tamil Nadu Chief Minister M K Stalin, who is heading the newly elected DMK-Congress alliance government, is most vocal. Andhra Pradesh also lodged its protests. More States, particularly the non-BJP States, may join the list soon.

Synergy required

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, attracting “investment” alone is not the right barometer of success, the country should ensure that the investments are viable.

The coal-power rush, during the UPA era (2004-2014), is a case in point. A sizable chunk of private investments became idle, the rest are suffering from low capacity utilization. The rush for Highway construction under PPA mode didn’t augur well either.

On the one hand, banks were saddled with huge non-performing assets, on the other hand, investment sentiments suffered big time. The same story can be repeated in the port sector, which is already suffering from idle capacity.

A look at Odisha may indicate the reasons. According to a statement by the State government, in the Assembly, in 2019, Odisha is planning to attract private investment in 12 more ports. This is over and above three existing large seaports.

To put it in perspective, Odisha is aiming for one seaport in every 32 km, along its 485 km coastline. This is irrespective of the fact that two of the three existing ports are suffering from idle capacity. Sensible?

Investments in the infrastructure sector suffer from long gestation. Moreover, port development requires huge public investment in highways, rail connectivity, rolling stock etc. There is no place for insane competition here, not even in the name of federalism.

Out of 160 odd minor ports, barely 10-15 attract decent traffic. Yet new investments may come at the lure of concessions and putting public money at stake.

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. In other words, there will be clarity on the responsibilities of a new port. It cannot eat into someone else’s profits.

Environment, safety, security

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

Assuming Kulpi port is barely operational and a ship sinks while approaching it, thereby blocking the narrow river channel leading to Haldia and Kolkata dock complexes, who will take responsibility for the financial loss to Kolkata Port and address the damages caused to the environment from the oil spill? Is any State government equipped to handle such emergencies?

Such concerns are real and often transcends State boundaries, inviting international attention. Marine pollution issues are most tricky as national governments are signatory in many international conventions. That’s why such issues come under federal regulations in the US.

Many may argue that port operations, whether in private or public, follow the same national, international conventions or norms. Ideally, that’s how it should happen. But, is there a way to know if such norms are enforced in equal measure in both major and minor ports?

The key problem is the wide difference in the capacity of the State maritime boards. Odisha has formed a maritime board in 2019. West Bengal has one, literally on paper.

The security issues are even more tricky. Nepal was keen to use an efficient private port in Odisha for third-country imports, instead of going all the way to central government-owned Vizag Port. But, the difference in security enforcement in the two types of ports doesn’t allow that.

Divide responsibilities

The question is, how long will the country continue with such loopholes?

States should enjoy autonomy but that must not encroach upon the federal responsibilities. Let States enjoy full autonomy with respect to commercial issues at the minor or private ports. The Centre must not poke its nose in deciding port charges or cargo handling.

But States must accept federal responsibilities in the areas of marine pollution, safety, security. And, both sides should work cohesively to ensure that all ports in the country follow the due rules and regulations with equal earnest.

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 end up facing a bigger problem than the coal mining sector faced.

No one dared to denationalise the coal sector, for fear of political backlash, so they invited private capital through the backdoor – using the captive mining provisions in the nationalisation law. The rest is history.

Coal was merely a domestic issue. But shipping is an international business. The recent incidents of a Chinese ship reporting at a Sri Lankan port without declaring a controversial cargo is a stark reminder that the time has come to put the house in order.