‘Shipping ministry may award 12-13 port infra projects by the end of this fiscal’

The Union shipping ministry, which unveiled itsVision 2020 in January this year envisaging an investment of Rs3 lakh crore, has started working on some of its plans such as corporatisation of major port trusts. Mumbai’s Jawaharlal Nehru Port Trust (JNPT) will be the first port to be corporatised. Shipping secretary
K Mohandas talks about this and other aspects of the agenda with DNA. Excerpts:

Vision 2020 talks about corporatisation of some major ports. What will the advantage of this be?
The central government ports are created under the Major Port Trust Act, except Ennore port, which is a company. The statutory status of the major ports creates several obligations and responsibilities and puts restrictions on its functioning. All private ports are structured as companies. So the company format seems to be a good structure to follow. That will give the port more operational freedom and there will be more professionalism. It is a decided and declared objective, but it is a process. In many cases, it will require amendment to the Act itself, which is time consuming.

Have you identified any?
The first one we have identified is JNPT. We are working on that, but I cannot give a timeframe.

There were plans to convert some of the non-major ports to major ports. Have any of the state ports approached the ministry regarding this?
We are not really planning to take over any state port, except in cases where the state wants us to do so. There is a request from the government of Andhra Pradesh for setting up one more major port other than Visakhapatnam. That is under consideration. We may take over a minor port and develop it, or it may be a totally greenfield venture. That is being discussed with the state government.

Any more disinvestment plans after Shipping Corporation of India?
Nothing is lined up on this front as of now. Traffic handling at major ports is projected at 615.70 million tonne for 2011-12.

What is the capacity creation planned going forward?
Ports don’t really have control on the availability of cargo. What we focus on is creation of capacity, because as of today, the capacity is inadequate. One of the intents is that the overstretched capacity utilisation of the ports should be brought down to the globally accepted levels of 70-75%. The details of projects to be awarded next year are being worked out. This year eight projects have been awarded. We are likely to award 12-13 port infrastructure projects by the end of this fiscal.

How much investment will this translate into?
That depends. If we are able to award the fourth container terminal at JNPT, that itself is of Rs 6,700 crore. It got stuck owing to court cases, but we are expecting a Supreme Court order any day. If that particular project is awarded, the targets are achieved. It may also extend to next year, like the Chennai mega terminal. It was slated to be awarded this year, but the bidders wanted some more clarity on certain matters. So that is now slipping to April.

We are entering the 12th five year plan. Will the incentives, such as taxation in line with global fiscal regime, cargo support through first right of refusal, continue for the sector? What are the other incentives on cards?
We have not yet started the Twelfth Plan exercise. But the broad policy framework will continue. We will naturally be looking at improvements on the existing framework. On taxation system for example, one major reform was introduction of the tonnage tax.

But even now the industry is aggrieved. But then taxation related proposals are not necessarily part of the Plan proposal exercise. There will be a comprehensive study of all aspects of the sector.

Vision 2020 talks about hiking the country’s share in ship building from 1% to 5%. But ship building subsidy is still a contentious issue. What is the way forward on this front?
We can go forward only if we make a planned aggressive effort, including the subsidies and tax-related measures. We are still deliberating on the ship building subsidy. There is no conclusion as yet. The industry has been demanding subsidy to the extent of 30%. We have prepared a scheme, which proposes levels lower than that. We have made some studies and the inputs show that the industry has grown in other countries with government support.

Apart from subsidies, what other incentivising options are being looked at?
There could be things like easier finance, purchase preference, or preference in cargo handling. There are several possible measures. But too strong protective measures are not generally good for the economy also. So, one has to look at the overall interest of the economy while promoting a sector.

Vision 2020 envisages capacity creation of 3200 million tonne. How has the industry reacted to this? Do you think that the industry is capable of implementing this?
This has been welcomed by the industry. Port operators, investors and state governments that are promoting the non-major ports are generally very positive towards what has been assessed. Out of this 3200, 50% is envisaged to be in major ports, and the balance in non-major ports. This means ports capacity ratio will be a 1:1 ratio as against 2:1 right now.

This translates into investments worth Rs3 lakh crore. The requirement here would be a standardised bidding framework, which the ministry already has, but needs to be fine tuned. By when would concrete request for qualification (RFQ) and request for proposal (RFP) norms for taking up this massive facelift be in place?
As of now, we have a standard model concession agreement. We also have the RFQ and RFP documents in place. There is a transparent procedure. These documents are being reviewed from time-to-time. There is no finality. These are evolved over the last fifteen years. As of today, we have a satisfactory system.