After a thorough study of investment options available, the Ministry of Shipping on July 31, 2018 issued new guidelines to all the major ports on the investment of provident funds, based on the Employees Provident Fund Organization (EPFO) guidelines from the Ministry of Labour and Employment in 2015.
The ministry also issued the fresh guidelines on the investment of surplus funds based on guidelines from the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises in 2017.
These new guidelines are expected to increase the returns of provident and surplus funds by 1 to 1.5 percent across ports, adding around Rs 150 crore annually to the current earnings.
With the launch of new guidelines, many ports including Kandla, Goa, JNPT, New Mangalore and Visakhapatnam will now switch the investment pattern with higher rate of return. The estimated financial benefit would show up in the books of accounts of major ports from 2018–19.
Treasury investments at Indian ports
Treasury investments at India’s 12 major ports are governed by Section 88 of the Major Ports Trust Act, 1963. These 12 ports are - Kandla, Mumbai Port Trust, JNPT, Goa, New Mangalore, Cochin, Tuticorin, Chennai, Ennore, Vishakhapatnam, Paradip, and Kolkata/Haldia.
The Major Ports Trust Act mandates that investments pertaining to pension, provident and surplus funds adhere to the guidelines issued from time to time by the Ministry of Shipping or Ministry of Finance.
Why was there a need of fresh guidelines?
One major initiative undertaken by the Ministry to boost profitability across Indian ports was to improve the returns earned on treasury investments by the ports for pension, provident and surplus funds. Across all major ports, these funds add up to around Rs 33000 crore, yielding interest of around Rs 2700 crore.
To push this amount further, the Ministry focussed to improve returns by Rs 150 crore or more through a strategic shift in its guidelines for provident and surplus funds.
Moreover, as per the most recent guidelines, major ports have been investing their provident and surplus funds in the fixed deposits of nationalised banks, earning returns in the range of 5.5 to 8 percent. However, many PSUs have enjoyed significantly better returns.
Realising the potential to earn higher returns, the Ministry evaluated its recommended investment pattern in comparison to the frameworks followed by other PSUs and government bodies.
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Who: Ministry of Shipping
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