Four Major Ports Buying Dredging Corporation of India is Not Great News For Ports

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Posted November 26, 2018

So the Dredging Corporation of India (DCI) is not being privatised, but its sale to four state-owned Major Port Trusts is not much to celebrate.

It is merely a move by the Modi government to meet its disinvestment target while allaying the massive opposition it faced while trying to privatise the DCI, less than a year away from the elections. It is also unlikely to do much for the health of these Major Ports, which the government is already trying to privatise.

On November 8, the Union Cabinet approved the sale of the central government’s 73.47 per cent stake in DCI to a consortium of four cash-rich major port trusts — Visakhapatnam Port Trust, Paradip Port Trust, Jawaharlal Nehru Port Trust (JNPT) and Kandla Port Trust.

The details and modalities of the sale, however, are not publicly known yet. It is not clear how much stake each of the four port trusts would be buying, and how much money they would be shelling out — although Visakhapatnam Port Trust is likely to buy the biggest chunk in DCI — said Padmanabha Raju, general secretary of United Port and Dock Employees’ Union (affiliated to the Centre of Indian Trade Unions), to Newsclick.

It was reported in July that the BJP-led NDA government is expected to fetch Rs. 1,500 crore, as per the company’s share price, from the deal. This amount would help the Modi government get closer to its disinvestment target of Rs. 80,000 crore for the year 2018-19.

However, Raju said the per share price had fallen from around Rs. 680-700 last November — when the BJP-led NDA had approved the privatisation — to less than Rs. 380 now.

On November 1, 2017, the Union Cabinet in a meeting chaired by Prime Minister Narendra Modi had approved the sale to private players of the government’s entire stake in DCI — a Public Sector Undertaking (PSU) that has consistently made profits ever since it was set up in 1976 with an investment of Rs. 28 crore.

As the 170th Report of the Parliamentary Standing Committee (PSC) on Modernisation of Major Ports in 2011 had noted, the government had meted out a rather “shabby treatment” to DCI, and that “huge funds are outstanding due to DCI from various agencies and as a result of which the DCI has not been able to take up development activities.”

And yet DCI remains among the top 10 dredging companies of the world.

Privatisation Plan Dropped due to Workers’ Resistance

The Modi government was forced to drop the privatisation plan — thanks to sustained resistance by workers, including one who committed suicide. The massive campaign undertaken by the DCI Non-Executive Employees’ Union and the DCI Officers’ Association garnered support of even the state government in Andhra Pradesh, ruled by the Telugu Desam Party (TDP), which recently broke its alliance with the BJP-led NDA.

On June 18, during a meeting held with the heads of major ports and chaired by the Secretary to the Ministry of Shipping, Gopal Krishna, the proposal of selling the DCI stake to the major ports was discussed.

Initially, three major port trusts had been mooted by the shipping ministry as prospective buyers — Paradip Port Trust, Visakhapatnam Port Trust and New Mangalore Port Trust (NMPT). These ports were “suggested” during the meeting “based on the availability of surplus funds lying with them”, as the Minister of State for Shipping, Mansukh L Mandaviya, informed the Rajya Sabha in a written reply.

However, New Mangalore Port Trust was dropped and replaced with JNPT and Kandla in the consortium, given the latter two’s better positions in terms of cash reserves, as per news reports.

It has since been reported that the port trusts were not keen on buying the DCI, but had no choice under pressure from the government as they are controlled by the government.

It has also been pointed out in at least one news report that except for Kamarajar Port Limited, which was set up as a company, the other 11 Major Ports are run as trusts and therefore, do not pay dividend to the government. Thus, this is an effective way to suck cash out of the port trusts.

Govt’s Attempt to Suck Cash Reserves out of Profitable PSUs

In keeping with this regime’s practice of draining out the cash reserves from profitable public-sector companies, the Modi government has indeed been eyeing the cash-rich ports now. Recently, the government was trying to sell off Air India’s iconic building at Nariman Point in Mumbai to the Jawahar Lal Nehru Port Trust for Rs. 2,000 crore, however, the plan appears to have hit a hurdle.

Sucking out cash from the cash-rich government-owned ports would also allow the government to give a leg up to its corporate friends, such as Adani Ports, helping private ports to grab market share from the public-sector ports.

We have seen how the government has destroyed other public-sector companies through various means, including getting them to make unnecessary purchases of other, often loss-making, companies: such as in the case of ONGC. The LIC-IDBI deal is also an example of the same impulse. Earlier, the Congress-led UPA had done something similar with Air India, which was needlessly merged with Indian Airlines and then destroyed at one go to make way for private airlines.

As evident, this not only serves the agenda of the government meeting its disinvestment target while using these cash-rich companies as a cash cow, but also paves the way for these profitable public-sector companies to become sick and then to be privatised.

The BJP government has already sold more than Rs. 2 lakh crore worth of PSU assets, amounting to 58% of all disinvestment since 1991.

As for DCI being bought by the ports, sector experts have pointed out in a report by the Business Standard (BS)on how it makes no “business sense” for these ports to buy DCI — even though these “experts” have their own privatisation agenda to peddle.

“There is no business sense in this deal. The consortium port trusts can get dredging done at competitive rates if the scope of work is tendered rather than handed over to DCI. Due to this, ports will lose out on the cost advantage,” Shailesh Garg, director of Drewry Maritime Advisors, was quoted as saying by the Business Standard.

“There are no synergies between two sides of the deal as ports do not have any expertise to scale up operations of DCI. It looks more like the government meeting its divestment target via this route,” another port consultant told the BS.

The report points out that out of these four ports — Visakhapatnam Port and JNPT need maintenance dredging once in three years, while Paradip Port needs dredging for six to seven months annually and Kandla Port for eight to nine months. Though Visakhapatnam Port chairman Krishna Babu told BS that the DCI stake will help the ports during cases of emergency.

“This stake buy will help us give dredging, mainly capital dredging contracts, on a nomination basis (without tendering) to DCI in cases of emergency. If we go for tendering during an emergency, it takes time. Moreover, European participants charge a huge premium. An in-house dredging company like DCI will come in handy in such a situation,” he was quoted as saying.

The report also mentioned that Kolkata is the only port among the 12 major ports that needs maintenance dredging on a daily basis due to high silting.

Major Ports Authorities Bill

And, while it is certainly a matter of relief that the DCI will stay in government hands, this reprieve is temporary. Because the Modi government is already trying to privatise major ports, as Newsclick had written about earlier, through the Major Ports Authorities Bill, 2016. The Bill is meant to replace the Major Port Trusts (MPT) Act, 1963, but is pending in Parliament.

The Bill has faced vehement opposition by trade unions and employees of all Major Ports, and was referred to the department-related Parliamentary Standing Committee, which gave its report to the Centre in July 2017, and the Cabinet approved some minor amendments to the Bill in February 2018, but it has not yet come up for discussion in the Lok Sabha since then.

The new Bill, in the name of increasing “autonomy”, not only gives more power to the central government while clearing the path for corporatisation of Major Ports, turning them into companies.

“The central government can give directions to the authority board, whether on a policy matter or otherwise, and the direction will be binding upon the board, even though the board is autonomous in name. This means that whenever the government decides to give away the major ports to any corporate company, they will simply issue an instruction and the ports can’t do anything,” Raju had told Newsclick earlier.

The Bill also allows in effect sale of the land with Major Ports, which have over 74,000 acres of land in prime cities.

“As per the MPT Act 1963, no assets or land belonging to a Major Port can be sold, these can only be leased for up to 30 years. But the new Bill has provision for the sale of land if the government wants,” he had added.

Source: NEWSClick