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PPP projects at Indian major ports at risk of running aground, litigation locked

It is really ironic that PPP projects at major ports face possible failures when the government is taking all steps to achieve massive results through port-led developments with greater importance being given to PPP projects. Reasons are easy to find and the threat of failure of the PPP projects at major ports is attributed to rigid regulatory framework and the fluid market dynamics.

Kandla Port Trust scrapped two PPP projects in August with RAS Infraport Pvt Ltd; the one saying that the other did not pay the contractually mandated revenue share and the other throwing the blame back pointing out the port failed to give them rail connectivity and required water depth on time.

At Visakhapatnam, four PPP projects with four different entities are under stress from rate issues and other tender terms which could finally force termination in some cases, according to Port Trust Chairman M K Krishna Babu.

According to a managing director of a Mumbai-listed port logistics firm, every PPP project has legal problems. “Across geographies, every PPP project is in litigation/arbitration with the government,” he said, referring to court cases filed by terminal operators individually and collectively under the banner of the Indian Private Ports and Terminals Association (IPPTA), over rate setting, lack of dredging on time, delayed environment and security clearance and insufficient yard space. Projects have also collapsed due to non-compliance of contractual obligations by the port trusts.

One former head of a PPP terminal on India’s eastern coast added one more angle to the issue saying that though the blame for the crisis must be shared by the port trusts and the bidders, ‘ the consultants who made the detailed project report who are mainly responsible’, a view with a strong common sense. .

For instance, the consultants had claimed the cargo terminal run by Sterlite Ports at Vizag would be able to evacuate four lakh tonnes of coal every 10 days. On that basis, they worked out a capacity of 10.2 million tonnes of cargo a year.

“Did they check if importers were willing to take the cargo out in 10 days? Did the port give them adequate rakes? It’s a total design fault, but the consultants go scot free,” he said.

One more point of view was expressed by another expert who rued that the concession agreements framed for 30 years did not include provision for review and amendment. Even the Constitution can be amended, but not concession agreements!” he exclaimed.

To give somewhat a total picture of the situation, it is said thirty-three PPP projects with an investment of Rs.17,818 crore are operational, while 20 more projects worth Rs.22,363 crore are under implementation.     

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