POLITICS & POLICY 05 MONDAY, JUNE 23, 2014, MUMBAI ° WWW.LIVEMINT.COM mint Safety regulatory system needs urgent, drastic overhaul I ndia needs an effective safety case regulatory regime. There are over 1,900 major accident hazard (MAH) control units or facili- ties in India. There are also thousands of registered hazardous factories, below MAH criteria. There are numerous factories in unorganized sectors storing and handling hazardous chemicals, posing serious and complex risks to people, property and the environment. Major chemical disasters, with multiple fatalities, have occurred almost every year since the 1984 Bhopal gas leak disaster. In addition to the loss of lives, these disasters have eroded the manufactured, human and natural capital base of the Indian econ- omy. Flow-on, adverse impacts to the banking and finance sector are also significant. For example, insurers and underwriters can po- tentially become insolvent if disasters of the scale of the Bhopal gas leak were to occur. To foster process safety excellence, India needs to re-engineer process safety governance. The re-engineered safety governance will include radical regulatory and enforcement reforms, organiza- tional development and indigenous capacity building within the in- spectorates; and an on-going safety performance monitoring of MAH units to prevent major accidents. Regulatory reforms India should formulate and implement a comprehensive safety case legislative framework. This is the first and foremost step to- wards a performance-based governance approach that ensures pos- itive safety outcomes for the industry and the community. At present, various elements of safety are dispersed in various rules that have become antiquated when compared with current industry best practice and community expectations. India should consolidate the intent and the principles underpin- ning the various Acts and rules relevant to MAH control units, and develop a self-contained and an integrated legislative framework to enforce and monitor safety performance outcomes. There are also Acts and rules promulgated by the Petroleum and Explosive Safety Organisation (PESO) and the Oil Industry Safety Directorate (OISD) that are outside the realm of MAH rules. There is a need to bring to- gether the best elements from these Acts and rules to develop a co- hesive regulatory framework. At present, more impetus is being given to on-site and off-site emergency planning, preparedness and response. Little or no em- phasis is put on hazard prevention and control. Hazard mitigative measures are often complementary to hazard prevention efforts. However, mitigation is costlier and prevention is cheaper in the long term. MAH control rules do not explicitly consider safety management systems, while major accidents that have been occurring invariably point towards systemic failures at the facilities. Neither the current regulation nor the industry codes of practice provide sufficient clar- ity on risk tolerance criteria. There is no mention of the “so far as is reasonably practicable” (SFAIRP) or the “as low as reasonably practicable” (ALARP) concept in the MAH control rules. It is absolutely essential that MAH control units should define individual and cumulative risk tolerance criteria for on-site and off-site fatality and serious injuries, and evaluate the facility risks against these criteria as part of their safety case assess- ment. The MAH control rules must define what constitute a safety man- agement system and demonstrate how its key requirements are be- ing met. Implementing the above reforms and measures will be critical to achieving process safety excellence in Indian MAH control units. Process safety excellence is a key differentiator to gaining competi- tive advantage in global markets as it can lead to consistently high quality and reliable supplies. It can also restore public confidence in safety governance and can encourage collaboration and partner- ship with local communities on industrial and spatial safety plan- ning, and in the safety case approval processes. The MAH rules prescribe a three-yearly cycle for continuous im- provement and a mandatory review of the safety report. However, should a major incident occur at the MAH unit, or should there be a major industrial accident, the safety report should immediately be reviewed and reassessed. For example, post Buncefield oil storage depot fire and post the BP Texas refinery incidents, the tank terminals and refineries in In- dia should have reviewed their safety report and provided assur- ance to their regulator that sufficient control measures have been in place to prevent those types of incidents from occurring. Need for audits At present, the safety audits are primarily focused on occupation- al safety and health issues and lack sufficient technical rigour. The audit scope and methodology should be expanded to include audit- ing of major incident event scenarios and controls identified and assessed for each scenario. The audits should seek evidence on performance assurance of safety controls. The performance