CHAPTER VI PRIVATISATION OF INDIAN...
Transcript of CHAPTER VI PRIVATISATION OF INDIAN...
CHAPTER VI
PRIVATISATION OF INDIAN PORTS
World over ports are passing through a phase of structural transformation-
Ports in India being no exception. Indian Ports are governed by the Indian Ports
Act, 1908 & Major Port Trusts Act, 1963 and function as autonomous bodies
under the Ministry of Shipping. Indian ports (12 Major Ports) are highly labour
intensive yet work at 105% of their capacity as compared to other modern
international ports which work at 55%-65% of the capacity.
Recognising the need to attract modern technology, introduce better
managerial practices, expeditious implementation of schemes and the huge
investment, the Government has decided to encourage private participation in
ports. The public-private endeavours in the port sector so far, have yielded
positive results.
Efforts should be made to synergise the strengths of the trading partners, in
order to improve the productivity and profitability of the port sector so that there is
a concomitant benefit to all the port users. This in turn will make the Indian
products more competitive internationally.
Current scenario
On the 5560 kms stretch of coastline, India has 12 Major Ports (including
Ennore Port, just inaugurated) and 148 Minor Ports (30 contributing to cargo
handling). The major Ports are literally bursting at seams. They handled 284.31
million tones of cargo in 2001-02 against the available capacity of 269.87 million
tonnes - a capacity utilization of 105.35%. Contrast this with the global scenario
where most ports operate at 55-56% capacity. This is against the backdrop of the
fact that most of the Indian Ports are highly labour intensive and work using
antiquated equipments. Besides, the ports have to make use of the available
(limited) financial resources to address their development/investment
requirements.
Privatisation - Raison D'etre
By virtue of being a vital infrastructure that is critical to the trade and
commerce, the Ports exert a powerful influence of the present standing and the
future progress of the economy. As at present and as the trends show, the demand
far surpasses the capacity. According to "Vision 2020" report by the RITES, the
traffic projection for year 2003 is 365 million tonnes and it will be 530 million
tonnes by 2007. This calls for a massive augmentation of the capacities to meet
the demand. The total requirement of funds during 9th Plan (upto March 2002) is
Rs.13,550 crores of which Rs. 6550 crores will come from budgetary support and
Rs.7000 crores from Private Sector Investment. The task is colossal and requires a
high magnitude of investment.
Initiatives
Recognising the need to attract new technology, introduce better
managerial practices, expeditious implementation of schemes and the huge
investment, the Government decided to encourage the participation of the Private
Sector in the Ports and accordingly in October 1996 issued policy guidelines. To
facilitate private investment, the Government of India has provided a number of
fiscal incentives also.
The areas that have been identified for Private Sector participation are:
> Construction/installation & operation of liquid bulk, break bulk, multipurpose
and special purpose berths;
> Container Terminals;
CFS, Tank Farms and Storage facilities;
> Cranage/Handling equipments;
> Leasing out existing assets;
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> Leasing in of Cargo Handling Equipment & Floating Crafts; and
> Captive Facilities for Port Based Industries.
Port Policy
Port Policies will have to be more proactive to the needs of the consumer:
> Port policies need to reflect and respond to the continuous changes in macro-
economic policies, in particular the move towards a more open Indian
economy.
> Ports should remain statutory bodies but evolve towards the "landlord" rather
than the service port.
> Operations should be organized within a system of integrated terminals, partly
owned, but fully run by qualified private operators capable and willing to
invest in superstructures and equipment, and organized on the principles of
unity of command and specialization.
> Financial managements and pricing policies should lead to transparent and
cost-based tariffs which optimize the use of resources and minimize cross sub-
sidizations;
> Public investment should be limited to the infrastructure needed to facilitate
growth and development;
> Private initiative in the provision, funding and operation of superstructure and
equipment should be encouraged.
Solicited Projects
A solicited project is identified and formulated by the Govt. with necessary
pre feasibility, feasibility, detailed studies for its essential viability and private
sector participation. Solicited projects undergo through analysis and integrated
into the country's overall infrastructure system and in the developmental plans.
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Unsolicited Projects
This is identified and proposed by a private sector promoter to the port for
an exclusive right to develop and operate the particular project/system for a
particular period. These are considered on exceptional basis for its need.
