Context

Major Port Authorities Bill 2020 was recently introduced in the Lok Sabha by the Ministry of Shipping.
The Bill aims to replace the Major Port Trusts Act, 1963.
It seeks to provide for regulation, operation and planning of Major Ports in India and to vest the administration, control and management of such ports upon the Boards of Major Port Authorities.
This will empower the Major Ports to perform with greater efficiency on account of full autonomy in decision making and by modernizing the institutional framework of Major Ports.

Background

Ports in India

India is the sixteenth largest maritime country in the world, with a coastline of about 7,517 km. The Indian Government plays an important role in supporting the ports sector.
According to the Ministry of Shipping, around 95 per cent of India’s trading by volume and 70 per cent by value is done through maritime transport
India has 12 major and 205 notified minor and intermediate ports.
The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce.
It has allowed Foreign Direct Investment (FDI) of up to 100 per cent under the automatic route for port and harbour construction and maintenance projects.
It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports.

Major Port Authorities Bill, 2020

Key features of the Bill include:

Jurisdiction

The Bill will apply to the major ports of Chennai, Cochin, Jawaharlal Nehru Port, Kandla, Kolkata, Mumbai, New Mangalore, Mormugao, Paradip, V.O. Chidambaranar, and Vishakhapatnam.

Major Port Authorities Board

Under the 1963 Act, all major ports are managed by the respective Board of Port Trusts that have members appointed by the central government.
The Bill provides for the creation of a Board of Major Port Authority for each major port.
These Boards will replace the existing Port Trusts.

Composition of Board

The Board will comprise of a Chairperson and a Deputy Chairperson, both of whom will be appointed by the central government on the recommendation of a selection committee.
Further, it will include one member each from

(i) the respective state governments,

(ii) the Railways Ministry,

(iii) the Defence Ministry, and

(iv) the Customs Department

The Board will also include two to four independent members, and two members representing the interests of the employees of the Major Port Authority.

Powers of the Board

The Bill allows the Board to use its property, assets and funds as deemed fit for the development of the major port.
The Board can also make rules on:

(i) declaring the availability of port assets for port-related activities and services,

(ii) developing infrastructure facilities such as setting up new ports, jetties, and

(iii) providing exemption or remission from payment of any charges on any goods or vessels.

Fixing of rates

Currently, the Tariff Authority for Major Ports, established under the 1963 Act, fixes the scale of rates for assets and services available at ports.
Under the Bill, the Board or committees appointed by the Board will determine these rates.
They may determine rates for:

services that will be performed at ports,
the access to and usage of the port assets, and
different classes of goods and vessels, among others.

Such fixing of rates will not be with retrospective effect and must be consistent with the provisions of the Competition Act, 2002, or any other laws in force, subject to certain conditions.

Financial powers of the Board

Under the 1963 Act, the Board has to seek the prior sanction of the central government to raise any loan.
Under the Bill, to meet its capital and working expenditure requirements, the Board may raise loans from any:
scheduled bank or financial institution within India, or
any financial institution outside India that is compliant with all the laws.
However, for loans above 50% of its capital reserves, the Board will require prior sanction of the central government.

Corporate Social Responsibility

The Bill provides that the Board may use its funds for providing social benefits.
This includes the development of infrastructure in areas such as education, health, housing, and skill development.

Public-Private Partnership (PPP) projects

The role of the Tariff Authority for Major Ports (TAMP) has been redefined. The Bill defines PPP projects as projects taken up through a concession contract by the Board.
For such projects, the Board may fix the tariff for the initial bidding purposes.
The appointed concessionaire will be free to fix the actual tariffs based on market conditions, and other conditions as may be notified.
The revenue share in such projects will be on the basis of the specific concession agreement.

Adjudicatory Board

The Bill provides for the constitution of an Adjudicatory Board by the central government.
This Board will replace the existing Tariff Authority for Major Ports constituted under the 1963 Act.
It will consist of a Presiding Officer and two members, as appointed by the central government.
Functions of the Adjudicatory Board will include:
certain functions being carried out by the Tariff Authority for Major Ports,
adjudicating on disputes or claims related to rights and obligations of major ports and PPP concessionaires, and
reviewing stressed PPP projects.

Penalties

Under the 1963 Act, there are various penalties for contravening provisions of the Act.
For example, (i) the penalty for setting up any structures on the harbours without permission may extend up to Rs 10,000, and (ii) the penalty for evading rates may extend up to 10 times the rates.
Under the Bill, any person contravening any provision of the Bill or any rules or regulations will be punished with a fine of up to one lakh rupees.

Why need corporatization?

Indian state-owned ports or major ports (12 in number) account for around 55% of maritime cargo traffic in the country.
Currently, most major port trusts in India carry out terminal operations as well, resulting in a hybrid model of port governance.
The involvement of the port authorities in terminal operations leads to a conflict of interest and works against objectivity.
But, they still have to adhere to a tariff and policy regime that has its roots in the 1960s.

Significance of the Bill

Privatized ports operate under a much more liberal regime and are under the control of state governments.
They are operationally more efficient and are crucially developed better linkages to the hinterland to enable smooth traffic flows.
The bill aims at decentralizing decision making and to infuse professionalism in governance of major ports.
It would help to impart faster and transparent decision making benefiting the stakeholders and better project execution capability.
The Bill is aimed at reorienting the governance model in central ports to the landlord port model in line with the successful global practice.
This will also help in bringing transparency in operations of Major Ports.

References

https://pib.gov.in/newsite/PrintRelease.aspx?relid=200153.

https://www.prsindia.org/billtrack/major-port-authorities-bill-2020

https://www.ibef.org/industry/ports-india-shipping.aspx