I OVERVIEW

1.1 INTRODUCTION

1.1.1. Infrastructure plays an important part in fuelling economic growth. In particular, transportation is a critical infrastructure, as it has backward and forward linkages for connectivity of production centers and markets, at home and abroad.

1.1.2. The importance of maritime infrastructure in facilitating international trade is well recognized. It is observed that about 95% by volume and 70% by value of the country’s trade is carried on through maritime transport. Having regard to the current level of India’s share in global merchandise trade at around 0.67%, the strengthening of the maritime infrastructure would have a favourable impact on the country’s trade front and also on economic growth. The country's long coastline of around 7517 kms. spread on the western and eastern shelves of the mainland and also long the Islands is a natural resource capable of being harnessed for the country’s trade and tourism development.

1.1.3. The maritime sector of the country encompasses, inter alia, ports (major and non- major), shipping (overseas and coastal), inland water transport, navigational aids besides trained manpower engaged in the operations of the maritime sector, on board and ashore. The entries relating to the development of maritime ports are in the Seventh Schedule of the Constitution of India and therefore under the purview of the Centre and the States as well.

1.1.4. Policies of the Central Govt. regarding the maritime sector have in the past addressed issues of mismatches of capacities and traffic at major ports, acquisition of shipping tonnage for facilitating cargo carriage, the need to encourage inland water transport and positioning of navigational aids as warranted from time to time. The programmes in each of these sub-sectors had been structured as part of Plan schemes of the Ministry of Shipping (in the present from as also in the erstwhile Ministry of Transport/ Ministry of Surface Transport).

1.1.5. The liberalization in economic policies initiated in the 1990s provided the impetus to the maritime sector whereby private public partnerships have been encouraged in provision of port and handling facilities; side by side, the emergence of non-major ports through proactive policies of some of the maritime States have also ushered in a steadily growing share of maritime traffic handled at these ports, especially through private investment and by units for captive use of jetties and terminals.

1.2 APPROACH

1.2.1 Based on the experience of over 50 years of development efforts mainly by the Union Government and also by select maritime States and the potential of the maritime sector in facilitating economic growth, it is felt that the policy framework regarding ports, shipping and inland water transport should be purposive to induct modern technology and achieve increased levels of synergy and coordination. The policy would address not only issues for strengthening the sector through synergies of initiatives of the Centre and the States but also encourage the flow of investments into the sector – for upgradation of infrastructure and for modernization of facilities in respect of maritime ports, shipping and IWT sectors. In addition, the policy would help assure the status and efficiency of fixed and mobile maritime infrastructure and as a concomitant, ensure that investments in human capital optimize the country’s factor and resource endowments. As part of this comprehensive strategy towards building a vibrant and responsive maritime sector, reliable contractual procedures with built in safeguards would also be positioned, wherever required, to encourage competition. The prevalence of an independent judicial system of the country assures a transparent and healthy operational environment. Wherever required, favourable fiscal reliefs would also be provided.

1.2.2 Considering the fact that cargo movement from different modes within the country utilize more than one mode of transport to reach the maritime port for exports (and vice versa in respect of imports) and the increasing recourse towards picking up and reaching the cargo at the door of origin/destination, the need for synergies amongst the different modes of transport for such multimodal transportation is well established. This would require rationalization of the provisions of Multi-Modal Transportation of Goods Act, 1993, to support easy transportation and documentation through different modes of transport.

1.2.3 At the present juncture, the policy for maritime sector would also need to emphasise the complementary roles of the modes in sharp contrast to merely competitive functioning. The supplementary, and sometime competing, modes of transport like road, rail, and pipelines need to be integrated with water transport. Policy on a common platform encompassing the entire transport network spanning different modes and addressing critical issues such as pricing, timely deliveries and cost effective service need to be positioned. In short, a holistic approach would have to be adopted with due emphasis on the role and effectivity of maritime transport.

1.3 OBJECTIVES

1.3.1 The Policy for the maritime sector would emphasise the importance of cost effective movement of cargoes, transparency of decisions on objective considerations in matters of investment decisions, the efficiency of operations of the infrastructure as well as the relevance of core competent maritime personnel. The programmes under the Policy would address the following:-

(i) Modernizing the existing ports and upgrading their facilities in order to bring them on par with the leading ports of the world.

