Shift in Governance: Major Port Authorities Bill, 2020 seeks to decentralise decision-making

Major Port Authorities Bill, 2020 seeks to decentralise decision-making

To promote the expansion of port infrastructure and facilitate trade and commerce, the Rajya Sabha passed the Ma­jor Port Authorities Bill, 2020, in February 2021. First introduced in the Lok Sabha on Mar­ch 12, 2020, the bill seeks to provide for regulation, operation and planning of major ports in the country, and give greater autonomy to these ports. It also seeks to replace the Major Port Trusts Act, 1963.

The bill is aimed at decentralising decision-making and bringing professionalism in the go­vernance of major ports. It seeks to shift from the governance model at central ports to the land­lord port model, in line with successful glo­bal practices. This will also help in bringing tra­ns­parency in the operations of major ports. The bill will empower the major ports to perform with greater efficiency by providing full autonomy in decision-making and modernising the institutional framework of these ports.

Indian Infrastructure provides a snapshot of the Major Port Authorities Bill, 2020, and its notable features…

Need for the bill and its salient features

According to the Ministry of Ports, Shipping and Waterways, the Major Ports Trust Act, 1963, was deemed to be restrictive, with major ports finding it difficult to operate in a highly competitive environment and respond to market challenges. Further, the board of trustees was felt to be too large and disparate to allow efficient de­cision-making.

The Major Port Authorities Bill, 2020, is more compact in comparison to the Major Port Trusts Act, 1963, as the number of sections has been reduced to 76 from 134, by eliminating overlapping and obsolete sections. The new bill has proposed a simplified composition of the port authority board, which will comprise 11-13 members as against the present 17-19 members representing various interests. A co­m­pact board with professional independent members will strengthen decision-making and strategic planning.

Major Port Authorities Board: Under the 1963 Act, all major ports are managed by the boa­rds of port trusts that have members appointed by the central government. The bill provi­des for the creation of a board of the major port authority for each major port. These boa­rds will replace the existing port trusts.

Composition of the board: Provision has been made for the inclusion of government representatives of the state in which the major port is situated, as well as the Ministry of Railways, Ministry of Defence, Customs Authorities and Depart­­ment of Revenue, as members of the board, apart from a government nominee me­m­ber and a member representing the em­p­loyees of the major port authority.

Powers of the board: The newly passed Ma­jor Port Authorities Act, 2021, provides grea­ter autonomy to major ports. Further, with the diminished control of the Tariff Authority for Major Ports (TAMP), the authority boards for each port will now be vested with the power to frame their own rates and charges in accordance with the market conditions, enabling them to compete with their private competitors. The Board of Port Authority has been gi­ven the power to fix the scale of rates for other port services and assets, including land.

Tariff determination: The boards of port authorities have been granted the power to fix the scale of rates for other port services and assets including land. The boards will also be allowed to enter into contracts, undertake planning and development, and determine ta­riff, except in cases of national interest, security and emergency arising out of inaction and default. Under the present Major Ports Trust Act, 1963, prior approval of the central gove­rnment was required in 22 instances.

Financial powers of the board: Under the 1963 Act, the board has to seek prior sanction of the central government to raise any loan. However, under the Major Port Auth­o­ri­t­ies Bill, 2020, the board may raise loans from any scheduled bank or financial institution with­in India, or any financial institution outsi­de India that is compliant with all the laws to meet its capital and working expenditure re­quirements. However, for loans above 50 per cent of its capital reserves, the board will re­q­u­ire prior sanction of the central government.

Corporate social responsibility: The bill provides that the board may use its funds for providing social benefits. These include the development of infrastructure in areas such as education, health, housing and skill de­velopment. These benefits could be provided to the board’s employees, business pa­rt­ners, customers, local communities, environment and society at large.

Public-private partnership (PPP) projects: The bill defines PPP projects as projects taken up through a concession contract by the board. Accordingly, for such projects, the board may fix the tariff for the initial bidding purposes. Further, the appointed concessionaire will be free to fix the actual tariffs based on market conditions, and other conditions as may be notified. Meanwhile, the revenue share in such projects will be on the basis of the specific concession agreement. Further, the tari­ff fixed by the port authorities will act as a reference tariff for purposes of bidding for PPP projects. PPP operators will be free to fix tariff based on market conditions.

Adjudicatory board: An adjudicatory board has been proposed to be created to carry out the residual function of the erstwhile TAMP for major ports to look into disputes between ports and PPP concessionaires, to review st­ressed PPP projects and suggest measures to review stressed PPP projects. The adjudicatory board would also suggest measures to re­vive such projects and look into complaints regarding services rendered by the ports/private operators operating within the ports.

Penalties: Under the 1963 Act, there are various penalties for contravening the provisions of the act. For instance, the penalty for setting up any structures on harbours without permission may extend up to Rs 10,000; and that for evading rates may extend up to 10 times the rates. Under the new bill, any person contravening any provision of the bill or any rules or regulations will be punished with a fine of up to Rs 100,000.

Others: Subject to the rules made under this act, the board of each major port will be required to create a specific master plan in respect of any development or infrastructure established or proposed to be established within the port limits and the land appurtenant thereto; and such master plan will be independent of any local or state government regulations of any authority whatsoever. Meanwhile, a provision has been made for safeguarding the pay, allowances and service conditions including pensionary benefits of the employees of major ports.

What lies ahead?

In sum, the bill is intended to create a level playing field not just between major and private ports, but also between terminals owned and operated by major ports and PPP terminals. Within major ports, PPP terminal players, too, have to take tariff approvals from the TAMP, which the bill has eliminated. As a result, in­ve­stment in PPP projects at major ports is expected to increase in the coming years. Further­more, the move is certainly expected to pave the way for realising the central government’s vision towards Aatmanir­bhar Bharat, making India a global manufacturing hub.

While 88 votes were in favour of the bill in the Rajya Sabha, 44 votes were against it. It has been alleged that the bill is aimed at privatising ports and diluting the powers of the states on land use. Although the bill addresses several impediments faced by major ports, these ports lack service quality and marketing as compared to private ones. Hence, it has been argued that the creation of a mechanism will not be enough.

Net, net, while the positive impact of the new bill still remains to be seen, it is surely ex­pected to help the major ports tide over many challenges.

Garima Arora