Topics Covered: Investment models.
Vadhavan port and landlord model
What to study?
For Prelims: Major ports in India and about landlord model.
For Mains: Need for and significance of this model.
Context: The Union Cabinet has approved a proposal to set up a major port at Vadhavan near Dahanu in Maharashtra with a total cost of ₹65,545 crore.
- This will be 13th major port in India.
- With the development of this port, India will become one of the countries in the top-10 container ports in the world.
- A special purpose vehicle (SPV) will be formed with Jawaharlal Nehru Port Trust (JNPT) as the lead partner, with equity participation equal to or more than 50% to implement the project.
- The port will be developed on the landlord model.
How many major ports are there in India currently?
Currently, India has 12 major ports at Deendayal (erstwhile Kandla), Mumbai, JNPT, Mormugao, New Mangalore, Cochin, Chennai, Kamarajar (earlier Ennore), VO Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia).
What is landlord model?
- In the landlord port model, the publicly governed port authority acts as a regulatory body and as landlord while private companies carry out port operations—mainly cargo-handling activities.
- Here, the port authority maintains ownership of the port while the infrastructure is leased to private firms that provide and maintain their own superstructure and install own equipment to handle cargo.
- In return, the landlord port gets a share of the revenue from the private entity.
- The role of the landlord port authority would be to carry out all public sector services and operations such as the award of bids for cargo terminals and dredging.
- Currently, most major port trusts in India carry out terminal operations as well, resulting in a hybrid model of port governance.
- The involvement of the port authorities in terminal operations leads to a conflict of interest and works against objectivity.
The neutrality of the landlord port authority is a basic requirement for fair competition between port service providers, particularly the terminal operators.