The Hindu Business Line : Concession period for BOT projects at ports to be extended to 99 years

THE last big impediment to better private sector participation in setting up cargo handling facilities at the Government-owned major ports is set to be removed with the Shipping Ministry mooting a Cabinet proposal to extend the maximum concession/lease period for build, operate and transfer (BOT) projects from the existing 30 years to 99 years.

The plan to increase the maximum concession/lease period from 30 to 99 years forms part of the Ministry's note seeking an " in-principle" approval for the Sagar Mala project from the Union Cabinet, a senior Ministry official told Business Line.

After the Cabinet approves the proposal, the policy change in the concession/lease period will be implemented with prospective effect. In other words, the 99-year concession/lease period will be available only to BOT projects to be developed in future and not to the existing ones.

The erstwhile Ministry of Surface Transport, which looked after major ports, had prescribed a maximum ceiling of 30 years as concession/lease period for private operators when guidelines were first issued in October 1996 for private sector participation at the 13 major ports in the country.

"However, experience gained so far in implementing the policy has showed us that the 30-year concession/lease period was a major inhibiting factor in getting the best private operator for developing and operating the cargo handling facilities at major ports," the official pointed out.

Private operators had sought a longer concession/lease period to remove the uncertainty and improve the financial viability of BOT projects.

"This type of projects takes a longer time to recover the capital costs. So, the longer the duration, the better it is," says Capt. J.H. Sarbh, Director, P&O Ports, which operates container handling terminals at the Jawaharlal Nehru port, Chennai port and the Mundhra port.

With the date for the next Lok Sabha polls to be announced soon, the Ministry has expedited the process of obtaining the Cabinet approval for the Sagar Mala project by circulating the note only to the Ministries of Finance, Commerce and Industry and the Planning Commission, asking them to submit their comments within three days before taking it to the Cabinet.

The Ministry is also seeking the Cabinet approval to set up a separate fund for the development of coastal shipping and inland water transport with an initial corpus of Rs 500 crore. " The fund could be set up either with a portion of the proposed maritime development cess. If the Government does not agree to the cess, then it should come as budgetary support," says the Shipping Secretary, Mr D.T. Joseph.

Once the Cabinet clears the proposal for the creation of a separate fund, the Ministry will ask either ICICI or IDFC to operate it for the purpose of extending low cost finances for developmental activities in coastal shipping and IWT sectors, he said.

Other proposals include declaring the approach channels of public-owned major ports handling at least 1 million tonnes of cargo as national sea waterways, to be maintained by the Central Government, on the lines of the national highways.

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