Ports serve an important function in fostering and promoting international trade. In India, maritime trade accounts for 95% of its global trade volume. Ports in India are designated as either major or minor ports. These designations determine their regulatory and administrative structure. As of now, the Indian Ports Act of 1908 is the umbrella legislation which deals with port regulation in India. The major ports are further governed by the Major Ports Authorities Act, 2021 and minor ports are regulated and governed by respective state laws. The Indian Ports Bill, 2021 inter alia seeks to repeal and replace the Indian Ports Act of 1908. It primarily aims at rationalizing the present system of minor port administration in India. This article critically analyzes the salient features as well as the conflicts weaved into this Bill. The authors have highlighted how this Bill could be a stepping stone for the port sector while also underlining the areas of concern.
Efficient port infrastructure is a key factor in the promotion of international trade. This is underscored by the surprising fact that maritime trade accounts for a whopping 95% of all ofIndia’s global trade volume. Although India possesses the longest coastline along the Indian Ocean, it has failed to capitalize substantially on the same. Post the 1991 reforms, Indian ports have grown leaps and bound, but they still lag behind international ports in terms of efficiency and infrastructure.
As per the Constitutional scheme, Indian ports are divided into two categories – major ports and minor ports. Entry 27 of List I of the Seventh Schedule of the Indian Constitution provides that the Parliament would have the exclusive jurisdiction to legislate with respect to all the major ports in India. The Major Ports Authorities Act, 2021 is enacted under the said entry and deals with the regulation, operation, and planning of major ports in India. The said Act designates 11 ports as major ports; these are- Chennai, Cochin, Deendayal (Kandla), Jawaharlal Nehru (Nhava Sheva), Kolkata, Mumbai, Mormugao, New Mangalore, V.O. Chidambaranar (Tuticorin), Paradip and Visakhapatnam. All the ports not included under the definition of major ports are designated as minor ports. Entry 31 of List III (Concurrent List) of the Seventh Schedule confers powers on both the Parliament as well as the state legislatures to legislate under this head.
The century-old Indian Port Act of 1908 was the first comprehensive piece of legislature that covered a wide range of operational and procedural aspects governing the functioning of Indian ports. Additionally, it delineates the powers and responsibilities of the Central and State governments for the administration of ports.
The Indian Ports Bill, 2021 (hereinafter referred to as “IPB, 2021”) was circulated on 10th June 2021 for comments from various stakeholders by the Ministry of Ports, Shipping and Waterways. IPB, 2021 inter alia seeks to repeal and replace the Indian Ports Act of 1908. It aims at rationalizing the present system of minor port administration, which is currently under the control of State Governments and State Maritime Boards constituted by State Governments.
Objective of the Act
As per the preamble of IPB, 2021 the said Bill is being enacted to fulfill the following objectives –
1. Consolidate and amend the existing laws relating to ports, for safety & security, prevention & containment of pollution at ports, and ensure compliance with the country’s obligations (fiduciary and otherwise) under the maritime treaties and international instruments to which India is a party;
2. Take measures for conservation of ports;
3. To establish State Maritime Boards and empower them for effective administration, control and management of non-major ports in India;
4. Provide for adjudicatory mechanisms for redressal of port-related disputes and
5. To authorize a national council for fostering structured growth and development of the port sector, ensure optimum utilization of the Indian coastline, and to provide for matters ancillary and incidental thereto, or connected therewith.
In the following sections, this article analyzes how the IPB, 2021 seeks to achieve the objectives stated under its preamble, its intended and unintended consequences and its impact on the port sector in India.
Comprehensive Code on Operational and Procedural Requirements
IPB, 2021 seeks to incorporate a myriad of international regulatory developments in the national legislation, namely the International Ship and Port Facility Security Code 2004, (hereinafter referred to as “ISPS Code”) and the International Convention for the Prevention of Pollution from Ships– (1983, 2005) (hereinafter referred to as “MARPOL”) and the International Convention for Safety of Life as Sea.
More specifically,Chapter VIII of the IPB, 2021 deals with Safety and Conservation of Port and inter alia provides for a code of procedure for rules for the safety of shipping and conservation of ports. This Chapter co-relates to Chapter IV of the Indian Ports Act of 1908. In the IPB, 2021, this Chapter has rationalized the provisions of the erstwhile Act and tuned it to suit modern shipping practices.
Chapter IX of IBP, 2021 deals with Safety and Security and seeks to implement the nation’s obligation under the ISPS Code and International Convention for Safety of Life at Sea. Although India is already fully compliant with these conventions, there is no instrument through which these obligations are made part of Indian law. The obligations under this Code can be found dispersed in the Merchant Shipping Act, Directorate General of Shipping Circulars and Rules formed by various ports and port authorities.