Different concepts
There are different schemes available under the privatisation concept. The
Govt. has preferred the BOT scheme in the infrastructure facilities such as port,
Roads, etc. This approach increases the risks associated with infrastructure project
to a level of acceptance to the private sector. It also assures that profits generated
are commensurate with the risks. In BOT concept a contractual agreement is
made where a private investor can finance, construct, operate and maintain the
port facility for a concession period after which the facility is transferred to the
port authority at no cost.
DIFFERENT SCHEMES OF PRIVATISATION:
Build - Operate- Transfer (BOT)
Provides private consortia with a concession to finance, build, operate and
maintain a facility. During the life of the concession, investors collect user fees to
cover the costs of construction, debt servicing and operations. At the end of the
concession the facility reverts back to a public authority.
Build-Own-Operate-Transfer (BOOT)
Same as BOT, after a negotiated period of time, the project is transferred to
the Government.
Build-Transfer-Lease-Operate (BTLD)
Government provides the right way on which the facilitates agreements
required by the concessionaire to pay a nominal rent of payment for the use of the
land.
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Service Contract
More narrowly focussed than a management contract is that a private
contractor performs a particular operating or maintenance function for a fee over a
specified period of time.
Besides adding credibility to the project, the BOT scheme can also lead to
significant cost economies accruing out of a more focussed private control and
economic interest in design, construction, technology, and operation of the project.
The continued involvement of the sponsors during the life of the concession also
implies a constant transfer of technology. A successful BOT project means that the
Government creates vital infrastructure without putting pressure on budgetary
funds, and has facility with better efficiency of operation. Unless all involved, work
in cohesion with proactive thinking, coordinating, cooperation, mutual trust and in a
continuous manner, the complex BOT concept cannot lead to success.
Success Links
Success factors for the port/Govt. to promote BOT projects are:
> The project must be financially sound, feasible and affordable.
> The country risks must be manageable
> There must be strong Govt. political support.
> The legal frame work must be stable.
> The administrative frame work must be efficient.
> The project must rank high on the host Govt. list of infrastructure projects.
> The bidding procedure must be fair and transparent.
BOT transaulations should be concludable within reasonable time and cost.
> The sponsors must be experienced and reliable.
> The sponsors must have financial strength.
> The construction contractor must have experience and resources.
> Project risks must be allocated rationally.
> The financial structure must provide the tender sufficient security.
> The public and private sectors should cooperate on win-win basis.
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Initiatives of Govt
The Govt. has understood that unless the incentives are provided there will
not be takers in cost intensive port privatisation projects. Hence the Govt. has
highlighted and liberalised the measures as under;
> Existing legal frame work permit private sector participation.
Port will regulate as per the Major Port Trust Act.
> An independent Tariff authority has been established to induce confidence to
the investor and have a level playing field.
> Tender with the transparent conditions shall be put on BOT basis.
> Proper feasibility report shall be made at the expenses of the port but
subsequently recovered from the successful tenderer,
> Evaluation is made transparent as per the criteria indicated in the Tender.
> Concession period is 30 years.
> Automatic approval of an Indian company with 74% foreign equity.
> Even upto 100% foreign equity shall be considered by the FIPB (Foreign
investment Promotion Board)
> Tax holiday for 5 years and tax concession for another 5 years within 12 years
for infrastructure project.
> Customs duties for imported equipments are drastically reduced.
> Subscription to debentures or equity of companies engaged in infrastructure
would qualify for income tax relief for the investor.
> Infrastructure development financing company (IDFC) has been set up for
financing infrastructure project.
> HUDCO also proposed to finance such projects.
> Model tender document has been prepared.
> Bankable agreement has also been prepared so that the entrepreneurs would be
able to raise funds.
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The special committee for infrastructure headed by the Prime Minister and
concerned Minister Paves the way for removing the bottlenecks, and ensure
smooth progress under BOT concept.
> Leasing out exiting assets of the port.
> Construction & creation of additional assets, such as;
a) Construction & operation of container terminals
b) Construction & operation of bulk, breakbulk, multipurpose & specialised
cargo berths.
c) Warehousing, container freight stations storage facilities, and tank farms.
d) Cranage & handling equipment.
e) Setting up of captive power plants.
Dry docking and ship repair facilities.
> Leasing of equipment for port handling and leasing of floating crafts from the
private sector.
> Pilotage.
