For greater private investment

Shipping Secretary D.T. Joseph, is a man of action. Since he took charge in June 2003, the shipping sector has witnessed significant changes. "I have no skeletons in my cupboard, so why should I be worried about taking tough decisions?" he asks. In a free-wheeling interview to P. Manoj, he spoke on a wide range of issues concerning the maritime sector.

Excerpts:

Let us begin with the Prime Minister's Sagar Mala project. At what stage is the plan now?

With Sagar Mala, we succeeded in focussing attention on this sector. Everybody said Sagar Mala would provide the handle for other developments in the sector. We met the Prime Minister on January 7 and made a presentation. He was present for one full hour and listened to whatever my Minister said; to what I said. After that it was perhaps a question of devising a strategy. So we said let the P.M. launch Sagar Mala with some components. There you know, the elections have actually upstaged me. Otherwise I could have got it done. It was listed on the agenda for the Cabinet meeting held on February 4, but was not taken up. Unfortunately, there was no time. So now I have to wait until a new government is formed.

What is the Sagar Mala project all about?

The basic concept is that all those projects where the private sector has shown interest will be lined up and the Mala will be comprised of them. That part is not occurring.

Why?

I'm asking myself the same question. There are very few private sector projects. I'm not able to understand. Those who have come in, whether it is P&O, Pipavav or Mundra, they are all making their money, PSA Singapore is also doing well, ULA-Dubai Ports Authority at Vishakhapatnam also has no complaints so far. Why? Because traffic volumes will keep on increasing. But then why are more people not coming forward to take up projects?

What needs to be done?

I'm also looking for solutions. Even, the labour has been quite reasonable in spite of all the privatisation so far and we are ready to throw open all the doors. We want the landlord port [where the port authority retains the infrastructure and fulfils its regulatory functions while port services are provided by private operators] concept to come up. We have started this at Ennore (Chennai). Wherever the private sector shows interest I'm prepared to sit with them and smoothen the process. Earlier we had inflexible guidelines, now we are ready to be flexible. If necessary we will go back to the Cabinet to bring in that flexibility into the guidelines for private sector participation. Still I'm not happy with their [private sector] response to the concept of Sagar Mala.

Maybe we are looking only at international-level container terminals [for private investment]. Now I'm almost coming around to the view that private investment itself probably is a milestone. In order to reach that what are the things we have to do? One is the government's political commitment. Secondly, wherever funding is necessary you have to give, but most important, you have to build up that kind of traffic volumes.

Private sector people, both foreign and Indian, have come in the last five years, but that is only the fringe, there is scope for more.

What made you grant flexibility/autonomy to major ports in fixing rates?

Ports were in a monopoly position. They were sitting on top of infrastructure and waiting for people to come. When a regulatory agency [Tariff Authority for Major Ports (TAMP)] was set up in order to support customers or trade, I think major port trusts felt aggrieved. They said why only us, why not minor ports, why not other ports.

When I came here, I asked them, `what is your problem?' So major port trusts said we cannot compete... traffic is limited and minor ports are attracting them. So I said, `Why don't you also attract traffic?' They said `We cannot because we are under TAMP, they are not. So they are very flexible with their rates'.

I said if they are flexible with rates, it means that they are decreasing the rates to attract traffic. I said we shall give you also that concession the moment TAMP says the rates given is not fixed, but there is a ceiling, which means you can go below that, so now you don't have the excuse to say you cannot compete with other ports. That was the main driving force behind it.

Secondly, it automatically enables the port to charge less, because one reason why Indian ports are not developing is because the rates are definitely high, much higher than what others are charging. Regardless of whatever they may say, I'm convinced we should bring them down. Why should trade pay for inefficiencies or for the port's tendency to hoard more and more money?

What made you direct Chennai, Tuticorin and Kochi ports to cut their vessel-related charges for mainline container ships to the level prevailing at Colombo port?

If you look at Colombo, it is not as if they have a depth or draft, which is much higher than our ports. To my mind, Chennai, for instance, in some berths probably has deeper drafts than what Colombo has. Still Colombo is getting traffic. Why are we not getting? If you have a deeper draft, larger vessels can come in, but vis-a-vis Colombo I don't think that is the major problem. I think efficiency and dues (charges) are more important and, of course, the route.

In the route when you go to Colombo, if you are carrying most of it across to the east, any detour that you make means additional time and money. So, unless your rates are such that this additional detour costs can be absorbed, it makes no sense. In fact, it should be lower than Colombo and it should absorb the detouring costs.

You have given flexibility in rate fixation to the port trusts, now it is up to them to reduce the rates...

Yes.

There will always be a fear of audit when such decisions are taken.

This fear of audit is a bugbear, which the inefficient bureaucrat himself generates. Either your hands are not clean so you are worried, or you don't want to take a decision. There cannot be a third option. So, I am quite sure that I can't be caught elsewhere, I have no skeletons in my cupboard, then why should I be worried? You convince me and you take the order, that is how I look at things.

