MANU/PIBU/2190/2022

Department/Board : Press Information Bureau

Date : 11.05.2022

Guidelines for early Resolution of Stuck Public Private Partnership projects at Major Ports

Background

In the past decade, Government of India invited private investment into Major Port Sector and several projects were awarded under Design, Built, Finance, Operate & Transfer (DBFOT) basis across the Major Ports in the country. Since the implementation of first PPP project at Major Port in 1997, significant progress has been made through this method of implementation. Notable benefits including private investment, capacity addition and operational efficiency has contributed to the growth of the sector. Currently, 34 projects of over INR 27,000 crore are operational and 25 projects of over INR 14,000 crore are under implementation. The operational projects have added a capacity of around 350 MTPA at Major Ports.

Under Asset Monetisation, there is clear pipeline of 31 projects of Rs. 14,500 Cr. to be awarded by 2025. Apart from current pipeline of 31 projects under NMP, additional 50 projects (of value ~INR 27,500 crore) have been identified for offer under PPP. Out of these 50 projects, 14 projects (~INR 2,400 crore) are envisaged to be offered in FY 2022-23.

In order to encourage private investment in the Major Port sector and standardise the diligence process for implementation of such projects and encourage EoDB, the Ministry has undertaken many initiatives in terms of preparation of policies/ guidelines.

With the aim to reduce arbitrations and litigation in the sector, new Model Concession Agreement (MCA) was launched by the Minister of MoPSW on 21st November 2021. The new document provides clarity on responsibilities and obligations of parties along with remedial measures in case of change in law. Apart from new MCA, new Tariff Guidelines have been issued with the focus on flexibility to PPP player to fix tariffs as per market dynamics, provide level playing field for competition between private terminals at major port and private port, facilitate better utilization of the capacity and introduce differential royalty rate to promote coastal shipping and transshipment

Despite all the policy level initiatives to mitigate the possibilities of litigation and encourage EoDB and due diligence and caution at the time of conceptualizing these projects from various perspectives, the survival of some of the projects is at risk due to various reasons like aggressive bidding and optimistic projections with regard to volumes & charges, unforeseen dynamic changes in the business and absence of flexibility to overcome such dynamic changes in the Concession Agreements that were either not foreseen or are beyond the control of the collaborating partners, i.e., the Concessionaire and the Concessioning Authority.

The Guidelines