A one-sided contract between Cochin Port Trust, the landlord, and DP World Ports Vallarpadam Terminal, its tenant, has led to intense lobbying over cabotage rules. A local problem, which has more to do with a local solution, is being used as a catalyst to push a deeper agenda with a national bearing. The country's interests are at the stake, once again, for reasons that increasingly appear to be very shady
A few days ago, the minister of shipping made an announcement pertaining to restricting and controlling the entry of old ships into Indian territorial waters and Indian ports. Broadly, the statement was about new rules to be promulgated shortly on this subject and some other aspects pertaining to shipping in India. That perfectly decent rules existed in 2005 and were withdrawn without explanation in 2006 has been reported on Moneylife. (Read, 'Why are overage ships with improper documents being chartered for Indian ports?')
However, as always, announcements tend to conceal more than they reveal, and the real truth behind the new rules lie elsewhere. In the current dispensation, it appears that in some convoluted manner, these new rules may also well be used to relax the cabotage laws as they stand in India. A variety of vested interests appear to be behind this move. National interest, however, does not seem to be present. (Some of the issues on cabotage were covered in 'Anchoring cabotage laws in India'.)
Now, according to media reports, some of the loudest voices on the removal of cabotage appear to be emanating from the Cochin Port Trust, whose own container terminal lies unutilised due to-among other things-high handling charges, as well as a one-sided deal with neighbouring Dubai Ports-controlled DP World's Vallarpadam terminal.
Thanks to what probably deserves an immediate investigation, the contract with the tenant, DP World, does not allow the landlord, Cochin Port Trust, itself to handle containers till DP World Vallarpadam reaches a throughput of 3.5 million TEUs per annum. Imagine a scenario where, for example, Indian Railways allows a private entity to run a private Rajdhani Express on Indian Railways tracks, but will not permit booking on its own Indian Railways Rajdhani Express till the private Rajdhani is running full to capacity.
How and why Cochin Port Trust signed such a contract with DP World in the first place is conveniently being ignored. So, because of an assortment of reasons which have more to do with probably shady deal-making at the contractual stage, an easy way out is being sought, by trying to sellout on a matter that is of serious national importance-cabotage. This would have been funny, if it weren't for the simple fact that the livelihood of workers as well as heavy loss of taxpayers' money in signing such contracts, were not realities that set the country back by thousands of crores of rupees.
Globally, countries protect their own shipping interests, whether inland, coastal or deep-sea. Simply stated, economic and military security depends, in no small measure, on this simple fact and truth, and it is a jealously-guarded national interest; along the same lines of military control, currency, foreign relations and similar. It is for this very reason that shipping-inland, coastal or deep-sea-is a subject on the Central list, barring certain minor exemptions.
Cabotage, within the Indian context, is covered by sections 406 and 407 of the Merchant Shipping Act, 1958. In brief, it reserves coastal shipping solely for Indian flag ships, adhering to Indian laws. Similar laws exist across the world, in, for example, the US, China, Greece, Indonesia, Brazil, Malaysia and others. Many of these cabotage laws, like the Jones Act in the US, are extremely rigorous and cover not just the nationality of the crew, flag and registration, but also construction and repairs to be performed nationally in the 'home' country.
Exemptions are made on a case-to-case basis. Within the Indian context, this means that a commercial enquiry for a foreign ship to be operated on cabotage waters is first circulated to the Indian National Shipowners' Association (INSA), which has the first right of refusal. And here lies the first flaw: INSA operates like a closed club, composed largely of members who themselves, have more foreign flag ships in their fleet than they do Indian. Barring the government-controlled Shipping Corporation, it tests where INSA's real interests lie.
This is over and above the fact that INSA makes it very difficult (and expensive) for new entrants. Potential shipowners, inland shipowners, small shipowners, and even those who simply do not make the cut for unknown reasons, are all going to find it difficult to become INSA members.
The big question here, on the Cochin Port Trust/DP World Vallarpadam container terminal, is not about cabotage being relaxed to hopefully increase container traffic. That will be dealt with in another article, as well as possible solutions suggested, on a national level. It is convenient for DP Ports Dubai and Cochin Port Trust to blame low throughput on cabotage laws when the truth lies elsewhere.
The big question on the larger national issue here is: does the Cochin Port Trust represent the interests of the Indian people and its government, or those of DP World Ports, Dubai? Because cabotage is without argument an issue of national importance, something like military or currency, and cannot be negotiated just because of possible faulty contractual obligations.
