India Pushes Port Privatization Plans

Indian port

By MarEx 2016-01-06 18:27:04

State-run ports need to be overhauled and moved towards privatization, said India’s Finance Minister Arun Jaitley, in the run-up to the government’s latest budget likely to be presented on February 29.

"If major ports don't overhaul their structures, they will seriously fall behind in competition with minor ports," said the minister, according to a report from NDTV.

To date, India’s major ports have been run by government-appointed boards of trustees.

Jaitley says that the country’s National Investment and Infrastructure Fund is already in place, and that many sovereign and pension funds have shown interest in investing in the sector.
India is aiming for a growth rate of eight percent in 2015 and 2016, and logistics development is a key factor in achieving the goal. Jaitley sees the privatization of India’s major, public ports as a way of achieving this. The productivity of these ports has been questioned in recent years, and they have been losing market share to India’s smaller, private ports.

Privatization would also remove a centralized pricing scheme that currently prevents major ports from charging market prices to compete with private ports.

Prime Minister Narendra Modi’s government plans to double the handling capacity of major ports and to increase their share of coastal shipping by 2019. His “Made in India” campaign is aimed at making India an international manufacturing hub.

However, the government is facing a backlash as exports fell for the 12th straight month in November last year. Exports contribute to about 20 percent to India's GDP, and in its mid-year economic review released last month, the government revised its financial year 2016 growth rate projection to 7-7.5 percent.

Two new ports planned for Andhra Pradesh and West Bengal are expected to be privatized on completion.