In an attempt to spur private investment in the port sector, the government has cleared changes in the PPP (public-private partnership) framework allowing developers to exit a project after two years of commercial operation. The revenue sharing provisions have also been relaxed to make the sector more investor-friendly. The move, seen as a big positive for the sector, will allow developers to monetise assets by diluting stake in projects. It will bring new class of investors such as pension and sovereign funds.
According to infrastructure experts, changes in PPP for ports would now be aligned with other sectors like highways and renewables. “Overall, it’s a positive development. It will enable asset monetisation for developers. They can monetise, dilute or sell off their projects and hence when they sell off their projects after completion it will get a new class of investors. The equity coming back to the existing developer could be put into new projects,” said Sandeep Upadhyay, MD and CEO, Centrum Infrastructure Advisory.
Amendments to the model concession agreement (MCA) provides for setting up of the society for affordable redressal of disputes – ports (SAROD-P) as dispute resolution mechanism similar to provision available to the highways sector.
As per new PPP provisions, concessionaires would also have to pay lower rent for land with the government reducing it from 200 per cent to 120 per cent of applicable scale of rates for the proposed additional land. Further, concessionaires would now pay royalty on the “per MT of cargo/TEU handled” basis, which would be indexed to variations in wholesale price index annually.
According to a shipping ministry statement, the new method of fixing royalty 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).