(ii) Developing new ports in order to fully utilize the vast coastline of the country and the available draft for deriving the maximum economic advantage.

(iii) Promoting hinterland connectivity to ensure least-distance access of the country’s cargo to the ports and also offer choice of ports in the region and terminals inside the ports to Trade.

(iv) Fostering Port specialization and inter-port complementarity for overall optimization of port facilities and the efficiency at the Ports.

(v) Facilitating the increased flow of private investment, both domestic and foreign, and at the same time ensure a competitive environment that would preclude prospects of emergence of monopolies.

(vi) Providing for institutional safeguards for the port infrastructure provider (public authorities/private sector – be it domestic or foreign / joint ventures) regarding investments and ensuring compliance of service standards to the users.

(vii) Promoting multimodal transport in the interest of time and cost efficiency.

(viii) Facilitating the acquisition of Indian tonnage for securing a significant share for the country in world tonnage and for increasing the share of Indian bottoms in the carriage of the country’s overseas traffic through cargo support to Indian flag vessels.

(ix) Promoting and strengthening shipbuilding, ship-repair and ship-breaking activities.

(x) Providing the necessary infrastructure for turning out qualified Indian maritime personnel of globally acknowledged excellence to benefit from the growing demand of both foreign and Indian flag vessels for such human capital.

(xi) Developing and integrating inland waterways to the national transport network comprising of maritime outlets as well as other points of interface with other surface transport modes.

(xii) Building appropriate institutions to support Training, R & D and other activities necessary to sub-serve and sustain the Shipping and Port sectors.

(xiii) Assuring the state of the art navigational aids at the country’s coastline with a view to encourage increased flow of coastal and overseas maritime traffic at Indian ports.

II PORTS

2.1 Ports provide an interface between the ocean transport and land-based transport. In the initial years, the traffic was being handled mostly at major ports. However, over the years, non-major ports have also witnessed growth in traffic. The growth in the cargo handled at Indian ports has increased from a level of 19.38 million tonnes ( major ports) in 1950-51 to around 457.96 million tonnes (major and non-major ports) by 2003-04. The share of traffic at major and non-major ports stood around 345 and 113 million tonnes respectively.

2.2 At present the 12 Major Ports (Kolkata/Haldia, Paradip, Visakhapatnam, Ennore, Chennai, Tuticorin, New Mangalore, Cochin, Mormugao, Mumbai and Jawaharlal Nehru and Kandla) handle about 75% of maritime cargo of the country. With infusion of new technology and capacity – building, the congestion at Indian Ports witnessed in the 1990s has reduced in some places and operational efficiency has also improved leading to capacities being marginally ahead of demand. However, with the projected growth of traffic and growing containerization, there is need to expand the capacities in the sector through investment from both public and private sectors.

2.3 The policy proposes to adopt a holistic approach for the development of port sector covering aspects of integrated development, connectivity, organizational and institutional arrangements, etc.

2.4 DEVELOPMENT AND AUGMENTATION OF INFRASTRUCTURE

2.4.1 Integrated Development

2.4.1.1Management of existing major ports and their facilities will be addressed through comprehensive master plan for each port. Berths will be planned for future needs only in line with such master plan of the port concerned.

2.4.1.2 Since problems faced by individual ports differ, these would have to be tackled and further growth planned depending on the specific requirement and not on a one-size-fits-all policy. In this, substantial changes that have occurred in the operating and urban environment around the older ports and the shift of traffic towards the new emergent ports in the vicinity would also have to be factored in. (For Example, Mumbai and Chennai ports have to come to terms with the role of JNPT and Ennore ports, respectively. Similarly, Kolkata Dock System will have to reconcile with shift of major share of its cargo to Haldia Dock System. This would call for suitably redesigning the future of the old colonial ports. Large manpower with these old ports and the real estate have also to be set on a clear course for rationalization, and development, respectively. Ports of Kandla, Vizag and Paradip face challenges of different nature and have to upgrade and modernize their manpower, management and asset-base, including berths, equipment and draft. Ports like Cochin, Mormugoa and Mangalore face limitations of commodity composition and customer base).

National Sea-Waterways

2.4.1.3. National Sea-Waterways (on the lines of Natonal Highways) along the coast would be developed; this would be funded by the Central Government and provision made for maintenance of channel depths at major ports in the first instance.

