By Kelli K. Clark —
Status: Not Started –The Major Port Authorities Bill (MPA), 2016 was introduced in the Lok Sabha but never approved. The bill has now lapsed and must be reintroduced, passed by both houses, and signed into law by the president of India.
Low Difficulty: Legislation, Light Opposition — Some trade union opposition, and minimal political opposition in parliament. With proper attention, the bill can easily be approved and put into effect.
This is the thirteenth installment in a new series of articles on the India Reforms Scorecard: 2019-2024 by the staff and experts at the Wadhwani Chair in U.S.-India Policy Studies. The series seeks to provide analysis on why reforms marked as “Incomplete” or “In Progress” have not been completed, and the impact such reforms can have on specific sectors or the economy at large.
The Major Port Authorities (MPA) Bill, 2016 began as a show-piece initiative of Prime Minister Modi’s government to replace the Major Port Trusts Act, 1963, and bring greater autonomy and efficiency to India’s twelve major ports.
After being introduced in the Lok Sabha in December 2016, the MPA bill was referred to a standing committee. Final amendments from the committee were approved in February 2018.
The Lok Sabha passed 21 bills in the 2018 monsoon session, but the MPA bill was overlooked. In the 2018 winter session of parliament, the pending bill was again considered low priority. On June 3, 2019 the sixteenth Lok Sabha dissolved, the MPA bill lapsed, and the opportunity for reform was missed.
Why Reform is Needed
Maritime transport accounts for 95 percent of India’s trading by volume and 68 percent by value -making India’s ports vitally important for economic growth. Unfortunately, India’s major ports are quite inefficient in their turnaround time and use of existing facilities. World Bank’s report suggests that if South Asian container ports were as efficient as the world’s most efficient ports, the existing facilities would have capacity for double the number of containers they are currently receiving. This could have major implications, with one study suggesting that a 50 percent reduction in turnaround time could increase manufacturing exports by at least 20-25 percent.
The problem is that the central government controls India’s major ports under the Major Port Trusts Act, 1963. This is unlike India’s over 200 minor and intermediate ports, which only receive administrative oversight from state governments under the Indian Ports Act, 1908. The effect of this difference has caused a divergence in the growth between major and minor ports. In 2018-2019, cargo tonnage at minor ports grew at a rate of 10.1 percent, while volumes at major ports only managed to grow by 2.9 percent. This discrepancy is largely due to three sets of strict regulations imposed on the major ports by the central government, all of which are addressed in the MPA Bill.
Strict Regulations on Rates
The Tariff Authority for Major Ports (TAMP) controls assets and controls rates at major ports. This leaves major ports at a serious disadvantage when compared to minor ports, which are not under the authority of TAMP. The new MPA bill will level the playing field by allowing all future public-private partnership operators to fix tariffs based on market conditions.
Strict Regulations on Governance
Under the Major Port Trusts Act, 1963, major ports are governed by a Board of Trustees appointed by the central government under the supervision of the Ministry of Shipping (Ennore Port was established as India’s “for corporation” port in 2001 and operates under the Companies Act, 2013). This method of governance has slowed the port’s ability to respond to challenges, mediate disputes, and make changes. The MPA bill will replace the Board of Trustees with a Board of Port Authority which will be given new powers to “use its property, assets and funds in such a manner and for such purposes as it may deem fit for the benefit of the major ports.” The MPA bill also creates an independent review board to investigate disputes between ports and public-private partnership concessionaires, review stressed projects, and suggest new measures to handle complaints.
Strict Regulations on Decision-making
The MPA bill will also lead to more rapid and transparent decision-making by transforming how major ports are managed. Under the 1963 act, the Board of Trustees must seek approval from the central government in order to raise a loan. The MPA bill will change this by allowing the new Board for Port Authority to raise loans from both Indian and foreign financial instructions. Prior sanction will only be necessary for loans above 50 percent of a port’s capital reserves. With the new system, the Board for Port Authority can make and implement its own decisions including: declaring the availability of port assets for port related activities and services, developing and providing infrastructure facilities, and providing exemption from payment of any charges on goods or vessels.
By addressing each of these strict regulations, the MPA bill will increase the efficiency of major ports, making them more competitive and quicker to grow.