Ministries at loggerheads over revised bill for Gwadar Port Authority

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (November 02 2009): Ministries of Defence and Ports and Shipping have locked horns over the revised Gwadar Port Authority (GPA) Bill as the former wants incorporation of a clause in the Bill which will allow armed forces to take control of the port from the operator in case of any emergency or war, well-informed sources told Business Recorder.

This is reportedly the reason why the Ministry of Ports and Shipping withdrew its summary from the Cabinet a couple of weeks ago. "The whole operation of the port has been authorised to a private port operator. It is suggested that a provision with regard to shifting control of the port to the government during war or emergency should be suitably incorporated. At least the private operator should be bound by a statutory provision to facilitate activities for defence of the port and coastal infrastructure," the sources quoted the Defence Ministry as saying in its comments, copy of which is available with this scribe.

Regarding the viewpoint of the Ministry of Ports and Shipping that the Director General Ports and Shipping becomes the Chairman of the Defence Shipping Authority, the Defence Ministry stated that the main function of the Defence Shipping Authority is economical employment of merchant ships in war/emergency and has no role in defence of ports.

The Defence Ministry is of the view that Commander Coast be included in the Board of the Port because of-late, Commander Coast has been made responsible for harbour defence with reference to all ports of Pakistan, including Gwadar Port, therefore, non-inclusion of COMCOAST in the GPA Board will have direct implications on the roles assigned to Coastal Command with respect to port operations in a number of ways: (i) Government of Pakistan (GoP) War Book, section 72 (amendment under process), stipulates that COMCOAST will become the Chairman of Port Executive Committee. As and when the Committee is set up, the executive control of all the ports including Gwadar Port will be exercised by COMCOAST; (ii) COMCOAST has been made the Naval Control of Shipping Officer (NCSO) for all ports including Gwadar Port.

In this regard, shipping control in all the ports will be administered by NCSO; (iii) Harbour defence of all including Gwadar Port is under the purview of COMCOAST; (iv) COMCOAST is responsible to ensure that navigable channels in the approaches to all ports including Gwadar Port are cleared promptly in case of any blockages. In addition, salvage operations will be undertaken by COMCOAST command ;( v) COMCOAST is being made responsible to assist port authorities if the ports are threatened with partial or complete strike (civil disturbance). In that case, all available resources of the ports will be utilised under overall control of COMCOAST; and (vi) provision be made for providing free berthing facilities to PN Ships until construction of dedicated Naval berthing in Gwadar port.

The sources said the Establishment Division had conveyed its concurrence to the Bill whereas the Finance Ministry was of the view that the Board should delegate its powers to the executive authorities except the non-executive chairman.

The Federal Board of Revenue (FBR), in its comments, has stated that under section 9 of the Customs Act, 1969 the Board is empowered to declare places which alone can be customs-ports for the clearance of goods imported or exported, or the places which shall alone be ports for carrying on coastal trade with any specified customs port (s) in Pakistan.

The power to specify the limits of a port as a customs station also vests in the Federal Board of Revenue. It must be ensured that while defining or altering the limits of the Gwadar Port under section 3 of the Revised Bill, the notification issued there under is consistent with the notification issued under provisions of the Customs Act. Gwadar Port has been declared as customs-port.

Under section 14-A of the Customs Act, 1969, any agency or person managing or owning a customs port is under obligation to provide at its or his own cost adequate accommodation to customs staff for offices, examination of goods, detention and storage of goods and for other departmental requirements to be determined by the Collector of Customs and is also bound to pay utility bills, rent and taxes in respect of such accommodation.

The FBR has proposed that there is need to specifically mention in the revised Bill that the port authority would provide all necessary support and ensure provision of infrastructure, services etc as required under the Customs Act, 1969. In certain cases the delay in customs clearance is caused due to reasons beyond the control of the importer or the exporter. In such situations, the importers/exporters have to incur extra charges for no fault on their part. Customs issues Delay and Detention Certificates (DDCs), in such cases, to enable them to seek remission from such extra dues, charges etc.

The FBR further suggested that appropriate provision may be included in the Revised Bill for institutionalised acceptability of the DDCs.

Under the customs law, the role of the port authority is of custodian of the goods imported or to be exported. Under section 197 of the Customs Act, 1969, the control over the conveyance and goods in a customs area ie port, vests in the Customs.

If goods imported on a port or brought in a port area for export are not cleared within 20 days (extendable by another 10 days) of their arrival at the port, the power to remove them to a warehouse or selling them in an auction or disposing them in any other manner rests with Customs only. However, the port authorities are entitled to the charges that are due in respect of such goods from the sale proceeds in the manner specified.

The sale proceeds are distributed in the following order of preference: (i) payment of expenses of the sale; ( ii) payment of freight or other charges; ( iii) customs duty, other taxes and dues payable to the federal government; and (iv) charges due to the person holding such goods in custody.

The provisions of section 11 of the Revised Bill appear to be in conflict with the above stated provisions of the Customs Act and need to be brought in consonance with sections 82, 197 and 201 of the Customs Act, 1969.

