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"The new model will have the benefit of maximising revenue to the port trusts. The Government's risk will be less irrespective of traffic in this model. The private operator will have to pay the annual revenue share quoted by him in the bid to the port trust, whether he transacts business or not," a Ministry official said.

New Delhi , Dec 29

WITHOUT much fanfare, the Government has altered a key element of the policy on building container terminals at major ports with private participation by allowing the port trusts to adopt a mix of the revenue share and minimum guaranteed throughput (MGT) models while developing such facilities.

Though the Shipping Ministry had allowed Jawaharlal Nehru Port Trust (JNPT) to adopt a combination of revenue-share and MGT methods for developing a new box terminal at the port following demands from some of the short-listed bidders, this was considered an exception since the tender for the project was floated on the revenue share model in line with the policy of the Government prevailing at the time.

But, the Ministry has now allowed Mumbai Port Trust also to go in for a hybrid of revenue share and MGT models for building a two-berth off-shore container terminal at the port with private sector investments.

Like in the case of JNPT, the Mumbai Port Trust had floated the tender for developing the terminal on a pure revenue share format. But, in the wake of directions issued by the Shipping Ministry to all the major port trusts to follow the JNPT formula involving a combination of revenue share and MGT models, the Board of Trustees of Mumbai Port has recently approved the change in the bidding format to switch-over to the hybrid model for developing the project.

As per the new model, the successful bidder will be identified on the basis of the revenue share quoted by him (the bidder willing to share the highest percentage of his annual gross revenues from operating the terminal with the port trust would win the deal). Moreover, he will have to abide by the MGT stipulated in the concession and license agreement signed with the port trust.

The Union Government had flagged-off the policy of private sector participation at major ports in 1996 with the MGT model, which was shelved in favour of the pure revenue share method in 2000.

In the MGT model, the private operator was selected on the basis of the royalty per tonne of cargo handled at the terminal, which was to be paid to the port trust besides complying with the MGT. But, the revenue share model did not stipulate any MGT and the bid was determined solely on the basis of the highest quantum of revenue share quoted by the bidder.

"The new model will have the benefit of maximising revenue to the port trusts. The Government's risk will be less irrespective of traffic in this model. The private operator will have to pay the annual revenue share quoted by him in the bid to the port trust, whether he transacts business or not," a Ministry official said.

The prescription of an MGT is also aimed at gauging the performance level of the private operator. He will have to strictly abide by the MGT clause and non-compliance will attract stiff penalties including termination. "The MGT will help the port trusts in determining extend of performance of the private operator," he noted.

The new model will be followed in the case of container terminal projects being planned at Vallarpadam in Cochin port and the one at Kandla port.

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