Minor Ports and Other Issues

2.4.1.4 In order to avoid unhealthy competition and to protect the territories of major ports, no new minor port may be carved out of the territory of a major port. Similarly, no minor port, or a part thereof will be converted into a major port without the consent of the respective State Government. Criteria will be prescribed for declaration of minor ports as major ports.

2.4.1.5 Possibility of extending financial support for the development of minor ports will be explored.

2.4.1.6 As the policy envisages integrated development of facilities in the port sector covering both major and non-major ports, synergies would be developed for avoiding unhealthy competition.

2.4.1.7 Development of ports would take into account the need for ensuring equitable geographical development, optimal utilization of existing assets and avoidance of unbalanced growth of individual ports.

2.4.1.8 Development of new ports and new facilities within old ports as necessary, will be encouraged.

2.4.1.9 With a view to optimize the use of presently available handling equipment at different ports, inter-port transfer of assets including to minor ports, would be permitted at book value, as earlier decided by the Maritime States Development Council.

2.4.1.10 Mechanism to coordinate the development between major ports and minor ports will be strengthened. Maritime States Development Council (MSDC), under the Chairmanship of the Union Minister for Shipping and comprising all Ministers dealing with ports in the States as Members, has been constituted on the basis of an administrative order. This will be converted into a statutory advisory body and membership will be expanded to include representatives from trade and commerce. Recommendations of the Council, if not implemented, will be brought back to the Council for its information and directions.

2.4.1.11 A centralized cell will be set up in the Ministry to secure and analyze the data for major and non-major ports for regular monitoring to serve as inputs for making policy adjustments, whenever need arises.

2.4.1.12 Trans-shipment of Indian cargo taking place outside the country at present, will be encouraged to be handled at Indian ports through concerted measures. These would include increasing the draft available at Indian Ports, rationalization of port-dues, providing differential levels of tariff for different sizes of vessels or for different cargoes to attract mother ships to berth at Indian ports.

2.4.2 Connectivity

2.4.2.1With increasing unitization of cargoes, either in the form of containers or through ever-increasing ship size for single commodities, the evacuation and handling of cargoes have become critical for the port functioning. Therefore, the resultant connectivity issues will be addressed. Apart from according priority to rail and road connection to the ports, the port authorities would be encouraged to participate in the equity of Special Purpose Vehicles (SPVs)/ Joint Ventures (JVs), formed to provide hinterland connectivity.

2.4.2.2 Monopoly situations in areas of port connectivity, such as is enjoyed by CONCOR or any private tolled road, will be suitably addressed to enable competition as well as improvement in quality and efficiency of such linkages.

2.4.2.3 Special Purpose Vehicles (SPVs) will not be allowed to develop into monopolies. The policy would provide for bringing in additional investors and competition, as may be warranted.

2.4.2.4 For ensuring that benefits of competition are available to users of ports/ terminal facilities, safeguards would be provided to ensure that terminals which are operated by private parties/sector set up through SPVs do not become captive facilities but continue as public utility.

2.4.3 Dredging Policy

2.4.3.1 Presently most of the dredging requirements of Major Ports particularly maintenance dredging are met by the Dredging Corporation of India. Measures will be taken to promote Indian dredging industry including the private sector so as to provide competitive dredging at the least cost.

2.4.3.2 Major Ports will also be required to contract out maintenance dredging for a long term of say three years, which will encourage private companies to procure dredgers and equipments, besides enabling ports to obtain competitive rates.

2.4.3.3 In the medium term of about 5 years, Major Ports, excepting Kolkata, will be required to invite tenders for their dredging requirements, instead of giving the work on nomination basis. Right of first refusal will be provided to Indian dredging companies to match the lowest foreign tender, without differentiating between a public company and a private company, provided their bids are within a prescribed band. Such preferential treatment to Indian companies will be provided initially for a period of five years, so that they can grow and compete with foreign dredging companies.

2.4.3.4 Indian private dredging companies will also be provided conducive fiscal regime to facilitate their growth. Efforts will be made to get exemption for first five years from any additional percentage of tax when they form a joint venture.