> Captive facilities for port based industries including captive oil facilities and
SBMS.
Criteria
Some of the criteria to qualify as a Private Sector Partner are:
Experience of managing facility for similar cargo with average annual volume
for last 3 years equal to at least 50% of the proposed capacity of the
terminal/berth under bidding;
> A bout 20% of the net worth of the bidder should be at least equal to the 50%
of the estimated project cost; and
> Aggregate net accruals during the immediately preceding 3 years should at
least be equal to 50% of the estimated project cost.
Privatisation - Objectives
The generally accepted outlook towards the privatisation of the Ports is as a
means for increasing private enterprise participation in the operations of Major
Ports and it does not mean sale of Major Ports' land, which remains under public
ownership. The idea is to make use of private investment technology & modern
management concepts to increase port productivity and to modernize port facilities
and thereby to make cargo handling cost effective and thus in turn making Indian
trade & products globally competitive.
Assessing the true extent of privatisation in ports requires careful analysis
of distinct activities, roles and responsibilities that are now being undertaken by
the public entity to the private sector. Basically this involves three elements that
can be either collectively or individually be privatized, viz.,
a) The Regulatory Functions: These are the functions that are empowerments
by way of statute(s) and include activities like maintaining, etc. The Welfare
State notion under the ambit of which these functions are imposed on public
entities (ports), leave little or no room for these regulatory functions to be
transferred to the private sector. It would also incapacitate the public bodies to
the extent that while doing the public good, they will have to simultaneously
compete with other private agencies on an uneven plank.
b) The Land Resources: Ports are the proverbial "realtor" in the sense that they
hold a vast area of land. World over, ports hold maximum of estate, next only
to the municipalities. Land is a scarce resource and has to be put into the most
judicious use; more importantly for port related activities that add up to the
cargo and vessel traffic volumes at the ports. Special Economic Zones
involving some manufacturing/assembling that is export-import oriented would
fall under this category of activity.
c) The Port Operations: This is the most significant of the three elements under
analysis for private sector involvement. The traditional port operations involve
the handling of sea-borne cargo and passengers. It also includes under its
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ambit value added services such as warehousing, container freight stations,
storage, tankage, etc.
A right mix of these key elements will lead to a purposeful public-private
participation and derive mutually beneficial results. For instance, the private
sector can discharge the dominant role of service provider (operational) and the
public sector can back up the regulatory functions. Another option could be that
the land ownership rests with the public sector and the regulatory or operational
functions are the responsibilities of the private sector. A third scenario could be
that all the three elements are transferred to the private sector. Thus the public-
private synergy is in the right proportion and after a diligent analysis will aid in
shaping the economy in right perspective, port sector in particular.
Privatisation - Approach
Against this backdrop, the methods identified by government for attracting
private investment are:
a. Immediate steps
- Leasing of existing assets; and
- Joint venture between ports & private companies or consortia of private
companies.
The Major Ports have been quick to react to the Government policy to
invite private participation in leasing of existing assets. As on date, some of the
key projects in operation are:
> Jawaharlal Nehru Port Trust - Nava sheva International Container Terminal:
container Terminal being operated by MIs P&O.
> Kandla Port (KPT) - MIs GEEPEE: Leasing of berth for bulk & beak Bulk
Cargo handling.
> KPT-Essar Oil: Erection of SBM for handling Crude Oil & Products.
> KPT-IFFCO: Leasing of berth for handling fertilizer & raw material.
> Tuticorin Port - Port of Singapore: Licencing berth for container handling.
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> Chennai Port-Bengal Tiger Lines: Berth Reservation scheme for container
handling.
> Cochin Port Trust (C0PT)-FACT: Leasing of berth for handling fertiliser &
raw material.
> New Mangalore Port- Mangalore Refineries Limited: Setting up of crude oil
jetty (under construction).
> CoPT-P&O: Joint venture for setting up international transhipment terminal
(under evaluation).
Most of these projects have paid rich dividends to both the port and its strategic
partner.
