Modi govt amends shipping rules to favour Adani-owned Mundra port

Author, commentator, publisher, documentary film maker, TV anchor and former editor of the formidable Economic & Political Weekly, Paranjoy Guhathakurta has worn several hats since 1977 when he began his career as a journalist. He has worked for publications like India Today, Business India and Business World and has written extensively on business, politics and media. Bhasha Singh spoke to him on crony capitalism and a recent change in shipping rules that, he says, is likely to benefit the Adani Group to the detriment of the public sector.

Excerpts from the interview:

What are the policies tweaked or changed after 2014 that have favoured the private sector or 'cronies' ?

Let me give you the most recent example. On May 21 this year, less than a month ago, the Ministry of Shipping of Government of India issued a notification that has relaxed the restriction on the movement of foreign ships engaged in transporting containers (full containers with goods for import and export as well as empty containers) between Indian ports and among Indian ports along the coastline of this country.

This move, which comes less than a year before the next general elections, is the outcome of a policy tussle and lobbying that has been going for some years now. But it now appears to tilt the balance in the shipping industry and the ports sector in India hugely in favour of private shipping lines and major multinational shipping lines and private port operators to the detriment of public sector ports.

Indian shipping companies like the Shipping Corporation of India are now at a disadvantage against foreign shipping lines and companies like the Adani Group which has partnerships with some of the biggest shipping companies in the world like the Mediterranean Shipping Company. Similarly, when you look at India’s biggest port, which is Jawaharlal Nehru Port Trust located in Nava Sheva (near Mumbai), that port is likely to suffer on account of the change in the policy and the gains would go to Mundra port.

What has changed and on what grounds?

The Government of India has changed what is known as cabotage rules. Cabotage is the movement of goods by ship within the domestic jurisdiction of a country. Such rules exist across the world in over 90 countries including the United States and China.

Favouring the private sector over the public sector has been the trend for quite some time. Isn’t it?

Let’s forget about ideology; let’s forget whether the public sector is bad and the private sector is good; let’s forget arguments that the public sector is inefficient and the private sector is super-efficient. Let us forget about Indian companies being inefficient and foreign companies being very efficient.

The problem I have with the change in policy is that it is going to have a direct impact on jobs. There are 300,000 seafarers in India and Indian companies are statutorily obliged to engage the services of Indian seafarers. But with the change in the policy, there will be job losses. I do believe that this policy change is contrary to what Narendra Modi has been talking about, namely, “Make in India” or “Serve in India.”

The earlier rule restricted transport of goods from one Indian port to another by only Indian owned ships. Only if Indian ships were not available, would permission be given to private or foreign ships. But now the changed rules have withdrawn the restriction. Is that's what you are saying?

It is absolutely correct. Let’s consider an analogy. Air India or Jet Airways, Go Air or IndiGo, these are all Indian airlines. They are allowed by the Government to move passengers within the country. But if foreign airlines like Lufthansa or Air France want to fly passengers between Delhi and Mumbai or from Delhi to Kolkata or from Kolkata to Mumbai, they are not allowed to do so barring under certain conditions.

Let me explain. Until this change in policy took place on May 21, if a foreign ship wanted to transfer goods from one Indian port to another, it would need special permission from the DGS (Director General of Shipping). The DGS would first ascertain whether there were Indian ships available to do the same transportation. This would be done by asking the owner of the foreign ship to obtain a no-objection certificate (NoC) from the Indian National Shipowners’ Association (INSA). Only after the INSA gave this NoC, the DGS would clear the proposal and allow the foreign to ship transport goods from one port to another within India. Now this restriction has been done away with which I may describe as a new form of colonialism.

But why would people who are transporting these goods opt for foreign ships?

Because they are cheaper. Indian companies have many obligations including higher taxes, such as the Goods and Services Tax, higher fuel costs and other payments which foreign shipowners don’t have to deal with. It is one thing to allow free competition if it’s international trade, but this is domestic trade. As I mentioned earlier and I repeat myself, there are over 90 countries in the world with coastlines who have imposed similar restrictions of movement of goods within their domestic jurisdictions.