The IPB, 2021, for the first time, provides a comprehensive code implementing these obligations. This would make compliance with these obligations easier and bring in more clarity for all the stakeholders involved. This change would be a welcome development for both the public and private sector port operators as it would decrease the cost of compliance.
Chapter X of the IBP, 2021 deals with the prevention and containment of pollution at ports. Vide this Chapter, the Government intends to incorporate into Indian law provisions of International Convention for the Control and Management of Ships’ Ballast Water and Sediments, 2004 (hereinafter referred to as “Ballast Water Convention”) and MARPOL.
The Ballast Water Convention aims to prevent the spread of invasive aquatic species and potentially harmful pathogens in ships’ ballast water when released into the port premises or adjacent environment. It is pertinent to note that to date, India has not ratifiedthe Ballast Water Convention. Presently, some of the obligations under these conventions are implemented via the Directorate General of Shipping Circulars. However, these were only with respect to the requirement for Indian Ships, and as of the date, these obligations have not been extended to the Port infrastructure. The requirement for all ports to implement and be compliant with standards would not only ensure that Indian ports are at par with international standards but would also be a step towards sustainable development.
MARPOL aims at limiting and minimizing ship-borne pollution. It imposes two sets of requirements, one on the ships with respect to stowing, handling, shipping, and transferring pollutant cargoes and the other on ports for providing adequate reception facilities for such pollutant cargoes. It is pertinent to note that under Indian law, as of date, there is a lack of standardization with respect to these requirements. For instance, obligations under the MARPOL are incorporated into Indian law vide the Directorate of Shipping Circulars which mandate compliance with the same. Some ports, while implementing these Circulars, impose additional compliances requirements. This has created an environment whereby a ship calling upon a port has to check the requirement of each port. A comprehensive, uniform, and common code of conduct for all ports would significantly ease the compliance burden on shipping lines and shipowners.
Establishment of State Maritime Councils
Chapter V of the IPB, 2021 provides for the establishment of State Maritime Boards. It also recognizes the already established State Maritime Boards by several coastal states. Section 19 of the IPB, 2021 empowers the State Maritime Boards to inter alia take the lead with respect to planning, development, and maintenance of non-major ports in India. The provision of this Chapter does not in any way affect the power already exercised by these Boards under their respective Acts but instead merely affirms that the State Maritime Board are to be held responsible for the functioning and development of minor ports.
Dispute Resolution Mechanism
Chapter VI of the IBP, 2021 provides for adjudication of disputes. Section 21 states that State Maritime Board shall have the jurisdiction to adjudicate any dispute between the State Maritime Board, non-major ports, port users, port officials, concessionaires, and port service provides. However, the jurisdiction of the Board could be ousted if parties agree to hold arbitration. Section 22 provides that any appeal on the decision of the State Maritime Board goes to the Adjudicatory Board established under Section 54 of the Major Ports Authorities Act, 2021. It is also pertinent to note that the Adjudicatory Board is empowered to inter alia adjudicate the dispute between two or more ports in instances where such ports are not located within the purview of the same state, or between two or more State Maritime Boards, one or more major ports, one or more minor ports and/or between two or more state Governments.
As perSection 55 of the Major Ports Authorities Act, 2021, the Adjudicatory Board consists of a Presiding Officer and two members. As per Section 56 of the Major Ports Authorities Act, 2021, the Presiding Officer must be a retired Judge of the Supreme Court of India or a retired Chief Justice of a High Court and the member must be either retired Chief Secretary of a State Government or retired Secretary of the Central Government. An appeal from the decision of the Adjudicatory Board lies to the Supreme Court.
It is pertinent and interesting to note that such a dispute resolution mechanism is absent under the Indian Ports Act of 1908 or the respective State Maritime Board Trust Act. Although the exclusion of arbitration is a step in the right direction, the fact that the State Maritime Board could adjudicate a dispute between itself and any other stakeholder in the port ecosystem reeks of conflict of interest. This also puts a question mark against its legitimacy as an impartial dispute resolution authority.
Another anomaly in the dispute resolution setup is that as per Section 22(2)(c) of the IPB, 2021 the Adjudicatory Board could adjudicate any disputes between two or more State Governments. In other words, the Bill fails to specify that the Adjudicatory Authority would only be empowered to adjudicate disputes which may have some relationship to the operation or development of ports. This vague language that derogates the original jurisdiction of the Supreme Court could face constitutional challenges if retained in the enacted legislation.
