Panel set up to clear stuck PPP port projects

The government has formed a committee headed by finance minister Arun Jaitley with representation from the law and shipping ministries to resolve stuck PPP projects worth Rs20,000 crore in the ports sector, transport minister Nitin Gadkari has said. There are around 12 such projects in 12 government-owned major ports, the minister said without naming the stuck projects.

The union cabinet chaired by Prime Minister Narendra Modi on Wednesday approved amendments to the Model Concession Agreement (MCA) to make port projects more investor-friendly and improve investment climate in the port sector.

Amendments to the MCA envisage constitution of the Society for Affordable Redressal of Disputes - Ports (SAROD-Ports) as dispute resolution mechanism similar to provision available in highway sector.

The amendments provide for exit route to developers by way of divesting their equity up to 100 per cent after completion of two years from the start of commercial operation.

Under provision of additional land to the concessionaire, land rent has been reduced from 200 per cent to 120 per cent of the applicable scale of rates for the proposed additional land.

Concessionaire would pay royalty on "per MT of cargo / TEU handled" basis which would be indexed to the variations in the WPI annually.

This will replace the present procedure of charging royalty which is equal to the percentage of gross revenue quoted during bidding, calculated on the basis of upfront normative tariff ceiling prescribed by the Tariff Authority for Major Ports (TAMP). This will help to resolve the long pending grievances of public private participation (PPP) operators that revenue share is payable on ceiling tariff and price discounts are ignored.

The problems associated with fixing storage charges by TAMP and collection of revenue share on storage charges, which has plagued many projects, will also get eliminated.

Concessionaire would also be free to deploy higher capacity equipment / facilities / technology and carry out value engineering for higher productivity and improved utilisation and / or cost saving of project assets.

The new definition of "Change in Law" will also include imposition of standards and conditions arising out of TAMP guidelines / orders, environmental laws and labour laws and increase in tax rates or imposition of new taxes, duties, etc for compensating the concessionaire.

Since the viability of the project was affected, concessionaire will now be compensated for the increase and imposition of new taxes, duties etc. except in respect of imposition / increase of a direct tax, both by the central and state government.

Provision for commencement of operations before projected commercial start and formal completion certificate will lead to better utilisation of assets provided by the port in many projects.

Provision regarding refinancing is aimed at facilitating availability of low cost long term funds to concessionaire so as to improve the financial viability of the projects.

There is also a provision for extending the provision of SAROD-Ports for redressal of disputes to existing concessionaires by introducing the Supplementary Agreement to be signed between the concessionaire and the concessioning authority.

A monitoring arrangement has been introduced for keeping periodical status report of the project.

The amendments have been proposed keeping in view the experience gained in managing PPP projects in port sector during the last twenty years and to obviate the problems being faced on account of certain provisions in the existing MCA. The amendments in the MCA have been finalized after extensive consultation with the stakeholders, says a government release.