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India: New concession pact to ease port projects

The Cabinet this week approved amendments to the model concession agreement (MCA) to make port projects more investor-friendly and make investment climate in the sector more attractive.

For existing port projects, the government has formed a panel under Finance Minister Arun Jaitley to iron out implementation issues.

Shipping Minister Nitin Gadkari said contractual issues or other such hurdles in the execution of the existing 10-12 port projects would be resolved by the committee headed by Jaitley, which would have representatives from the NITI Aayog and the Ministry of Law and Justice.

The amendments in the MCA envisage constitution of a Society for Affordable Redressal of Disputes-Ports (SAROD-PORTS), similar to the provision available in the highway sector. Another salient feature of the revised MCA include the provision of an exit route to developers by way of divesting their entire equity after completion of two years from the commercial operation date.

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

The concessionaire would pay a royalty on “per MT of cargo/TEU handled” (or the ship’s cargo carrying capacity), which would be indexed to the variations in the Wholesale Price Index. This will replace the procedure of charging royalty 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.

The new method is expected to resolve the long pending grievances of public-private participation operators that revenue share was payable on ceiling tariff and price discounts have been ignored. The problems associated with fixing storage charges by TAMP and collection of revenue share on storage charges would also get eliminated.

Concessionaire would be free to deploy higher capacity equipment or technology and carry out value engineering for higher productivity and improved use and/or cost saving of project assets.
Source: Business Standard

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