criteria are functionality, availabil- ity, reliability, effectiveness, independence, survivability, auditabili- ty, maintainability, etc. The Code of Practice on Occupational Safety and Health Audit should be reviewed to include core elements of process safety. At present, safety audits are being conducted either by consult- ants or by safety auditing cell experts. Increasingly, this capability must be internalized within the inspectorate to ensure independ- ence and to avoid potential business bias and rent seeking. External expertise can still be made available to the industry as support serv- ices. Investigative and technical rigour should be enhanced in the in- spections that are being undertaken by the inspectorate. There should be a national capacity building programme for the inspec- tors in process safety, incident investigation, and auditing and in- spections. Universities and professional institutions should contrib- ute to the long-term skill development of the inspectorates. Inspec- tors should be trained and assessed in both soft and hard technical skills. The directorate general, Factory Advisory Service and Labour Institutes (DGFASLI) should be strengthened and effectively uti- lized for developing professional capabilities of the inspectorates. The Centre for Chemical Process Safety (CCPS), the Institution of Chemical Engineers (IChemE-UK), the International Labour Insti- tute (ILI), and other international institutions should be invited to participate and contribute alongside Indian institutions to facilitate cross-pollination and skills transfer. Funding and benefits Many countries have successfully implemented a “fee-for-serv- ice” model, recovering the labour and total overhead costs of deliv- ery of regulatory services. The full cost recovery model provides more accountability to the governance structure and ensures great- er economic and administrative efficiency for the regulatory and enforcement services delivered. The inspectors’ performance should be assessed by defining and monitoring key performance indicators and continuous learning and professional development activities. Feedback on individual and team performance of the inspectors should be sought from MAH units and other stakeholders to identify and implement areas of continuous improvement. Current accident fatality numbers are clearly not acceptable, if India wants to become a global leader in this sector. By implement- ing a safety case regulatory and enforcement regime, the inspector- ate’s efforts will be focused to keep the occupiers honest. Ultimate- ly, the occupiers are responsible and accountable for safe operation of their facilities. To achieve drastic reductions in the frequency and number of major accidents, India should transform its safety regulatory system and build professional capacities within the inspectorate. As a side benefit, this will also enable its strong and vibrant chemical and petrochemical industry to become world class, both in market and safety performance. The writer is a safety specialist based in Perth, Australia EXPERT VIEW VENKATESAN NARAYANASWAMY Respond to this column at feedback@livemint.com B Y P . M ANOJ p.manoj@livemint.com ························· BANGALORE T he Kerala government has set rates on par with Co- lombo port as it enters the fi- nal lap of an auction to select a private firm for running a con- tainer trans-shipment terminal at Vizhinjam port near Thiru- vananthapuram. The southern state is the first to follow the so-called model concession agreement being finalized by the Union government for state-owned ports such as the one planned at Vizhinjam when the project avails a viability gap funding (VGF) from the central govern- ment. Kerala has sought VGF for the Vizhinjam project, billed the biggest infrastructure project yet in the state, to boost its viability. “The Union government has started the process of apprais- ing the project for VGF and a decision is expected in the next few days,” a spokesman for the Kerala government said. A model concession agreement sets out the terms and conditions of a port con- tract, including the rights and obligations of both the parties. Viability-gap funding refers to a one-time grant given by the central or state govern- ment for supporting public- private-partnership (PPP) projects in infrastructure that are economically justified but fall short of financial viability. A project can secure as much as 20% of the capital costs as viability gap grants from the central government. The state government which is implementing the project can chip in with a matching 20% grant. The combined viability-gap funding for the Vizhinjam project is estimated at `1,600 crore with the centre and the state governments contribut- ing `800 crore each. The bidder seeking the low- est grant will win the `3,950 crore project with a capacity to load 2.8 million standard con- tainers. Adani Ports and Spe- cial Economic Zone Ltd, Essar Ports Ltd, Gammon Infrastruc- ture Projects Ltd, a consortium of Srei Infrastructure Finance Ltd and Obrascon Huarte Lain SA, and a