Many Questions on Viability of JNPT FTWZ after Customs Actions to Scuttle Existing FTWZ

- Arun Goyal -

JNPT is embarking on a big programme of setting up a $666 mn FTWZ facility at public cost. PM Modi himself is inaugurating it to underline the emphasis on infrastructure in his plan for the economy. He has chosen the next day after his Independence Day Speech at Red Fort for the event for special effect. Ministers from Maharashtra in his cabinet and the Congress Chief Minister Prithviraj Chavan are in attendance.

JNPT with all its negative points of poor administration and labour relations has emerged as the alternative to the even more badly managed Mumbai port. It has emerged as the biggest container port in India, handling 56 per cent of containerized cargo. It is basically a port for transhipment of containers from the Delhi ICD and others spread over North and Central India with nothing to show for port based industry. Even though JNPT is located some 800 kms away from the Main Singapore-Europe-US route through the Suez Canal, it gives stiff competition to Colombo which is bang on the route with zero diversion. The rail-road link to the hinterland ICD is in JNPT plus point.

A fourth container terminal with a quay length of 2000 metres and capacity of 4.8 million TEUs will come up at an estimated project cost of $1.3bn crore by PSA Investment of Singapore. The project is scheduled to be completed in six years in two phases.

JNPT has little to offer on its own, it depends upon foreign operators who handle the cargo at its terminals. It gets its revenue as a landlord extracting rent share from BOT contract with private parties. Its future is, however, bleak with port draft of only 12 m which is grossly inadequate to handle ships over 18,000 tonnes. With ship sizes going up to 100,000 tonnes, Mundra with 18 m draft will take over from JNPT on the container cargo front.

Regulatory hurdles in FTWZs

The JNPT surpluses are from Government monopoly rentals. Its own working is dismal. Locking up $666mn in FTWZ is risky, may be even fool hardy. Rival SEZs in Kandla/Mundhra/Pipavav/Dahej have taken away all the good business. Besides this, FTWZ has not taken off with customs putting up many legal and technical hurdles in the way. Arshiya FTWZ is bleeding with many units on the verge of closing. JNPT has no expertise in handling FTWZ. Where is the private party to do this job?

There many unresolved issues in FTWZ. For example, exports to FTWZ from DTA is not accepted by customs even though the SEZ Act administered by Ministry of Commerce defines export to include movements from DTA. Similarly imports from SEZ to DTA are not recognized by customs and charged the SAD tax even though there is an exemption notification on this subject released by Department of Revenue. The entire revenue department is out to kill FTWZ which is a derogation from its own Customs Act, 1962. With this environment, how will the JNPT FTWZ with its emphasis on transhipment succeed where others have failed?

Other questions for JNPT FTWZ:

• India has NTBs in place, there are no exemption in customs clearance on NTBs for FTWZ. What is the advantage of FTWZ over DTA?

• India is out to scuttle Trade Facilitation (TF) of WTO. There is no chance of special window on TF in FTWZ - which are for "Free Trade".

• No exemption from Exchange Control in FTWZ.

• JNPT customs is not the best example of efficiency. Long queues for users at the lift in the Customs House. CHAs are treated as coolies. The attitude of customs in the new FTWZ is not a good sign.

• Customs is out to defeat FTWZ, it is not a haven but a prison, according to the users.

• No separate law for FTWZ, it is an extension of SEZ

• SEZ Board in Commerce Ministry is only a Blackboard, prior customs approval is required for agenda items!

• Many units are Debonding from SEZs for DTA. Reliance SEZ is an example

• Where is the income tax holiday for SEZs? Government has gone back on it.

• Transaction costs are very high, Concor is inefficient, containers are taken by road to Mumbai, the result is that it cost of sending a container from Delhi to Mumbai is more than the cost of shipping it from Mumbai to Hamburg!

• JNPT was to be privatised, What happened. IAS and IRS officers are running the port!