2.4.4 Land Policy

2.4.4.1The Land Policy for Major Port Trusts shall ensure that

i. Full powers are delegated to the ports for leasing of land upto 30

years and that the lease rent is reasonable.

ii. The land is allotted following the tender procedure for all fresh

allotments excepting in certain identified areas where it could also be allotted on nomination basis.

iii. Allotment of land is generally on upfront premium basis. However,

Port shall also have the flexibility of allotting the land on annual lease rental basis under certain circumstances.

iv. Ports shall be allowed to renew lease in favour of sitting occupants

even though the original lessees are no more occupying the premises.

v. Ports shall be allowed to sublet/partially sublet the leased premises subject to fulfillment of certain conditions.

vi. Change of use of leased land would be permitted subject to fulfillment of certain conditions.

vii. Dispensing with the Minimum Guaranteed Throughput (MGT) requirement, in those cases which were finalized in the past, would be allowed subject to fulfillment of certain conditions.

viii. For renewal of leases, a simple transparent system will be followed.

ix. Port land will not be given for religious purposes/activities.

2.4.5 Single Point Moorings (SPM)

2.4.5.1 With the increasing demand of crude oil requirements of Indian oil industry, the infrastructure facilities at Major Ports of the country need to be strengthened for handling crude oil. In view of this, the policy for establishment of SPMs would be facilitative; it is also proposed that a private SPM need not necessarily be within either major or non-major port limits.

2.4.6 Private Sector Participation :

2.4.6.1 Private Sector participation in ports and the modalities governing the

same will be laid down in clear and comprehensive terms. Cost-plus approach for laying down tariff by TAMP will be studied and improved upon to adopt reasonable methods of earning profit by the private investor. Gradually cost-plus approach will be replaced by normative approach, starting at first in container-handling facilities. Monopolies of any sort will be prevented and competition encouraged.

2.4.6.2 Since private sector investment is expected to lead to efficiency and

competition, it is necessary to ensure that these result into tangible benefits to the users in terms of cost reduction. The policy would endeavour to bring in both inter-port as well as intra- port competition so that users have a choice not only among ports and even operators within the same port. In case there is only a single terminal/facility at a particular port, it would have one operator. However, wherever the second terminal is to be set up at the same port, the existing terminal operator would be excluded to ensure competition. If there are a minimum of two private operators in any port, no restriction would be placed on the existing operators to bid for the subsequent terminal, subject to the condition that a single private operator will not be allowed to operator more than two terminals at the same port or 1600 metres of quay length.

2.4.6.3 In the case of container terminals, minimum quay-length is required

to optimize utilization of the facility. Hence, a quay-length of 800 meters in a straight line will be considered wherever possible for one container terminal in future. This however will not apply to existing terminals and the existing private terminal operators, while eligible, would have no rightful claim for any additional quay-length if the present quay-lengths are lesser.

2.4.6.4 Concession agreements with private operators, in future, would

include a clause on scope to handle operations outside the terminal in certain emergencies such as strikes/breakdowns etc., so that Trade is not to inconvenience.

2.4.6.5 As captive berths of break bulk or dry bulk cargo for large users

could lead to concentration of control in very limited private foreign or private domestic companies, this possibility will be discouraged. As in US, EU, Japan or China, there would be differentiation between captive terminals and common user terminals, for development of both types depending upon the needs.

2.4.6.6 Generally port projects will be awarded through tender route. However, assets may be leased out on nomination basis, particularly for captive facilities. In such cases, revenue sharing will be preferred over royalty payment. Preference to Indian parties may be given except in transshipment ports of JNPT, Chennai and Cochin. In case of lease of existing facilities, it will be obligatory on the part of the lessee that surplus workers are taken on the rolls by the successful bidder; workers’ emoluments with the lessee will not be lower than the emoluments they were getting in the port. Ports will be entitled to design a policy for workers who refuse to exercise the option to move over to the private terminals, considering that the work for which they were employed by the Port does not exist any longer. As regards Minimum Guaranteed Throughput (MGT), it will be open for the concerned port to decide whether to lay down MGT or otherwise; however, penalty for failure to achieve MGT may be made flexible.

