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Govt moots major FDI reform in port sector

In a marked, and dramatic departure from its avowed swadeshi doctrine, the Bharatiya Janata Party-led government has launched a bid to develop port infrastructure by opting to modify foreign direct investment procedures to facilitate the setting up of 100 per cent foreign-owned subsidiaries in the ports sector.

As per the proposed modifications, the foreign subsidiaries will have the right to form joint ventures with domestic port trusts, with the latter holding a minimum of 51 per cent of the stake. At present, domestic port trusts are permitted to acquire only 11 per cent equity in joint ventures.

The modifications will first necessitate amendment to the Indian Ports Act of 1908, as also to the Major Ports Trusts Act of 1963.

As envisaged, the functions of the ventures will be to develop new ports, upgrade existing facilities and provide managerial and R&D skills and inputs. Further, it permits foreign port trusts to share revenues -- a new thrust, offering an immense lure for potential entrants into the sector.

In this context, it must be remembered that to date, foreign companies had to operate under the Build-Own-Transfer clause, implying that they lose their ownership after a stipulated period. Under the old provision, foreign companies could operate container terminals and provide cargo-handling capabilities.

As envisaged, the new policy change is expected to accelerate development of India's ports and cargo-handling capacity, as part of its thrust towards pushing trade capability into high gear.