FUTURE PLANS
Corporat isat ion
The singular most significant step taken by the government is towards
"Corporatisation" of the Ports. This involves carrying out two specific
amendments in the Major Port Trusts Act, 1963, viz., an enabling provision will
have to be introduced to denotify the Major Ports slated for Corporatisation from
the ambit of MPT Act, 1963 and the Union Government will have to introduce
amendments to Section 29 of MPT Act to facilitate the transfer of assets and
liabilities of Central Government from the Port Trust Board to the new corporate
entity. This amendment is aimed at giving legal sanctity to the transfer of assets
and liabilities of the Union Government back from the Board of Trustees to the
new company. February 1st 2001 will be remembered as a red-letter day in the
history of Port with the inauguration of Ennore Port-the first corporate port in
India. Corporatisation of the Jawaharlal Nehur Port (Navi Mumbai), New
Mangalore, Mormugao and Tuticorin Ports will be taken up in subsequent phases.
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Commercialisation
Historically worldwide success has come to ports that function as a private
enterprise or an autonomous government operated commercial style business
without political intervention. Some of the key issues that need to be addressed to
in this case are:
> Approach must be profitability oriented.
> Reorganisation of management & board for commercial operation.
> Reduce labour to workable level.
> Management training to learn how to operate a commercial enterprise.
> Evolve effective marketing strategy and develop business plan.
> Identify privatizable operations for efficiency.
> Develop a more commercially friendly pricing system.
Presently, studies are being conducted to evaluate the commercialisation
potentials of the Ports at Chennai & Mumbai. It is felt that much of the ills of the
present performance of the Ports can be cured if the ports focus towards
commercialising their operation instead of being a procedure ridden bureaucratic
set up. To operate a port as a commercial enterprise, a policy setting Board must
be comprised of persons who are commercially sound (bankers, engineers,
business managers, entrepreneurs, etc.) and this Board must be given full
functional autonomy.
Some of the suggested models for commercialisation for Indian ports are:
A. Spin off of select units (SO)
Selected non-core business units or social services of a port are sold or
contracted to private enterprise. This can include pilotage, tug operations, run
hospitals, etc.
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B. Build-Operate-Transfer (BOT)
Port allows a private company to construct and operate an enterprise on
port property. E.g. P.O. Terminal at JNPT, LNG facilities at Ennore Port, Pir Pau
Chemical berth at Mumbai Port.
C. Joint Venture (JV)
Contract where the port supplies existing facilities to a private operator and
the two share the profit or loss produced by the operator. Joint Venture have been
used where facilities are in place and mostly depreciated. The first project to
come under this scheme will be the Vallarpadam International Container Terminal
- J.V. between Cochin Port & P&O Ports.
D. Operating Concession (OC)
Port leases small unit to operate for a short period. This can be done in
cases where there are surplus storage facilities, for Container Freight Stations, etc.
Privatisation so far
So far 15 projects involving an investment of Rs. 4,376 crores and resulting
in capacity enhancement by 60.30 million tonnes have been approved by the
Government and are in different stages of implementation. In 9 cases, involving
an investment of Rs. 3,500 crores and capacity augmentation of 35.50 million
tonnes, bids are either under process or are likely to be invited shortly. In all, 24
projects involving and investment of Rs. 7, 876 crores and capacity addition of
95.20 million tonnes are on the anvil. Ennore Port, inaugurated on 1st February
2001 becomes the first corporatised Major Port in India. Another trends setting
project that of the Vallarpadam International Container Transhipment Terminal
the first Joint sector venture between a Major Port (Cochin Port) and a private
operator (P & 0 Ports), is nearing the final stages of approval by the Government.
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Privatisation of Tuticorin port
On the privatisation front the port handed over VIIth Berth to private
company MIs PSA SICAL Terminals limited on BOT Basis for the lease period of
30 years. PSA corporation, known as port of Singapore Authority till it was
corporatised in 1997, is one of the major foreign participants. The company has a
lot of international experience and has been the sole operation of the container
terminal at Singapore. It started its Tuticorin port operations in 3 rd December
1999, with the development and maintenance of the Container Terminal on a BOT
Basis. The PSA SICAL Company is the second Major Port project in India.
PSA Tuticorin container Terminal has the most modern equipment and
operating systems to deliver fast, flexible and reliable services to meet the
shipping industries needs and requirements. By calling at Tuticorin container
Terminal, shipping lines and shippers can also enjoy the high quality and value
added services that they have come to expect at PSA's terminals in Singapore and
world wide.
The company's main aim is
> Improve container handling facilities for India's southern region.
) Facilitate the development of India's growing trade market by providing
efficient, flexible and reliable terminal service.