joint venture of Con- cast Infratech Ltd and Hyundai Engineering and Construction Co. Ltd have been short-listed for the project. Bidders have time until 18 July to submit their price quotations. A container trans-shipment terminal acts like a hub into which smaller feeder vessels bring cargo, which then gets loaded onto larger ships. Larg- er vessels bring about econo- mies of scale, and lower the cost of operations for shipping lines, which then translates into lower freight rates for ex- porters and importers. Being a port owned by the state government, Vizhinjam is free to set rates for services. In comparison, ports controlled by the Union government are regulated by the Tariff Author- ity for Major Ports (TAMP). However, a tariff cap is being set for the project because a pre-determined tariff is a pre- requisite for availing viability gap funding from the Union government, according to the eligibility criteria for VGF. “For trans-shipped export- import containers, the private operator will be allowed to levy rates not exceeding the maxi- mum rate levied at any major port (those owned by the Un- ion government) in India or any similar port in Asia (read Colombo),” the Kerala govern- ment spokesman said. “For non-trans-shipment contain- ers, the operator will be al- lowed to collect rates not ex- ceeding the maximum rate lev- ied at any major port in India.” The rates so set act as an up- per limit or ceiling beyond which the private operator cannot charge customers. The rate will be indexed to Whole- sale Price Index (WPI), a meas- ure of costs, to account for in- flation. Private operators will be free to levy rates from cus- tomers within that cap. The pre-determined rate will remain valid for 10 years, after which the operator will be free to levy rates based on competi- tion. Vizhinjam is being devel- oped to compete with Colom- bo because its basic infrastruc- ture such as water depth and proximity to the main shipping lane is better than or similar to Colombo, which is the biggest trans-shipment facility in the region. Colombo and Vizhinjam are located in close proximity to international shipping routes involving only a marginal di- version of about 20-25 nautical miles. While Colombo has a water depth of 16-18 metres, Vizhinjam will have much deeper berths and approach channel of up to 20 metres, ca- pable of docking mega con- tainer ships. As such, the rates will play a key role in the success of Vizhinjam. “The container cargo related charges at Colombo are at least 25% lower than Cochin port,” says Deepak Tewari, the chief executive officer of MSC Agen- cy (India) Pvt. Ltd, the Indian unit of Geneva-based Mediter- ranean Shipping Co. SA and the world’s second biggest container shipping line. “In the case of vessel-related charges, the rate difference be- tween Colombo and Cochin is even wider.” “Vizhinjam cannot attract container cargo unless the tar- iff is competitive with nearby trans-shipment ports such as Colombo,” the spokesman for the Kerala government said. About 2 million containers originating in and destined for India gets trans-shipped at Co- lombo every year. Vizhinjam has received the key environment and coastal regulation zone (CRZ) clear- ances from the ministry of en- vironment and forests. It has also made an application to the shipping ministry for relax- ing a so-called cabotage rule to allow foreign-registered ships to haul container cargo be- tween different Indian ports, including Vizhinjam. TRANS-SHIPMENT TERMINAL Kerala sets rates on par with Colombo for Vizhinjam port project FATAL ACCIDENTS IN INDIA SINCE THE 1984 BHOPAL GAS TRAGEDY Major chemical disasters, with multiple fatalities, have occurred almost every year since the 1984 Bhopal gas leak. Location Incident No. of fatalities No. of injured Evacuated Chemical involved Year Bhilai Visakhapatnam Mumbai Jaipur Nagothane Renukoot Sonebhadra Hyderabad Cochin Mohali Vellore Vadodara Mumbai Paradip Panipat Calcutta Visakhapatnam Dhanbad Mumbai Asanol Calcutta Nagothane Bhatinda Bombay New Delhi Cochin 2014 2013 2010 2009 2008 2006 2005 2004 2003 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1991 1990 1989 1988 1985 1985 Pipeline blast Refinery explosion Release Fire Explosion Release Explosion Fire Fire Explosion Explosion Release Fire Refinery fire Fire Refinery fire Gas, rain Poisonous gas Fire Pipeline leak Leakage Leakage Refinery fire Release Release Mainly carbon monoxide Hydrocarbons Chlorine Oil Hydrocarbons Chlorine Hydrocarbons Tolune Unknown Explosives Chlorine gas Toxic fumes Hydrocarbons Hydrocarbons Hydrocarbons LPG Mine collapse Unknown Methane Chlorine Ethane and Propane Ammonia Oil Sulphuric acid Hexacyclopentadiene 6 27 Unknown 12 4 6 2 Unknown 4 25 2 Unknown 6 5 5 60 64 2 53 Unknown 32 Unknown 35 1 Unknown >30 7 70 >200 49 29 2 Unknown 25 3 18 5 >12 2 >100 31 Unknown Unknown Unknown 200 22 500 16 340 200 Unknown Unknown 120 1,000,000 >200 Unknown Unknown Unknown 150 Unknown <100 Unknown Unknown Unknown Unknown 150,000 Unknown Unknown Unknown Unknown Unknown Unknown Unknown <10 Unknown SARVESH SHARMA/MINT