10/28/21, 1:49 PM Indian Ports Bill 2021: 

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Home / Opinion / Panorama / Ports Bill: Back to central planning and inspector raj?

Indian Ports Bill 2021: Back to central planning and inspector

raj?
The port sector in India needs less centralisation, not more

K Ashok Vardhan Shetty, AUG 06 2021, 13:36 IST | UPDATED: AUG 06 2021, 14:40 IST

Representative image. Credit: iStock Photo

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10/28/21, 1:49 PM Indian Ports Bill 2021: Back to central planning and inspector raj? | Deccan Herald

India has 12
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Major Ports and nearly 200 Non-Major Ports (NMPs), and they handle about Subscribe
95% of its
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foreign trade by tonnage. Major Ports figure in the Union List and NMPs in the Concurrent List of
the Seventh Schedule to the Constitution. So, Major Ports come under the jurisdiction of the
central government and NMPs under the respective state governments, but the Centre has
overriding legislative and executive powers.

Two key central legislations governed the port sector: (1) the Indian Ports Act, 1908, which is
common to all ports, and (2) the Major Port Trusts Act, 1963. Recently, the Major Port Trusts Act,
1963, was replaced with the Major Port Authorities Act, 2021. The Indian Ports Bill, 2021, proposes
to do the same with the Indian Ports Act, 1908.

In comparison, in China, the central government has decentralised the control of

ports. Chinese ports are now managed at the municipal level. In the US, most ports are owned and
managed by counties and municipalities, but port operations are largely in the hands of private
enterprise. In Canada, the federal government owns the port lands and infrastructure but leaves
administration to local authorities. In Germany, Denmark and Belgium, ports are owned and
managed at the municipal and regional levels.

The port sector in India needs less centralisation, not more. The maritime states and port cities
must not only have a substantial stake in Major Ports but should be allowed to manage them. The
Centre should limit itself to the ‘higher’ functions of border control, competition policy, port
security, environment protection and hinterland connectivity.

NMPs have done better

Between 1993-94 and 2020-21, the cargo traffic of NMPs increased from 14 million tonnes (MT) to
575 MT while that of Major Ports increased from 179 MT to 673 MT. During this period, NMPs’ share
of the cargo traffic went up from 8% to 46%. They are perceived as “more business-oriented,
customer-friendly, cheaper and, in general, more efficient” (World Bank, 2011).

How did the maritime states do this? They set about developing NMPs almost entirely through
private investments, without too much red tape and regulation. Gujarat started the trend back in
the 1980s, by developing captive/commercial ports and jetties through public-private
partnerships (PPP). Gujarat’s notable achievements are India’s first private port at Pipavav (with
APM Terminals Rotterdam); biggest captive port at Sikka (with Reliance Industries); biggest
commercial port at Mundra (with Adani), besides India’s first two LNG Terminals at Dahej and
Hazira. 

In contrast, the Major Ports operated as “Service Ports”, performing the various port functions with
their own staff and equipment. The lack of commercial orientation, low labour productivity,
sluggishness in adopting innovations, and excessive supervision by the Union Ministry of Shipping
had negative consequences. From 1996 onwards, the ministry decided to shift to the “Landlord
Ports” model, in which the Port Trust continues to own the land and basic port infrastructure while
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10/28/21, 1:49 PM Indian Ports Bill 2021: Back to central planning and inspector raj? | Deccan Herald

port operations
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are contracted out, and the creation of new port facilities given in concession
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private enterprise on PPP basis. But the transition was painfully slow.

So, India’s port sector needs less regulation, not more. The way forward is to provide a level
playing field by freeing Major Ports of their administrative handicaps, not to impose the same on
NMPs.

What makes the Indian Ports Bill 2021 controversial are the provisions of Chapters II and III relating
to the Maritime State Development Council (MSDC). MSDC was created by an executive order in
1997, with the Union Minister of Shipping as chairperson and the ministers in charge of ports of the
maritime states/Union Territories as members. It served as an apex advisory body for the
coordinated development of Major Ports and NMPs. MSDC has met only 17 times in the past 24
years.

The Bill proposes to make MSDC a permanent body with its own office, staff, accounts and audit
and gives it wide-ranging powers and functions (Section 10). MSDC is empowered to formulate a
National Plan, to be notified in the official gazette, for development of Major and Non-Major Ports,
for both existing and new ports, and revise the plan from time to time. It can monitor the
development of NMPs to ensure their integrated development with Major Ports and the National
Plan. If any port contravenes the National Plan, then MSDC can order an appropriate enquiry. The
central government has the power to make a port non-operational if it is not in consonance with
the National Plan. The Bill is pioneering a dangerous new jurisprudence wherein mere
administrative lapses are criminalised. It prescribes draconian penalties, including imprisonment
(Section 83) for non-compliance with MSDC’s directions by Port Authorities, port officials and other
persons.

This is a replay of the socialist-era follies of central planning and inspector raj. History has shown
that central planning never works. Nobel Laureate Friedrich A. Hayek called it “the fatal conceit”.
An empowered MSDC is less about the efficient allocation of economic resources and more
about control by the Centre.

The Rakesh Mohan Committee’s India Transport Report (2013) had projected a total port capacity
requirement of 4,000 MT by 2031-32. As of 2020-21, port capacity was 2,490 MT (Major Ports 1500
MT, NMPs 990 MT). The new, overly regulatory regime is likely to choke future development of
NMPs, leading to serious shortfall in port capacity by 2031-32, with adverse consequences for the
Indian economy. This is as worrisome as the Bill’s anti-federal features. Moreover, the Bill is likely
to stifle novel initiatives by the maritime states like what Gujarat did on its own long before the
Centre.

It is therefore recommended that Chapters II and III of the Bill relating to MSDC, and the draconian
penalties in Section 83 for non-compliance with MSDC’s directions, should be scrapped entirely.
MSDC should remain an apex advisory body as before. International experience and India’s own

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10/28/21, 1:49 PM Indian Ports Bill 2021: Back to central planning and inspector raj? | Deccan Herald

past history
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are proof that “less is more” when it comes to regulation of the port sector.Subscribe
In its
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present form, the Indian Ports Bill, 2021, is poised to kill the goose that laid the golden eggs.

(The writer is a former IAS officer and a former Vice Chancellor of the Indian Maritime University,
Chennai)

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