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Experts Favour plan to corporatise Jawaharlal Nehru Port Trust

JNPT, which handles over 60% of the country's container cargo, had net profit of Rs 800 crore in financial year 2010-11.

, ET Bureau|
Last Updated: Nov 21, 2011, 04.45 AM IST|Original: Nov 21, 2011, 04.41 AM IST
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MUMBAI: Shipping experts have come out in support of the government's plan to corporatise Jawaharlal Nehru Port Trust, saying it will help the state-owned entity face competition and benefit from increased trade in Asia's third largest economy.

The government's plan to corporatise all major ports in the country, announced in June 2010, has run into a wall with workers' unions threatening nationwide strikes against what they say a step towards privatisation and subsequent loss of jobs.

Being a government entity JNPT cannot implement expansion or fund-raising plans independently, which blunts its competitive edge vis-a-vis private ports that have mushroomed along the west coast to facilitate trade.

"JNPT has to seek the approval of the shipping ministry every time there is activity of more than Rs 5 crore. For a company, which can become a 'Navaratna' if corporatised, the funds are very inadequate", JNPT chairman L Radhakrishnan said.

Robust economic growth over the last few years has pushed up container traffic along the west coast but the benefit has largely eluded JNPT, as private ports have cornered most of it. Container traffic at JNPT grew only 2% in the April-September period, as against 20% at the Adani Group-promoted Mundra Port and 35% at APM Terminals' port at Pipavav.

JNPT, which handles over 60% of the country's container cargo, had revenues of Rs 1,350 crore and net profit of 800 crore in financial year 2010-11.

Analysts say that corporatisation, which will result in its structure resembling that of a publicly owned entity, will help the it cut through red tape faster and raise funds for expansion. "Being a trust, the company does not have much scope for expansion, while its competitors have been faring well," a senior analyst at a leading research firm said, adding, "Going by the current net profit and turnover, it is easy to say that the company is definitely worth Rs 15,000 crore. At that kind of valuation, it needs to come out of the loop if it has to expand further."

The advice, however, will be tough to implement. The shipping ministry, which had said in April that JNPT would be corporatised by the year-end, is yet to make headway.

Adding to JNPT's woes is port congestion. This has led to private shipping liners preferring the private ports at Mundra and Pipavav.

In the April-September period, aggregate growth of cargo at Mundra and Pipavav was 3 million Teu (twenty-foot equivalent units), as compared with 0.04 million Teu at JNPT. Pipavav and JNPT handle most of the inbound cargo while Mundra has been handling more of exports.

"Bringing the trust under the company law board will bring about greater accountability and when the interests of the share holders are at stake, the port will be able to take decisions much faster," former shipping secretary Michael P Pinto said.

"There are many parties with various interest in the port and that affects decision-making." JNPT's plan to set up a new terminal was stuck in red tape for over three years. The project was finally awarded to a consortium of Port of Singapore Authority (PSA) and ABG Infra in July.

Various board members then raised concerns about ABG Infra's performance at Kandla port and the project was finally given a go ahead only last month. In the meantime, APM Terminals withdrew its bid for the project citing escalating costs.

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