Adopt Landlord System For Indian Ports: Study

Indian ports need to take a cue from the management of their counterparts around the world and shift from being service ports to landlord ports. This will result in substantial improvement in efficiency, says a study conducted by two officials of SCICI, the nodal agency for ship financing in India, which is being merged with ICICI.

The study authored by Y S Shah, general manager, and Neeraj Jindal, project officer, makes out a strong case for private sector participation in ports.

It was tabled as a background paper at a recent seminar on infrastructure organised by the Indian Merchants Chamber, Maharashtra Chamber of Commerce & Industry, Gujarat Chamber of Commerce and Industry, Goa Chamber of Commerce & Industry and Federation of Madhya Pradesh Chamber of Commerce and Industry.

 

Interestingly, the mooting of the landlord port system is in line with the new port privatisation guidelines announced by the government for major ports in October,1996. The guidelines provide for private investment in major ports only on a build, operate and transfer (BOT) basis.

Principally, three systems of port management are followed the world-over. They are the landlord system, the tool system and the service port system.

In the landlord port concept the government is not engaged in cargo operations. The private sector takes over this operation on land and infrastructure leased from the port authority.

The superstructure required for cargo handling related activities is purchased, operated and maintained by the private party, while port labour too is provided by private companies.

Infrastructure apart from land comprises the sea-front. The superstructure includes bulk terminals, container terminals, liquid terminals, container yard and container freight station.

In a tool port the government provides the infrastructure and the superstructure whereas labour operations - in particular the stevedoring operations - are carried out by private companies.

In a service port the government not only provides the infrastructure and superstructure but also the labour. The 11 major ports in India are service ports.

Amsterdam, Rotterdam and New York ports are based on the landlord port system. Ports in Portugal are based on the tool system. Singapore and most ports in the developing countries are service ports.

The study observes: All over the world, there is a trend of ports to move into the direction of the landlord port system i.e to increase the participation of the private sector. It may be mentioned here that the BOT concept requires the private sector to provide even infrastructure for the port and thus falls in the landlord port system.

Indian ports are characterised by poor productivity, over-stretching of capacities and congestion. Rotterdam, one of the world's premier ports handles about 288 million tonnes annually.

The 11 major Indian ports on the other hand have a capacity to handle only 177 million tonnes but ended up handling 215 million tonne in 1995-96.

Port traffic in India grew by over 9 per cent in 1995-96 and is expected to grow further with greater liberalisation. This demand-supply mismatch has resulted in congestion at Indian ports. The average turnround time of ships in Indian ports has increased from 7.6 days in 1994-95 to 8.5 days in 1995-96.

Jawaharlal Nehru Port, the most modern of Indian ports handles only 12 containers per hour per vessel at a berth. This compares poorly with 30 at Bangkok and Colombo and 40 at Singapore.

The other problems plaguing Indian ports are poor draft, insufficient storage space on berths and strong unions. The 11 major ports are also not driven by the profit motive and act as only service providers. The unions are also very strong which affects productivity. The study makes the point that internationally, port productivity has increased after private sector participation.

It cites the case of Malaysia and Philippines. Malaysia leased out a container terminal in Port Kelang to a consortium of local and foreign interests in 1986. Philippines followed suit in 1988 by handing over the management of Manila's International Container Terminal to a private group. Since the early nineties both countries have expanded private involvement to cover many other ports.

In both countries productivity increased by 15 to 20 per cent after privatisation. China too opened its ports to the private sector recently and within 18 more than US$1 billion worth of investment was pledged. The study however, cautions that privatisation alone will not solve the problems of ports.

Both public and private sectors need to contribute in terms of both management and investment to improve the competitiveness of Indian ports, the study states.