Was that the reason why you granted freedom to Indian Oil Corporation to make its own shipping arrangements?

Transchart, the centralised chartering wing of the government, has gained a lot of experience. As Director-General of Shipping I was not aware of it, but when I became Shipping Secretary and they took pains to explain to me the procedure by which Transchart works, I thought it has flexibility and sensibility.

In the normal course you have to call the tender, evaluate. You cannot negotiate other than with the L1 (lowest) in accordance with CVC [Central Vigilance Commission] guidelines. All these restraints are not there with Transchart; they have their own way of calling for rates and then giving a counter and then giving preference to Indian ships and doing it.

Now, the Petroleum Ministry felt Transchart has the authority but not the responsibility because Transchart is not spending the money, so it will not enter into any dispute if it occurs. Fair enough, because they are only acting as an agent bringing two parties together, but somehow the oil companies feel that in a liberalised set-up, they should have the capacity to decide for themselves and they would be able to take faster decisions if the powers are with them.

Do you think so?

Well, we don't think so, but at the same time we don't want to be obstructionist in our policy saying other Ministries must come to us. Then it becomes a turf battle. So I said all right, if you want to do it yourself, you can try it out. We will not oppose it. The Petroleum Ministry is now making a Cabinet note on the issue.

Has India banned old tankers from entering its waters?

In shipping, age is not relevant. But maintenance is very, very important; ships are highly capital-intensive assets. So how you maintain a ship is more important than the age of the ship. But Sahni (the Director-General of Shipping) felt that while that may be true, overall younger ships are likely to be more well-maintained. Therefore he felt that we should not allow older ships to come into our waters.

Secondly, he also felt that with other countries, including those of the European Union, imposing a ban on old ships, these rust buckets would end up in our waters. So I also agreed.

Have you changed the policy of giving preference to Indian ship-owners to carry domestic cargo?

We don't want to pamper Indian ship owners. We should give some preference, but it cannot be sort of leaving scope for speculation, and that is what they were doing. We have now said that within 10 per cent of the lowest foreign bid you should come in a competitive bidding process, then we will give you preference.

Earlier, a person owning one ship would go and take three tenders showing the same ship and then he would charter a foreign-flag vessel and run it. I stopped this when I was D-G. If you have one ship, one tender, yes. In the next tender I am not going to give you any preference, you cannot cheat by showing the same ship in every tender and then you go and take a foreign ship.

What is the aim?

We are trying to hold a balance between Indian shipping and fairness to the consumer. I strongly believe that the Indian consumer, taxpayer, is the ultimate. We must keep him in mind. I want to promote Indian shipping as long as it helps the Indian consumer, but if the ship-owners are going to speculate and make a profit out of the preference that we give to them, then we will remove that preference.

After all, that is liberalisation, isn't it? Any kind of monopoly has to be removed. But, the Indian ship-owners feel that worldwide ship-owning people get a lot of preference, so we shall also give them. I said, okay we will see that you also get a level playing field.

Therefore, we supported tonnage tax, which is now coming. Now they have to show their efficiency and quality.

Are dredgers also proposed to be included in the tonnage tax?

Yes, that is part of the proposal.

Are there any moves to give more concession in rates to promote coastal shipping?

Yes. Currently, a 30 per cent concession is given by TAMP for coastal shipping only on port dues or vessel-related charges, but not to cargo-related charges. I plan to increase the concession to 40 per cent and bring cargo-related charges also under the concession scheme so that more substantial concessions will come in. Besides, it will be delinked from foreign exchange fluctuations.

What are the government's plans on maritime training?

The government made the mistake in 1982 of closing down certain training establishments, that is how, according to me, the Philippines was ahead of India because when shipping expanded we didn't have trained Indian seafarers.

In the 1990s, the unions became so strong and we became a little more expensive than I think the Indian situation warranted. But anyway, since that is an international agreement, we did not want to interfere beyond a point. But we said we shall throw open training to the private sector so that market pressure will build up automatically, more and more people will come out trained, and there will be pressure on the job.

Maritime training should also have some more elements, that until such time that a trainee lands a job he should be able to do something else.

Today, unfortunately it is not like that. So if the trainee does not get a job, then he is not qualified for anything else.

What are the policy changes being contemplated in the ports sector?

We want to decentralise powers relating to ports. We want qualified people to be on the board; we want the structure of the port to be such that innovations are possible, private investment is possible. We want to encourage private investment in all aspects of port development. Wherever private investment cannot come, we are ready to come up with government funds. So that is the overall policy direction in which we want to move.

What about labour?

We are grateful that our labour has not been obstructionist. When privatisation takes place, we are giving freedom to both sides. The private entrepreneur can take the present labour force, but if the workers do not want to go, they need not go.