> Help to promote smooth flow of trade in the region by meeting the shipping
and maritime industry's needs.
Modern Equipment & Comprehensive facilities provided in Tuticorin port
PSA SICALs Terminals Ltd has installed most modern equipments and
comprehensive facilities provided in the Tuticorin port. The following are the
facilities available in Tuticorin port.
> 2 ship - to shore quay cranes with 44m outreach to handle gearless vessels.
> 4 Rubber-Tyres Gantry cranes to Stack 5 - containers high.
> 900 ground slots
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> 84 reefer (refrigerated) points.
> 8 prime movers and chassis.
> Current weekly rail services by CONCOR linking Tuticorin to Mangalore and
Coimbatore more services expected.
> Windened and increased number of road lanes to the terminal
Advanced IT facilities
PSA has customised its innovative computer Integrated Terminal
operations system (CITOS) to efficiently integrate operations at Tuticorin
container Terminal.
a) On - line and real-time terminal management systems.
b) High & reliable operational efficiency in the handling of ships and containers.
c) Reliable monitoring of container movements.
d) EDI connectivity to Customers, Port Trust and Customs.
Growth of container Traffic in Tuticorin port
Tuticorin port had commenced handling of containers during 1979-80 with
a meagre Volume of 121 boxes. There was an appreciable growth of container
traffic in the subsequent years. During the year 1995-96, the port handled around
69,000 TEUs with the use of only conventional handling equipment.
As per UNCTAD norms, whenever the container traffic exceeds 50000
TEUs, a full fledged container terminal has to be established. Establishing a
container terminal was under consideration by the port and the port constructed
berth No: 7 for that purpose. However, establishing a container terminal with
modern equipments would cost around Rs. 90 crores and the ports did not have
that much money for executing the project.
In the meantime, the central Govt. Issued guidelines for privatisation of
port's facilities Based on the above guidelines, a proposal was sent to the Most for
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setting up a container terminal in Berth No: 7 through private participation and the
ministry's clearance was obtained during July 1996.
The construction of the container Berth No: 7 was completed in May, 1998
at a cost of Rs. 34.88 cores. The berth has length of 370 m and a draught of 10.7
in line vessels carrying up to 2000. TEUs are expected to call on this berth.
To equip the above berth and operate the same Licence had been awarded on BOT
basis to MIs. PSA SICAL corporations Ltd., Singapore for a period of 30 years in
July, 1998 The license had imported and installed two quay cranes and four RTG
cranes. This berth was commissioned as a full fledged container terminal on
December, 1999. These container terminals can handle 300000 TEUs in a year.
In the year 2001-02 the port had handled the record of 213509 TEUs. The
year-wise container traffic at Tuticorin port has shown in the Table 6.1. The
growth rate of the container traffic after privatisation more than 35% in the year
1999-2000 and 2001-02. In the year 1998-99 the port has handled only 99512
TEUs. But in the year 2001-02 the PSA SICAL Terminals Ltd had handled
213509 TEUs. The company can be expected to handle more than 300000 TEUs
in the year ended 2003. The port has maintained a growth rate of more than 30%
in container traffic and joined the second level ports in container handling in India.
Table 6.1
Pre-privatisation Post ATT
Year No. of TEUs Growth Rate No. of TEUs Growth RateHandled (%) Handled (%)
1992-93 35010 26.52
1993-94 48110 37.42
1994-95 57000 18.48
1995-96 68619 20.38
1996-97 88769 29.36
1997-98 102464 15.43
1998-99 99512 -2.88
1999-2000 97626 (upto 2.12.99) 38986 37.28
2000-01 156978 14.91
2001-02 213509 36.01
Source: Secondary data
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The all-round growth achieved indeed points to a rapid growth in the near
future. Tuticorin port has many industries in its vicinity. Major industries like
Southern Petrochemical industries corporation ltd, (SPIC) Sterlite copper smelter
ltd, Tuticorin Thermal power station (TTPS), DCW, Sahupuram. Chemplast,
cement factories and a number of textile mills, number of salt factories located
within the port premises and in the hinterland of Tuticorin port.
