Asset monetisation plan gives a bigger role to private operators

Last week, the government unveiled its asset monetisation plan that envisages giving on lease many existing brown-field infrastructure assets to private players.  When implemented, the entities engaged in cross border trade in merchandise will deal more with private entities managing the ports and airports.
 
The National Institute for Transformation of India, known as Niti Aayog, says that the assets considered for monetisation in the port sector from FY 2022 to 2025 are spread across 9 of the 12 major ports. So far, 31 projects have been identified for private sector participation for improved operational efficiency and capacity utilisation of existing port assets. Also, twenty-five major airports of Airports Authority of India are considered for monetisation over FY 2022-25. The larger objective is to focus on monetisation of these 25 airports, while bundling of smaller airports may be explored based on market testing of transactions and investor feedback, says the Niti Aayog.

 
The new plan is reminiscent of the State governments building industrial estates and leasing the plots and sheds to industries in the sixties and the seventies. For all practical purposes, those assets have remained in the possession of the industries and will remain with them for all time to come.  The situation may not be very different under the new plan. Also, the asset monetisation plan may be the beginning of privatisation of more government assets in one form or the other. So, in due course, almost all ports and airports might be run by private operators.
 

The experience of most importers, exporters, shipping lines and other logistics services providers is that the private operators are more willing to be flexible and provide better services than government owned ports that are more rules bound. The charges of the private operators are also more than those charged by the port trusts.

 
The Tariff Authority for Major Ports under the Union Ministry of Port, Shipping and Waterways used to fix the tariffs for various services provided by the 12 major ports till recently. However, under the new Major Port Authorities Act 2021, the boards of these ports have the authority to frame their own price scales in line with market conditions, as the private operators do. So, the charges at the major ports may also go up.
 
The import and export volumes are expected to go up in double digits in the coming years. At present 95% of trade volume and 65% of trade value go through maritime transport and so, higher efficiency at ports is crucial. That would entail massive investments in the capacity of ports and airports to handle the cargo. So, the private players running the ports have to make the necessary investments to upgrade the existing facilities to provide better services and also charge higher tariffs.

 
Many ports and airports are monopolies in the sense that the exporters and importers in the nearer geographical areas have no choice but to use the nearest facility. For example, most importers and exporters in Maharashtra have to necessarily use the port at Nhava Sheva and keep their pre-shipment costs low. So, the government must consider having independent tariff regulators, who can fix the tariffs taking the interests of all the stakeholders into account rather than let only the Competition Commission of India look into cases of monopolies taking undue advantage.
 
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