14-12-2017

India: Centre looking to separate Kolkata, Haldia docks

 

The Shipping Ministry has started work on separating the accounts of Kolkata Dock System (KDS) and Haldia Dock Complex (HDC), which experts say could be the first step towards hiving off the two into independent entities.

Currently, both KDS and HDC come under Kolkata Port Trust, one of the 12 government-owned ports. It is also the only port among the dozen with two dock systems.

“We propose to separate the accounts of KDS and HDC to make them independent cost and profit centres,” a ministry official said.

“KDS has to improve its performance; it just cannot piggy-ride on HDC. The general view is that KDS should improve its performance and reduce expenditure to make it a viable organization.

Account bifurcation

The bifurcation of accounts is being done while maintaining the corporate account of Kolkata Port Trust.

The ministry had hired audit and accounting firm EY to work out the profitability of each dock system by separating their accounts, taking into consideration the common services provided by them. “That work is over. Kolkata Port Trust has submitted to the Shipping Ministry separate accounts based on the recommendations of EY on apportionment of common services such as marine pilotage services,” the official said.

Much of HDC’s revenue is now used to fund the pension liabilities of KDS. The separate accounts worked out by the Port Trust show that HDC made a net profit of over ₹250 crore while KDS incurred a net loss of around ₹410 crore in FY17.

Kolkata Port Trust posted a loss of ₹210.01 crore in FY 17 despite earning ₹1,924.11 crore (the highest among the 12 ports). It handled 50.314 million tonnes (mt) of cargo in FY 17, of which HDC handled 34.141 mt, or some 68 per cent of the total volumes.

The financial performance of Kolkata Port Trust, according to the ministry official, hinges to a large extend on the pension budget. The Port Trust is always short on contributing to the huge annual pension liability. “HDC is keeping Kolkata Port Trust alive on meeting pensioners’ liability,” he said.

“KDS has over 27,000 pensioners while HDC has about 3,000. The pension fund has a deficit of about ₹4,000 crore and the Port Trust is contributing some ₹700 crore every year to the fund. That is the big problem,” he said.

‘Not that easy’

While the ministry prefers to let HDC operate as an “independent entity”, port industry executives say separating KDS and HDC is “not that easy”.

First, the port workers unions are resisting the move. Secondly, the marine department of Kolkata Port Trust has to come on board to make the plan a success. The Port Trust currently has marine pilots who are common to both the dock systems. It is also the only government-run port that has a marine pilots’ union — the Kolkata/Haldia Port Pilots’ Guild.

A separate pool of pilots for HDC would smoothen the process of separation of accounts, a port consultant said.

Currently, marine pilots have to come from Kolkata, travelling some three hours, to do pilotage in Haldia, whether it is berthing or sailing. “If they are stationed in Haldia, they can be summoned at short notice. We are trying to relocate some pilots from Kolkata to Haldia. But, we’ll have to see whether it will happen,” the official said.

Question of funds

“Once the marine issue is fixed, it would be easier to push the separation of accounts to facilitate independent cost and profit centres,” the official said.

“Ultimately, it may lead to separation of the two dock systems.” If that happens, the ministry will have a greater say in the quantum of funds that HDS can transfer to KDS to meet the Port Trusts’ pension outgo every year.

Source: The Hindu Business Line

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