Besides the growing trends in industrial raw materials and traditional
general cargo Tuticorin port has attracted new items of general cargo like, timber
logs, granite stones fertilizers, copper concentrate, iron scrap etc. The outer
Harbour/satellite port study just concluded by MIs. CES, New Delhi in association
with Louis Berger of USA projects Tuticorin to be developed as a hut port for
containers. Tuticorin port can attract a part of the west bound container cargoes
and other container cargoes generated in the Southern states of India. Taking a
balanced view, Tuticorin can attract 20% of total Indian containers traffic.
The construction of cargo berth No: 8 in contamination of the berth No: 7 at
an estimated cast of Rs. 46.00 crores. The newly constructed 8th Berth with a
draught of maters was thrown open for traffic handling with effect from February
2002. This will increase the capacity of the port by 0.5 million tonnes. After
deepening to 10.70 mtrs the capacity will increase by another 1.00 million tones.
On completion, the berth will be offered for private participation on BOT basis.
Financial Impact of Tuticorin Port due to privatisation:
As per agreement between Tuticorin Port authorities and Ws PSA SICAL
container Ltd., the SICAL Ltd is paying royalty to the Tuticorin Port Trust for
using the Berth. In addition to the actual charges charged by the Port authorities,
the SICAL Ltd is paying Royalty amount. The Royalty amount for the 30 years is
shown in the Table 6.2.
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Table 6.2Minimum guaranteed traffic royalty rates and amount payable by
MIS. PSA SICAL Ltd.
Sr. No. ParticularsReference to Amount
Tender Clause
1. Initial Payment 56 (a) Rupees 45,000,000
2. Royalty Fees 5.6 (b & c) 4.9.2 Rupees 1,246,534,608
Period commencing Traffic guaranteeRate of
/
from date of award of from the seventhRoyalty Amount
license and at the end of berth in (TEU5)TEC (Rupees)
(Rupees)l st l2Months 0
2 d 12 Months 148,800 102 15,177,600
3 rd l2Months 188,800 133 25,110,400
4th 12 Months 228,000 174 39,672,000
5th 12 Months 268,000 230 61,640,000
6th 12 Months 300,000 306 91,800,000
7th 12 Months 300,000 410 123,000,000
8th 12 Months 300,000 554 166,200,000
9th 12 Months 300,000 748 224,400,000
10th 12 Months 300,000 1,010 303,000,000
11th 12 Months 300,000 1,313 393,900,000
12th 12 Months 300,000 1,641 492,300,000
13th 12 Months 300,000 1,969 590,700,000
14th 12 Months 300,000 2,264 679,200,000
15th 12 Months 300,000 2,490 747,000,000
16th 12 Months 300,000 2,615 784,500,000
17th 12 Months 300,000 2,746 823,800,000
18 1h 12 Months 300,000 21883 864,900,000
19th 12 Months 300,000 3,027 908,100,000
20th 12 Months 300,000' 3,178 953,400,000
2 I s' l2Months 300,000 3,337 1,001,100,000
22' 12 Months 300,000 3,504 1,051,200,000
23'd 12 Months 300,000 3,679 1,103,700,000
24th 12 Months 300,000 3,863 1,158,900,000
25th 12 Months 300,000 4,056 1,216,800,000
26th 12 Months 300,000 49259 1,277,700,000
27th 12 Months 300,000 4,472 193419600,000
28th 12 Months 3009000 49696 1,408,800,000
291h 12 Months 300,000 4,931 13,479,300,000
30th 12 Months 300,000 5,178 1,553,400,000
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Extra revenue to the Tuticorin Port Trust due to Privatisation
At the time of agreement between Tuticorin Port Trust, and Mis. PSA
SICAL Ltd, The SICAL Co Ltd had paid 450.00 lakhs as intial payment in using
7th Berth. Royalty amount received from the SICAL Ltd is additional income to
the port due to privatisation;
The royalty amounts received by the Tuticorin Port Trust are as follows
in lakhs
Year
1999-2000
2000-2001
2001 —2002
TEUsHANDLED
38986
156978
213509
Rate of RoyaltyPer TEUs
102
133
Amount received
160.12
283.97
In addition to the royalty amount received by the port Trust Interest for
initial amount is also additional revenues to the port authorities for every year.
The rate of interest for initial amount at present is 10% per annum. The interest
amount of Rs.45.00 lakhs per year is additional revenue to the port due to
privatisation.