2.5 ORGANISATIONAL AND INSTITUTIONAL ISSUES:

Directorate General of Ports

2.5.1 Having regard to the growing importance of maritime transport and

the criticality of port infrastructure, a separate Directorate General of Ports functioning under the Ministry of Shipping ( on the same lines of the presently functioning Directorate General of Shipping looking after issues concerning shipping sector) would be constituted. Such an authority would be set up after examining the modalities and the scope of activities that would be consistent with the provisions in the Concurrent List of the Constitution. Its mandate would include policy and its implementation for all Ports (including non-major ports, private ports/terminals and fishing ports) in the country.

Port Trusts

2.5.2 The existing organizational structure for major ports (Port Trusts

constituted under the Major Port Trusts Act) would be improved. Wherever considered necessary, corporatisation would be effected through suitable enabling legislative amendments to the Major Port Trusts Act, 1963.

2.5.3 Since maritime ports are essentially service providers, the present

arrangements for representation of user interests as trustees in major ports would be reviewed to enhance the levels of their participation.

2.5.4 The institutional/administrative arrangements for Ports other than

major ports would also be studied to make them flexible for growth. Corporatisation of the all ports administered by respective State Govt. would be pursued so that these ports do not remain as departmental undertakings of the State Maritime Boards. All the Maritimes States would be required to set up Maritime Boards to become eligible for any assistance from the Centre.

2.5.5 As successful functioning of ports in existing competitive environment

would depend on quick decision-making, adequate powers would be delegated to the port authorities so that business decisions on day-to-day matters are taken at the port level, leaving only policy issues to the Central Govt. for guidance or decision.

2.5.6 Special Economic Zone (SEZ):

2.5.6.1Select ports will be declared as SEZs (in consultation with the Ministry of Commerce). The land requirement for SEZ in ports will be suitably modified. The Deputy Chairmen of such ports will be declared the Development Commissioners for the notified SEZs. Private capital will be allowed to develop the infrastructure for setting up of the SEZ within the port. Efforts will be made to incorporate these provisions in the SEZ Act.

2.5.7 Supply Chain Management:

2.5.7.1As supply chain management has direct bearing on the trade and the economy, a suitable mechanism will be evolved to consider and initiate action on developments affecting the supply chain management. In this regard, the Ministry will take proactive steps so that it is consulted for its views before decisions are taken such as those concerning:

i) Setting up/closing down of an ICD.

ii) Suspension of service by railways.

iii) Special treatment for perishable goods/reefers.

iv) Alteration in war risk premium etc or in marine insurance.

v) Increase in Terminal Handling Charges.

vi) Increase in fees relating to documentation on transport to or from ports.

vii) Freight forwarding/consolidation and de-consolidation.

2.5.8 Electronic Data Interchange (EDI):

2.5.8.1Electronic Data Interchange (EDI) will be implemented at all the

major ports of India. In the first phase, the ports, where containers are handled, would be covered. In the second phase, EDI will be implemented in all the remaining ports and for all the remaining cargoes e.g. liquid and dry bulk.

2.5.8.2 The EDI will cover areas of internal computerization, port-customs

interface, port-bank-port users interface and port-port users interface.

2.5.8.3 A uniform and common web based EDI solution greatly reducing the scope of human interface in delivery of services will be implemented for the port sector to ensure that the port users do not have to visit the Port for transacting routine business. The system would standardize messages within the country and also internationally. A repository of information will also be built and regularly updated for the benefit of Port users.

2.6 MANPOWER/INDUSTRIAL RELATIONS AND TRAINING:

2.6.1 Dock Labour Boards

2.6.1.1At present Dock Labour Boards are functioning at Calcutta, Visakhapatnam and Kandla. The Bombay Dock Labour Board has been superseded. The Dock Workers {Regulation of Employment (inapplicability to Major Port Trusts)} Act 1997 provides for merger of Dock Labour Boards. To provide for interchangeability of Dock Workers with Port Workers, the existing Dock Labour Boards will be merged with the respective Port Trusts.

2.6.2 Productivity Linked Reward for Port Workers:

2.6.2.1 The present scheme of payment of Productivity Linked Reward is based on certain productivity parameters which are calculated on all India basis. However, the scheme needs to be made more realistic so that the reward is actually linked to the productivity. As the payment is made out of the resources of the Port Trusts and since each Major Port Trust is an independent entity, the Productivity Linked Reward would be calculated on the performance based on productivity parameters of individual Port Trusts.

