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Paradip Port Trust to develop Western Dock berths as common user facilities

The Public Private Partnership Appraisal Committee (PPPAC) has nixed a Shipping Ministry plan to build cargo berths at the Western Dock of Paradip Port Trust as a captive facility (for use by port dependent industries or PDI only), recommending instead that the project be taken up as common user terminals.

“All players (including PDI) should be eligible to compete and this project should be taken up on a common user basis,” the PPPAC decided in an October 30 meeting.

The eligibility criteria for PDI will be in keeping with the Captive Berth Policy finalised by the Shipping Ministry in 2016, while for non-PDI players, provisions of the model request for qualification (RFQ) drafted by the Department of Expenditure will be followed, it said.

However, the financial criteria for both PDI and non-PDI players will be a minimum networth of 50 per cent of the total project cost.

The contract terms would include a clause on minimum guaranteed cargo of 70 per cent to protect the income of Paradip Port Trust and the performance guarantee will be kept at 20 per cent of the total project cost with high penalties for non-achievement of specified milestones.

The PPPAC recommendation would be forwarded to the Cabinet for clearance ahead of calling for bids.

During an earlier meeting held in July, the PPPAC had asked the Shipping Ministry and Paradip Port Trust to “undertake a study to ascertain whether captive berths for PDI would be better than making all port players eligible to compete for the project”.

A comparative study undertaken by RITES had concluded that “the project be implemented under the captive cargo model from the port dependent industry (PDI) for the successful implementation and thereby guaranteed revenue to the port on a long-term basis”.

Paradip Port Trust favoured the captive model to set up the berths in its inner harbour after Tata Steel submitted a suo moto proposal to build the facilities primarily to cater to its Kalinganagar steel plant, which is being expanded from 3 mt to 8 mt.

Basis this, the port authority floated a global tender as per the captive berth policy, seeking interest from other bidders on which APSEZ and Essar applied, he added.

Project development
The 25 million tonne (mt) capacity project will be developed in two phases of 12.5 mt each. Apart from the Rs 2,040 crore to be invested by the private operator, the port trust will spend Rs 985 crore to extend the breakwater and deepen the channel/berths to allow capsize vessels to dock.

Paradip Port Trust has set a floor royalty rate of Rs 46.69 per metric tonne for the project. The bidder quoting the highest royalty per metric tonne above the floor rate would be awarded the contract.

After scrutinising the RITES study, the PPPAC led by Atanu Chakraborty, Secretary, Department of Economic Affairs, suggested that the project “may create more value to the project authority” if it is taken up on common user basis by allowing non-PDI players also to participate.

According to the estimates of Paradip Port Trust, the Western Dock will facilitate import of coking coal required by the steel industry and restricting eligibility to PDI would result in under-utilisation of capacity, thereby, exposing the port’s traffic to additional risks.
Source: The Hindu Business Line

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