PRIVATISATION IN OTHER SOUTH INDIAN MAJOR PORTS
Privatisation of Chennai port Trust
On the Privatisation front the Port handed over two berths in Jawahar Dock
to private companies with a view of attracting more traffic and to get a guaranteed
traffic volume. In container terminal, one of the berths is given to a private
company on a short-term lease of two years with a similar objective. The
container Terminal with 3 berths was given on a long lease for a period of 30 years
from November 2001.
With the commissioning of Ennore Port in 2001 the thermal coal meant for
Tamilnadu Electricity Board was shifted from Chennai Port. With the
commissioning of second stage at Ennore Port, all the other dusty cargoes will also
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move out to Ennore port. With these developments the Chennai Port will then be
handling mostly clean cargo such as containers and general cargo. With the
number of car manufacturing companies located around Chennai, potential exists
to attract the traffic of car exports and a trial shipment has already been carried out
with success.
The Govt. is also planning to make Chennai as the Hub Port for containers
on the East Coast, with the completion of extension of container terminal and
other modernisation plans in progress; the port is poised to become a unique Port
in the East to handle Ro/Ro traffic exclusively.
Privatisation plans at Chennai Port Trust
A consortium led by P & 0 ports, has won a 30-year concession to
privatize and development of the Chennai Container Terminal. The agreement
signed at Chennai on August 91h provides for the modernization of the current
terminal operations and development of Chennai a Major Hub port. The Indian
Government has already announced that Jawaharlal Nehur Port on west coast and
Chennai on the East coast will be developed as Hub Ports.
P & 0 Ports has taken over the Chennai Container Terminal on November
ninety days after the signing of a concession agreement of privatisation,
modernisation, operation and management of terminal. The Chennai container
terminal is already the second largest container port in India, accounting for
approximately 15 percent of the total volume. It is the only port on the East coast,
apart from Kolkata that is able to handle substantial container volumes.
The establishment of Chennai Port as a hub Port in the region will reduce
transhipment cost as well as transit time and will go a long way in helping
international trade. It will also result in considerable savings in foreign currency
for importers and exporters.
The Details regarding Private participants at Chennai Port Trust are as
follows:
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NameBerth Duratnj Original Date Extension_________
Handled Begin End Begin End
Bengal Tiger CTB - I 2 Yrs 18/01/95 17/01/97 18/01/97 17/01/98Line - oldExpress WestContainer Queyl&II
2yrs 18/01/95 18/01/97 25/12/97 01/04/98
LineACT JD-V 20 yrs 26/02/98 04/06/18
Arumaiduria Terminated onJD-I 20yrs 7/1/98
&Co 25/08/2001
Bengal Tiger CTB-I 2 yrs 17/09/99 17/09/01Line-NewChennaiContainer 30/11/20
CTB-III 30yrs 30/11/01Terminal 31
LimitedSource: Prepared from the data collected
Privatisation of Cochin Port Trust
Consistent with liberalization policy and 2 nd Generation regions of the
Government the Cochin Port has identified area for development which envisages
substantial investments from private sector. When developed, this would not only
aid in creation of infrastructure but also provide the state of art facilities for the
trade. Major development programme of Cochin Port Trust during 9th plan and
10th plan are proposed to be taken up are.
1. Establishment of a container Terminal at Vallarpadam under a Joint venture
with Cochin Port Trust and P & 0 Ports Ltd., Australia.
2. Construction of LNG terminal at Puthuvypeen
3. Development of Passenger Terminal
4. International Bunkering Terminal
5. Ship repair facilities at Cochin Port.
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Vallarpadam International Container Transhipment Terminal
Project to be implemented by the special purpose vehicle (SPV) unique just
in time in India a joint venture between Cochin Port Trust (26%) and a private
operator (74%). The project spread over 200 acres of land at Vallarpadam with
Berths measuring 2000 mts to accommodate 4 mainline and 3 Feeder vessels with
a draft facilities at Berth of 14 nits. The estimated project cost Rs.2000 crores in
two phases.
Phase 1(2000 - 2005) - Rs. 1000 crores.
Phase 11(2006-2015)— Rs. 1000 crores.
Privatisation of New Mangalore Port
On the privatisation front the Port handed over one berth to Mangalore
refineries Ltd for handling 4.6 million Tonnes crude of P.O.L. The total
investment is Rs.4 11.39 crores. The berth was constructed by the Port and funded
by Mangalore Refineries Ltd.