Maritime State Development Councils- An assault on federalism?
Chapter II of the IPB, 2021 provides for the establishment of the Maritime State Development Council (hereinafter referred to as “MSDC”). Apart from the Union Minister and State Minister-in-charge of ports, the MSDC also includes bureaucrats as members like All Joint Secretaries to the Government of India in the Ministry dealing with ports, Sagarmala and Shipping, the Joint Secretary to the Government of India in the Ministry of Environment, Forest and Climate Change, etc.
MSDC performs both recommendatory as well as mandatory functions. It contains within itself the power to make recommendations to the Central Government (with respect to major ports) and to the State Government (with respect to the minor ports) inter alia on the adequacy of the existing legal framework or statutory compliances for ports in India, measures to facilitate competition and promote efficiency in the operation of ports and to facilitate the growth of the port sector and port connectivity.
Its mandatory functions inter alia include formulation of a national plan for the development of both major and minor ports and monitoring the development of non-major ports in the States with the view to ensure their integrated development with major ports and the national plan.
It must be noted that MSDC is not a new body; it was established in 1997 for the coordinated development of major and minor ports. IBP, 2021 merely seeks to provide it with statutory recognition. It must be noted that the MSDC today is only a body of Union and State Ministers in charge of ports. In other words, it is membership does not extend to central government bureaucrats. With the inclusion of bureaucrats, the composition of MSDC is weighted in favor of the Centre. Such inclusion is not being viewed favorably by many states’ governments. This is mainly because it gives the states an impression that MSDC would end up being a body that would be controlled by the central government without paying heed to the concerns of the state government.
At this juncture, it would be apposite to discussSection 83 of the IPB, 2021, which provides for punishment for contravention of IPB, 2021. It inter alia imposes a fine of two lakh rupees or imprisonment up to six months or both if any “Authority, port or any other person” fails in their power to obey the direction of the MSDC. As per the definition clause, “Authority” does not only include the Major Port Authority established under the Major Port Authority Act, 2021 but also the State Maritime Board for non-major ports. Such provision may have a chilling effect on private port/terminal operators and may negatively affect private investments in both major and minor ports.
Another instance of concentration of power can be found in Section 17 of IPB, 2021, which confers the Centre with the power to declare a port as non-operational if it is not in accordance with the national plan
This instance of excessive authority and concentration of power conferred on the Union government has encountered a backlash by the States. The maritime states like Kerala, Tamil Nadu, Andhra Pradesh, Maharashtra and Odisha havepublicly protested against IPB, 2021 and conveyed their objections to the Centre.
It must not be ignored that its establishment will lead to another bureaucratic layer causing further delay in the facilitation of port administration and port projects.
Although the policy of having a coherent and integrated plan for the development of port infrastructure is laudable and necessary, at the same time, it is crucial to balance regional aspiration. In this regard, inspiration can be drawn from GST Council, whose membership is restricted to Union and State Ministers. A change in the structure of the statutorily constituted MSDC and limiting its role to policy setting would go a long way towards alleviating states fears of loss of autonomy while preventing over-centralization of power.
Although a new comprehensive code incorporating the best international practices on the port operation and management is a welcome development, what cannot be ignored is that some provisions of IPB, 2021 need reconsideration and reassessment. Globally, modern port management is moving towards decentralization, but the said Bill is sewn by the thread of centralization and concentration of power with the Union Government. Therefore, provisions of the IPB, 2021, which leads to centralization of power with the Central Government, could have an adverse impact on the development of infrastructure as well as private investment. It is recommended that IPB, 2021 be suitably amended so that MSDC retains its characteristics as a policy setting recommendatory body. This would balance the need for a cohesive national port policy while also ensuring that the States retain their leadership role in the development of port infrastructure.
Furthermore, limiting the membership of MSDC to Union and State Ministers would also ensure that the functioning of the council is more democratic and the concerns of all stakeholders are suitably heard.
About the Authors
Ms. Alifya Vora is an Advocate practicing in Mumbai.
Ms. Swadha Sharma is a 3rd Year Law Student, University School of Law & Legal Studies (USLLS), New Delhi, and an Associate Editor at IJPIEL.
Managing Editor: Naman Anand
Editors-in-Chief: Jhalak Srivastav & Aakaansha Arya
Senior Editor: Hamna Viriyam
Associate Editor: Swadha Sharma
Junior Editor: Sriniwas
Preferred Method of Citation
Alifya Vora and Swadha Sharma, “Indian Ports Bill, 2021- Critical Analysis of the Good and the Bad” (IJPIEL, 10 January 2022).