Privatization in Indian Port Sector

The concept and process of privatization in the ports sector is complex relative to the situation in other core sector industries. Privatization in other industries means transfer of shares in a company from Government to either a strategic investor or to public in general. Thus, privatization of Bharat Aluminum Company (BALCO), Videsh Sanchar Nigam Limited (VSNL), and Modern Foods in recent past was effected by transfer of shares to strategic private sector investors who eventually took up management control of the company. However, the process of privatization in ports sector is, quite complex. The complexity arises due to following reasons. 1. Multiplicity of activities within the ports sector. 2. Public monopoly to private monopoly. 3. Ports as catalyst for economic development Port Organization and Administration Structures: There are four different Port Organization and Administration structures, which are representative of orientation of ports. Commercial versus public, as well as the level of private sector involvement. Services Port This model conventionally followed in many countries of the world, mainly focus on the realization of public interests, by following a direct service provider role for the government, which also owns all the port assets and facilities. Many ports in developing countries like India and Sri Lanka are still managed as services Port though certain new policy initiatives are underway to move in the direction of landlord Port model, through partial privatization of port assets. In case of such service ports, the public port authority owns, maintains and operates all Port assets (both fixed and mobile) and cargo handling is done by labour employed directly under the port authority. The port authority undertakes to offer complete range of services required for functioning of the seaport system. Major ports in India are increasingly taking to landlord port model, by privatizing a range of port facilities and services. Tool Port Under tools port model the port authority owns develops and maintains the port infrastructure as well as the superstructure, including cargo handling equipment such as quay cranes, forklift trucks etc. The port authority also directly employs workers who carry out all the port related cargo handling operations. However, port authority does rent out its equipment and facilities to private parties, who are also allowed to set up specific facilities and services, which the port authority does not wish to operate on its own. Landlord Port In this model, several of infrastructure facilities is leased to private operating companies like oil refineries, chemical plants or private port operators. While each of the operators of services is free to further develop and add to the facilities operated by them, the basic ownership of the leased assets including land, waterfront and other fixed assets rest with the port authority, which acts as the landlord. This model is highly compatible with the .Build Own Operate. (BOT) route of financing port projects and is strongly recommended for moving out of the services port model that is less amenable to cooption of private sector in port development. Ennore is the only Indian port, which has adopted this organizational model. As the role of private enterprise in the sector grows, other Indian major ports will gradually get converted to landlord ports.

operate. Case Study: Nhava Sheva International Container Terminal [NSICT] NSICT promoted by P&O Ports is the first private and most modern Container Terminal of India developed at a cost of $ 270 million. optimum utilization of feasible water front area and avoiding difficulties in container stacking. would be handed over to JNPT. all the civil engineering structures. The document specified the life span of the assets for estimating depreciation. On the expiration of the stipulated license period. manage and maintain a 600 m Container Terminal on Build. operate and maintain a new state of the art two-berth container terminal at JNPT subject to the conditions specified in the bid document and subject further to section 42 of the Major Port Trusts Act. the license would receive the depreciated cost of permanent construction and other assets as taken over. JNPT was the natural choice as a test case in Indian Major Port privatization effort. the P&O Ports Australia Pvt. Landlord ports aim to strike a balance between public and private interests. except few countries like UK and New Zealand. Service and tool ports mainly focus on the realization of public interests. all equipments. Port is planning to extend Container berth by 330 m and other facilities on BOT basis. The Group of Experts appointed by the World Bank submitted their recommendations. In the absence of a port regulator in the UK. port land is fully privately owned and involves risk of being sold and resold for non-port use. In fully privatized ports. faster turnaround time. manage. The 30-year license was awarded on July 3. Ltd along with their Indian partner the RPG Group openly expressed their interest in managing the JNPT container terminal. ancillaries.Fully Privatized Ports As a model of port reform strategy fully privatized service port model has had few takers. Future: In view of expected growth in container traffic. The Government of India requested the World Bank for a team of international experts to do the necessary groundwork for the tendering for operation of the JNPT container terminal. privatized ports are essentially self-regulating. interests of the shareholders.e. 1997 to construct.. The estimated cost of the project is Rs 600 Crores (revised) and it is likely to be in . 1963. making it unavailable for maritime use. the licensee would construct. Fully privatized ports focus on private interests i. Operate and Transfer basis. The expectation was that the expertise gained from this experience would serve as a launching pad in the much wider and far more complex Privatization efforts at the other major ports. If JNPT were to terminate the agreement prior to the thirty-year period. etc. This included constructing a 600-meter long quay and developing a new container yard measuring 20 hectares all of which was to be reclaimed from the sea. General Notice Inviting Bids for Licensing the Operations of Port Terminals the MoST and the Ministry of Justice. Details of the Bid for the New Privatized JNPT Container Terminal: As per the bid. It is considered an extreme form of port reform and suggests that State no longer any meaningful role of pursuing public interest in the ports sector. Safeguarding of public interests has been made possible by the existence of high levels of competition in United Kingdom no significant city is more than 150 kilometers from at least 2 ports. Furthermore. machinery. The Terminal is located within Jawaharlal Nehru Port (JNP) across the island of Mumbai. reclaimed sea and water area in the licensed premises would always remain with JNPT. The ownership of all the land. Initializing the Deal: As the most modern port in India and also the port with the fewest labour related hurdles. accommodating larger size container vessels.

At present. Phase. The Tendering process for the capital dredging project will be commenced after appointment of the PMC. The work of geotechnical investigation is completed. In view of the directives received from the Ministry.2 kms which is maintained to a depth of 11 Mtr below Chart Datum. road rail connectivity and Construction of berths and provision of Container handling equipments. and a Chemical Terminal.5 mtrs navigate through Mumbai harbour channel and JNP channel. Mumbai harbour channel is presently maintained to a depth of 10. further terminal facility will be required. in this regard proposal is being put up to the Ministry.0 Km long main harbour channel with Mumbai Port.I: It includes development of 1000 m of container quay length and matching BPCL jetty facility in a 300 m long jetty for handling A.8 million TEUs) per annum.C class liquid cargo . JNPT shares about 21. In order to handle the additional volumes. It is assumed capacity addition of about 10 million tones (ie 0.B. JNPT has decided to develop Fourth Container Terminal. The development is proposed in two phases. JNPT is having a channel length of 7. as an extension of BPCL Jetty. large size vessels having a draught up to 12. The development will be done on BOT basis. 8 Parties have submitted their offers. The Port has decided to deepen and widen the existing channel to accommodate upto 14 mtrs draught vessels by using tidal window. the Port has re-invited RFQ. The work will be completed within 27 months after its award.operation by 2011-12. . It is envisaged from various studies that the Port would be required to handle container traffic to the tune of 10 million TEUs in year 2014-15. It includes reclamation of land. In view of this. dredging. development of yards. Proposal for appointment of a Project Management Consultant is at award stage.7 to 11 mtrs below Chart Datum. on BOT basis. making use of tidal window.

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