This, incidentally, is without going into the whole issue of DP World Ports of Dubai, and the controversies surrounding its operations in other countries; for example, the US. That, again, is another series of articles-just who are we giving our ports, gateways and all the security issues therein, to run? For example, have we forgotten the importance of Kochi as a major Indian naval base?
The issue of cabotage is too deep to be given away just for some short-term gains. It involves much more than coastal shipping. There are aspects of inland and river shipping, national security and most of all, the most vital element of the safekeeping of the country's economy.
Cochin Port Trust should re-work the lop-sided contract with Vallarpadam Terminal operators, and then compete on equal terms, doing all this with full transparency. For a start, it should reveal who was responsible for this one-sided contract that has prevented its own terminal from operating.
The company’s announcement in the media last week follows a fresh order by the Reserve Bank of India, asking it to bring down its aggregate liability to zero by 30 June 2015 and repay its depositors on maturity
A recent announcement by Sahara India Financial Corporation Limited (SIFCL) that it would repay its total liabilities by December 2011, four years ahead of the deadline, has come under the scanner of the Reserve Bank of India (RBI). According to sources, the apex bank is examining the company's claim and the legitimacy of the announcement that was published in the media last week.
The advertisement has set off a discussion on whether the RBI should formulate rules about disclosures in advertisements issued by regulated entities. For instance, this particular Sahara advertisement does not have the logo of the company and the signatory has been identified only by the designation.
Its claims of deposits of Rs73,000 crore till June 2011, conveys the impression that it will repay this stupendous volume four years ahead of the due date and this conveys a false and misleading impression of the financial strength of the company.
A Mumbai-based chartered accountant and social activist thinks that regulators like the RBI and the Securities and Exchange Board of India (SEBI) should have strict rules about the format for such financial advertisements. "There should be more transparency such as the name and the signature of company officials, mention whether the entity is a company as per the Companies Act or whether it is an NBFC or a residual NBFC," he explained.
It is reliably learnt that the company's total liability is around Rs5,000 crore. But even this may not be a cash repayment, and may well be a transfer of deposits to another entity.
Sources, requesting anonymity, said that at this juncture the RBI is examining the company's claim about repaying its total liabilities. The central bank is also looking into the trail of the deposits as well as the authenticity of the print advertisement.
In 2008, the RBI had directed SIFCL, which is a residual non-banking finance company, not to accept any deposits and to repay the depositors on maturity, after it found that the company was not complying with the rules and regulations that are laid down for this activity.
The company, however, challenged the directive of the RBI and the matter went up to the Supreme Court, which asked the apex bank to provide SIFCL a personal hearing and make a fresh order.
Subsequently, the RBI issued a fresh directive to SIFCL, asking the company to bring down its aggregate liability to depositors to zero by 30 June 2015 and repay its depositors on maturity.
SIFCL asked depositors (through the advertisement) to contact its service centres to receive repayments.
An e-mail message to SIFCL requesting details about the repayment procedure, its call centre and the total liability that has to be repaid, was not answered till the time of publishing this report.
In June this year, SEBI also restrained two other entities of the Sahara group, Sahara Commodity Services Corporation (earlier known as Sahara India Real Estate Corporation) and Sahara Housing Investment Corporation, from accessing the securities market to raise funds till payments are made to the satisfaction of the market regulator. It directed these entities to return the money collected from millions of investors through an instrument named Optionally Fully Convertible Debentures (OFCD), citing violation of regulatory norms. The company has appealed against the SEBI order which is being heard before the Securities Appellate Tribunal.
Sudarshan Venu is a graduate with honors at the Jerome Fisher Program in Management and Technology at the University of Pennsylvania, US
Sundaram-Clayton Ltd (SCL) said that it has appointed Sudarshan Venu, son of Venu Srinivasan, managing director of SCL and chairman of TVS Motor Company Ltd (TVSM), as an additional director.
Sudarshan Venu is a graduate with honors at the Jerome Fisher Program in Management and Technology at the University of Pennsylvania, US. He also obtained a Bachelor of Science Degree in mechanical engineering from the school of engineering and bachelor of science in economics, both from the Wharton School, University of Pennsylvania. He recently completed his Masters in International Technology Management from the Warwick Manufacturing Group, an academic department at the University of Warwick in the United Kingdom.
While pursuing his Masters, he underwent on-hands training in Die Casting Division of SCL and in TVS Motor Company Ltd.