You spoke of higher taxes paid by Indian shipowners; which means that even the Government is the loser?

Absolutely correct. The government will also be the loser because the biggest loser as I mentioned, would be the Jawaharlal Nehru Port Trust which is government-owned, that is, technically owned by you and me and people of this country.

Most of us do not understand much about shipping rules. Could you explain the process?

When large ships come to India, it is not economical for them to berth at more than one port. So they discharge their cargo to smaller feeder ships which then move the cargo from, say, a port on the West coast to one on the East coast, from a port in Gujarat to Chennai or from Mumbai to Kolkata. It will be no longer economical for large foreign ships to visit the JNPT. It will make more sense for them to go to one port and that will probably be Mundra. So, there will be loss of business for the public sector and gains for shipping liners which are already in partnership or in association with companies in the Adani Group.

Is it possible to defend the policy and say that the change would cut down on cost and time to transport goods from coast to coast?

There is no evidence to indicate that there will be gains in time or gains in costs. There are a number of studies that have shown there will be no such gain. You might like to call it a protectionist policy or a going back to the days of the licence control Raj. But across the world, countries protect their domestic airlines and protect their domestic shipping companies. Why should India be an exception?

Wasn’t this policy change resisted at the level of the bureaucracy?

Attempts to change the country’s cabotage policy have been going on for years and years. I found it particularly unusual that it should happen a year before the next general elections. I also find it unusual that a number of emails and letters I sent to the secretary, Ministry of Shipping, Gopal Krishna and to Gautam Adani did not elicit any reply. After my third email to the secretary, Shipping, I received a response from an official in the Government of India’s Press Information Bureau attaching the notifications which were already in the public domain. I found this ridiculous.

Was there any reaction after you first wrote about the policy change?

Nothing, not to the best of my knowledge.

How has the Government justified the move? Attempts to change the policy were made during UPA years too, you said. Has the justification or the ground changed since then?

The ground indeed appears to have changed. I have written how the Prime Minister’s Office, Nripendra Mishra, Principal Secretary to the Prime Minister, the National Security Council etc. –all of them at different points of time have argued that the change is not only against the country’s commercial interests but is also against the country’s security interests. But it seems all their objections have been overruled and there is no mention whatsoever of these objections and how these objections are going to be tackled in the notification issued by the Government of India on May 21, amending Section 407 of the Merchant Shipping Act.

Is it true that security concerns were raised even during NDA 1 when Atal Bihari Vajpayee was the Prime Minister?

This has been going on for decades. Those who have been associated with foreign shipping lines and private ports have been arguing forever in favour of this change. The debate is as old as the debate on which is good or bad for the country, the private sector or the public sector.

The point I am trying to make is why India should be different from 90 other countries in the world which have cabotage rules. Why do the US and China still have such rules which discriminate in favour of their domestic shipping companies? I am saying that this is the biggest change in India’s shipping policy made by any government and certainly in the last four years of the Narendra Modi government. And yet I find it unusual that there is so little debate and discussion on this policy change.

What about the Indian shipping industry? Haven’t they objected to it?

I have quoted at length from what the Indian National Shipowners Association has said. I am currently working on making a documentary film where I will not only talk about the apprehensions about this change in the shipping policy of domestic shipowners but how associations and unions of officers as well as seamen and seafarers are extremely unhappy with the change in policy. I suspect that the day is not far when 1,00,000 Indian seafarers are going to lose their jobs.

Were they never consulted or were they not invited for any discussion before this change?

They were invited, they did speak up. But what is clear is that their views have not been taken into account.

They seem to have written to the PMO after this change in the policy...

Some have already written and more will address their concerns to the Prime Minister’s Office, the Shipping Ministry and to the Minister in Charge Nitin Gadkari. I don’t know if Prime Minister Modi or Gadkari will change their mind. I hope they do. If they are serious about the “Make in India” policy and about job creation, then I think they should reverse the policy.

We haven’t seen much coverage, discussion or comment in the media. Have they addressed the issue?

The media have been conspicuous by their silence. The financial dailies have reported the notification, but not talked about its implications…and you are the first, you as in National Herald, who are discussing the issue with me