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Government Revises Model Concession Agreement for PPP in Major Ports

 Government has approved the revised Model Concession Agreement (MCA) for Public Private Participation (PPP) projects in Major Ports on 3.1.2018 in order to make port projects more investor friendly. The revised agreement will also make the investment climate in the major port sector more attractive. Salient features of the revised MCA are as follows:

Providing exit route to developers by way of divesting their equity upto 100% after completion of 2 years from the Commercial Operation Date(COD).  This is now similar to the MCA provisions of Highway Sector.

Land rent has been reduced from 200 to 120 per cent of the applicable scale of rates for the proposed additional land under the provision of additional land to the Concessionaire                        

Concessionaire would pay Royalty on “per MT of cargo/TEU handled” basis which would be indexed to the variations in the WPI annually.  This 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 TAMP. 

This will help to resolve the long pending grievances of PPP operators that Revenue share is payable on ceiling tariff and price discounts are ignored.  The problems associated with fixing storage charges by TAMP and collection of Revenue share on storage charges which has plagued many projects will also get eliminated.

Concessionaire would be free to deploy higher capacity equipment/facilities/technology and carry out value engineering for higher productivity and improved utilization and/or cost saving of Project assets. “Actual Project Cost” would be replaced by “Total Project Cost”.

The new definition of “Change in Law” will also include (i) imposition of standards and conditions arising out of TAMP guidelines/orders, Environmental Law &Labour Laws and (ii) increase and imposition of new taxes, duties, etc for compensating the Concessionaire.  Since the viability of the project was affected, concessionaire will now be compensated for the increase and imposition of new taxes, duties etc. except in respect of imposition/increase of a direct tax, both by Central & State Government. 

Provision for commencement of operations before Commercial Operation Date(COD).  This will lead to better utilization of assets provided by the Port in many projects before the formal completion certificate.

Provision regarding refinancing is aimed at facilitating availability of low cost long term funds to Concessionaire so as to improve the financial viability of the projects.

Extending the provision of SAROD-PORTS for redressal of disputes to the existing Concessionaires also by introducing the Supplementary Agreement to be signed between the Concessionaire and the Concessioning Authority, Introduction of Complaint Portal for the use of port users.

A Monitoring Arrangement has been introduced for keeping periodical status report of the project.

This information was given by the Minister of State for Shipping Pon Radhakrishnan in a written reply to a question in Lok Sabha last week.

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