25-10-2016

MoS intends withdrawing Monopoly Policy at Major Ports

MP

After undertaking a review of the existing policy, the Ministry of Shipping proposes to withdraw the Monopoly Policy with respect to the existing Major Ports as well as the new Major Ports which are proposed to be established in future. It has also been suggested that the issues related to monopoly, if any, can be taken up with the Competition Commission of India by the parties concerned, as per an official release.

The Ministry had introduced the Monopoly Policy, to be effective in all Major Ports, in August 2010. The Policy says that: "If there is only one private terminal/berth operator in a port for a specific cargo, the operator of that berth or his associates shall not be allowed to bid for the next terminal/berth for handling the same cargo in the same Port."

The Ministry now proposes to review the relevance of the Monopoly Policy in the port sector in view of the significant changes that have taken place over the last 5 years. After opening up of the ports sector, the PPP mode of infrastructure development has by and large been successful. During the last 4 years, 118 port projects have been awarded with an investment of Rs 53,353.80 crore. This will help to add 671.65 mtpa in the Major Ports. In addition, 52 projects are currently in operation where investments have come through the PPP mode. As is evident, the response of private players, unlike other infrastructure sectors, has been very encouraging in the ports sector due to the presence of a large number of players for each of the segments. Besides, ports have their own berths which also compete with private berths, the release pointed out.

During the last two years, 67 private investors have bid in the various port augmentation projects in Major Ports which were tendered out. It clearly establishes that there are enough number of private players who have shown interest in this sector, baring only a few exceptional cases where the project structuring was not good.

It is also important to mention here that non-major ports are offering strong competition and their market share is on the rise. Currently, it is around 40 per cent and is expected to touch 50 per cent soon. Also, the capacity utilisation of the Major Ports has come down during the last 10 years, decreasing from 92.85 per cent to 62.82 per cent, and this declining trend does not support such restrictive practices such as the Monopoly Policy, the release stressed.

As compared to non-major ports, the Major Ports suffer the following three regulations which limit competition and reduce their attractiveness:

 Tariff regulation by TAMP

Security clearance for bidders

Monopoly Policy

Non-major ports are free from these constraints and hence are attractive to investors. To provide a level playing field, the government has now proposed to do away with TAMP. Similarly, a new Major Port Authorities Bill has been proposed wherein several clauses have been suggested for imparting more flexibility, autonomy and quick decision-making for the Major Ports.

 In this background, continuing with the Monopoly Policy in Major Ports is affecting the growth of the ports and reducing competition. Moreover, the policy also deprives the operators of the benefits of economies of scale and use of common infrastructure and machinery between berths.

 One more disconcerting factor has been the spate of litigations on exclusion based on the Monopoly Policy. Every time an operator is excluded based on this policy, it has been challenged and the litigations have dragged on for 2-3 years delaying crucial projects. Though the Major Ports have succeeded in the end in the litigation, valuable time and opportunities have been lost which has been made the best use of by private ports.

The ambitious Sagarmala programme of the Ministry of Shipping envisages setting up 4-5 new Major Ports and the execution of 142 port projects at an estimated cost of Rs 93,000 crore. Private investment would need to be encouraged for this. If the current Monopoly Policy continues, this may deter the private investors.

Keeping in view the fact that large numbers of private ports are now operating and a large number of terminals in Major Ports are operated by private players, the purpose behind the guidelines, i.e. to ensure one entity does not monopolise operations at a port, is no longer valid. Competition will ensure best tariff-setting by terminals, which may be seen in the light of the fact that TAMP is to be abolished soon. Restricting participation of the extant terminal operators therefore serves no purpose, according to the Ministry.

Views of stakeholders have been solicited on the future applicability of the Monopoly Policy.

Source: Exim

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