Until and unless the customs formalities are fulfilled and the duties, taxes and other charges etc leviable on the goods and to be collected by Customs are paid, the first and foremost claim and control over the goods imported at the port or over the goods brought to a port for export remains with the Customs. Besides, the powers vested in Customs under sections 82, 197 and 201, it is the appropriate officer of Customs who is authorised to make an order for clearance of goods under section 83. Until such an order implying completion of customs formalities is made, the port authorities are not entitled to claim any control on the goods or have them sold to recover their dues. Therefore, this section of the Revised Bill may be amended to bring it in line with other sections of the Customs Act, 1969.

As explained above, the question of removal or sale of goods by the custodian for recovery of its dues would arise only when the order for clearance of goods has been made by the appropriate officer of customs under section 83. Unless the duties, taxes and other charges to be collected by the Customs are fully paid, the custodian of goods is not entitled to sell the goods or dispose it of in any other manner to recover its dues.

Similar controls and claims are exercisable by customs in relation to the conveyances (vessels etc.) as are exercisable in case of goods. The Customs Act provides for confiscation of a vessel for violation of the provisions of the Customs Act, 1969. There can be instances when the customs and port authorities might have a simultaneous claim over the vessel, tackle, apparel and her furniture. As already pointed out that first and foremost right over the conveyance and vessels is vested in Customs, therefore, the words "subject to the provisions of the Customs Act, 1969" may be inserted to obviate any conflict between the two statutes.

Under section 55 of the Customs Act, 1969, the power to grant port clearance vests in the appropriate officer of customs. While granting port clearance, he is under legal obligation to see whether port dues in respect of conveyance for which port clearance is being given, have been paid or not. Thus section 55 adequately caters to the requirement of this provision of the draft bill.

Under Section 18 of the draft bill, exemption is being granted to the concessionaire. It is not clear what exemption is being extended to such concessionaire either from income tax or other duties.

Section 54 read with section 3 of the Income Tax Ordinance, 2001 restricts the grant of exemption to the exclusive domain under the Income Tax Ordinance. This needs clarification. The Collector of Customs of Gwadar may be made ex-officio member of the Board. This would help in smooth functioning of the port. Similar arrangement already exists at other ports.

Under section 203 of the Customs Act, 1969, the power to fix the time period beyond which goods left at the port area become subject to wharfage or storage fees etc and the schedule of such fees requires the concurrence of the Collector Customs. In its comments Ministry of Labour and Manpower stated that section 51 of the Bill provides that nothing contained in the Industrial Relations Ordinance, 2002 (XCI of 2002) (now repealed through Industrial Relations Act, 2008) will apply to, or be in relation to, the Authority.

The Ministry is of the firm opinion that presence of CBA provides the legal forum to the management and the government to amicably sort out various issues which could invoke agitation and thus negatively effect on the working of the establishment. The labour laws give provisions not only to the right of workers but the employers also. The Ministry further feared that exemption to the Authority from application of laws relating to Industrial Relations will lead to refusal of acceptance of goods exported through this port by the international buyers. Apart from the above, it may also be appreciated that the relations between employers and the workers are governed through the Industrial Relations Act, 2008 and as per Principles of Jurisprudence, exemption from the special law through another law is not appreciable.

The preamble of the Gwadar Port Authority Bill, 2008 clearly provides that it is introduced "for making arrangements for the planning, construction, operation, management and maintenance of Gwadar Deep Water Port and associated facilities, industries and development of infrastructure". The very purpose of the introduction of the Bill shows that it has nothing to do with the relations between the employers and workers, the sources quoted the Ministry as saying.

This Ministry, however, supported the Bill in the best interest of the national subject to removal of section 51.

The Balochistan government, in its comments, said the word Provincial should replace the word Federal in the Bill because under the preamble of the Constitution of the Pakistan, the territories are substantive in case of provinces while delegated in case of federation. After the word "Government" appearing in the said sub section the words "on the request of the Federal Government" should be added.

Planning and Development Division, in its comments before seeking direct approval of master plan and a phased master programme for the development of the Gwadar Port and its infrastructure from National Economic Council (NEC), has suggested that instead of seeking approval of NEC, the same should be approved by the government in consultation with the Planning Commission.

Under this section, it has been stated that the Authority has the power to outsource any or all operational functions to any contractor or concessionaire with the approval of the Federal Government, in which case powers of Authority relating to tolls, dues, charges etc shall rest with the contractor/ or concessionaire as the case may be. It is pointed out that GPA has already handed over port operations on lease of 40 years to Port of Singapore Authority (PSA). The PSA is responsible to frame tolls, dues, charges etc.

The composition of Board should not be more than 10 members. Three members could be from private sector and rest of the 7 members, including Chairman could be from public sector for effective contribution.

The port has only 3 berths (compared with KPT having 30 berths and PQA having 10 berths) whose complete operation and future expansion has been handed over to the Singapore Port Authority for 40 years. There seems very little logic in having a 15 member Board.

It has also been proposed that the practice of detaining vessels through non issue of port clearance must be stopped. Ships of today are frightfully expensive. Any detention should only be through due process of law. Consequently, this section needs to be amended.

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