PRIVATISATION SCHEME IN OTHER PORTS IN INDIA
The success story in foreign ports tempted The India Major Ports also to
attempt and develop under privatisation. In India the Jawaharlal Nehru Port Trust
was the first port introduced privatisation schemes followed by Tuticorin and
Chennai Port Trusts. The following are the important key project operations in
other ports.
Jawaharlal Nehru Port Trust
Nava Sheva International container Terminal: Container Terminal being
operated by MIs. P&O Ports Ltd, Australia.
Kandla Port
M/s. - GEEPEE: Leasing of berth for bulk of Break Bulk Cargo handling.
KPT - Essar Oil: Erection of SBM for handling crue oil and products.
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Mormuguo Port Trust - The Port has leased two berths for coal handling on
privatisation.
Mumbai Port - Mumbai Port had invited two global tenders for leasing two
container berths and to give berth in India dock and another set for general cargo
equipping the berth's cost of Rs.2500 millions.
Development of Minor ports in India
The some of Minor Ports traffic has increased from 10% to 25% as the total
traffic handled at all Indian Ports. There is good scope for privatisation in this
sector too. Future projection indicates that it should grow to 100% provided that
the improvements are made in infrastructural facilities berths, dredging,
communications, traffic etc. Gujarat State has got a number of working minor
ports. They have recently commissioned private ports at Mundra, Pivavav &
Jamnagar etc. Similarly Maharastra is also taking the initiative. They had
awarded a port in Wadavan for nearly 20 berths under privatisation to P&O
Australia for development. Tamil Nadu Government is also taking the initiative
for developing the Colochel port with the help of Malaysian company. The state
Governments of Andra Pradesh, Karnataka, Orissa are also making serious efforts
to promote and develop existing minor ports and construction of additional ports
under privatisation.
Implications & Consequences of privatisation
At the outset, let it be understood in clear terms that "Privatisation" is not
the panacea for all ills. It is not the proverbial "magic wand" that will cure the
debilities that ail the Ports at the moment. The approach should be appreciated in
the context of the sincere efforts taken by Government in trying to bring about a
paradigm shift in the structure and management of the Ports by opening doors for
privatisation.
230.
Saddled by huge work force and other inherent problems, major Ports are
not able to attract more traffic or act as a commercial organization. Any effort for
public-private participation will be futile if not adequately backed appropriate
labour reforms. The diametrically opposed public-private labour philosophies
require to be harmonised; whereas the state seeks to maximize employment, the
private sector opts to work with restricted workforce.
Minor Ports have shown very encouraging signs of development during last
few years. There has been a steady increase in the percentage of traffic handled at
Minor Ports. From 9% (20.30 million tones) in 1995-96 it has nearly doubled to
17% (55.21%) in 1999-2000. Whereas this does offer promising investment
potentials. The objective should be to complement each other rather than to
compete with each other. As it is, with the squeezing hinterland, there is an
increasing competition among the Major Ports to gamer as much chunk of the
cake as possible. Thus investment in this sector without going into the intricacies
will only end up in a fiasco as witnessed in some other sector which have opened
up for private investment. This will affect the very existence of major and minor
ports. Taking advantage of liberalized regime, maritime states are also
contemplating development of the deep draft seaports without an overall master
plan for development of entire Indian coastline-this may act as a deterrent and
divert the investor's attention from Major Ports.
It is beyond doubt that the Public-Private participation, which will bring
with it professional management, functional autonomy and adequate financial
resources for development; will definitely give the much-needed fillip towards
making the Indian Ports more competitive and professional and gear them up to
face the challenges of globalisation. However, caution should not be thrown to
winds in the zest to grab the opportunities available. Many of the projects have
been non-starters simply because the investors did not make a correct assessment
of the market potentials.
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Private participation in the infrastructure development will definitely
reduce the demands on the public sector budget though this does not construe that
the state absolves its responsibilities entirely. The state will continue to retain at
least some degree of control.
On the whole, the privatisation of the Ports has become the need to the
hour, in order to remain competitive and to maintain a high and consistent
standard of service. The Government has taken positive steps towards this
direction and the Ports management and labour have attuned themselves to face
the exacting requirements of functioning as a professionally managed
organization.
In the ultimate analysis, the dependence of the economy on ports makes it
imperative that the Indian Ports discard it organizational clothing suited for
monopolistic environment.
232.