2.6.3 Training:

2.6.3.1 The training of port officers and employees would be given due importance. There would be induction/foundation courses for new entrants and departmental promotees. The curriculum of training programme would be designed to cover multifarious activities carried out at a port. Refresher courses would also be conducted at regular intervals to keep pace with the latest developments. Successful completion of training courses would be made mandatory for promotions to higher levels. Training Institutions will be encouraged to collaborate with their well reputed counterparts abroad for upgrading skills of both trainers and trainees.

2.6.4 Recruitment & Promotion:

2.6.4.1 In order to facilitate mobility of manpower from one port to the other, appointments at senior levels will be effected through a composite method where eligible officers from all Major Ports fulfilling the criteria would be considered. Recruitment and promotion rules of such appointments shall also be standardised.

2.6.5 Pension

2.6.5.1 In order to provide fair and equitable treatment, pension in the port sector would be on the lines of pension scheme in the Central Govt.

2.6.6 Incentives

2.6.6.1 The performance of the port officers/personnel of the ports would be monitored by the respective ports regularly and incentives in the form of award/ memento for each year would be awarded.

2.6.7 Stevedoring

2.6.7.1 The policy on stevedoring will be laid down. The system by which workers are employed by stevedores will be liberalized. Rational manning norms would be developed. Workers will be given incentives only on actual work done, considering the cargo-handling equipment used for carrying out the work. Time and motion studies will be carried out in each port as early as possible of the work done by the labour with the cargo-handling equipment for different commodities, and wages will be worked out based on such studies beginning with next financial year. The stevedores will be permitted to bring in additional manpower, in addition to port/dock workers, from open market, if necessary.

2.7 FINANCIAL AND FISCAL INITIATIVES:

2.7.1 Private Sector Participation

2.7.1.1 Guidelines are already in force regarding private sector participation in port/terminal facilities. Having regard to the immense potential for development of facilities at ports on the Indian coastline, private-public partnerships would be encouraged. The decision making powers of Port Trusts in financial matters would also be reviewed from time to time, as warranted.

2.7.2 Tariff

2.7.2.1 The fear of private investors that increase in efficiency and productivity might result in reduction of tariff by TAMP will be addressed; also increase in efficiency and productivity would be rewarded.

2.7.2.2 The functioning of TAMP would be strengthened so that uniform and transparent norms prevail in matters of tariff fixation as well as in prescription of quality of service for applicability to port authorities/terminal operators to ensure that the needs of the users of the facility and profitability to the facility provider are met.

2.7.2.3 Trade would be consulted before any charges affecting them are implemented at the Ports. For this purpose, if need be, amendments to the relevant statutes will be made. However, there will be no control or regulation on shipping freight. Where shipping lines do business which extends beyond the sea, that is, on land in India, they will also be subject to control like any other agent of any other mode of transport.

2.8 INTERFACE WITH TRADE/USERS INTERESTS:

2.8.1 Ports play a vital role in the EXIM trade. Delays at the ports have far reaching implications (both quantifiable and non-quantifiable) for the importers and exporters. It is, therefore, felt necessary; to put in place a mechanism whereby the users and trade interests have a bigger role to play. Shippers’ Councils and Port-Users’ Organizations would need to be strengthened; on the lines of other federations, it is also possible to promote a Federation of India n Maritime Organization (FIMO). The policy would ensure that regular meeting with the exporters/importers at different levels are held besides making the consultation with the user and trade interests as mandatory before proposing any increase in the tariff.

2.9 INTERNATIONAL COOPERATION

2.9.1 Sister Ports

2.9.1.1 Major Ports will be encouraged to enter into sister port relationship with ports in other countries, particularly with those ports, which have similar features and with whom Indian ports share cargoes. Visits by officers of foreign ports will be allowed and prior clearance of Ministry of external affairs/ Ministry of Home Affairs will be obtained only where the foreigners are likely to stay for longer periods at Indian ports.

2.9.2 Membership of International Organisation

2.9.2.1 The Ministry of Shipping and the different Major Ports would take up membership of International organization like International Association of Ports and Harbours (IAPH) & PIANC so as to remain updated with the latest happenings in the world.

2.9.2.2 Core competence of resource persons would be developed in various fields by exposing the selected persons to developments/events in the international maritime sector.