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Raja Simhan T.E.

Chennai , Feb. 7

THE Union Ministry of Shipping, Road Transport and Highways plans to appoint a law firm to prepare a model concession agreement for public private partnership (PPP) projects to be awarded on BOT (build, own and transfer) basis in major ports in India.

The Ministry feels that it needs to revisit various issues, mainly related to privatisation of projects at ports that involve legal, technical and financial aspects for which it plans to appoint a legal consultant.

As of now, 17 private sector projects involving an investment of about $1.4 billion in major ports stand approved, and of this, 13 projects are operational.

The private operators include container terminals by P&O Australia Ports Pvt Ltd at the Jawaharlal Nehru and Chennai ports, Port of Singapore Authority at Tuticorin, Dubai Port International at Kochi and Visakhapatnam, Maersk A/S at the Jawaharlal Nehru port apart from multi-purpose and specialised cargo berth operators, the Ministry has said in a request for proposal for the law firm, which is available on its Web site.

The law firm will study the existing legislative, policy and regulatory framework and suggest appropriate measures to address the concerns of various stakeholders in the port sector projects so as to stimulate investment, encourage competition, improve quality of service/efficiency in performance.

It will also prepare a final draft model concession agreement to be entered into between the port trust and private party for projects to be awarded on BOT basis, according to the Ministry.

The existing model concession document contains provisions that deal with issues concerning all stakeholders such as concession period, discount in tariff given by the BOT operator and revenue share.

There are arguments whether the licence period of 30 years, which includes the construction period, is adequate or not. Ports have received revenue share as high as 50 per cent, which shows that revenue share may not be the best method for award of contract and cost to users could be reduced.

There is a range of issues that need to be revisited to address them appropriately. The bidder while preparing the agreement should come out with amended clauses in such a way that interests of users are protected while ensuring fair return to the port and the private parties and there is equity and level playing field and the Government's objective of encouraging public participation goes on fast track, the Ministry said.

There are nearly 30 issues that need consideration. These include implications of prescription of minimum guaranteed throughput, particularly on investor response and risk allocation, conditions to be attached for allocation of facilities on a captive basis in a major port and terminal value of assets to be transferred by the licensee to the licensor on expiry of licence period by efflux of time (the licence having run its full course), according to the Web site.

Among other things, the agreement, which will reflect the proposed policy measures, should identify the financial/commercial risks and ensure their efficient allocation between the contracting parties. It should also contain provisions regarding the scope of the project to be given on BOT along with its technical, financial, commercial and security terms and discuss and address issues that are peculiar to the port sector such as capital dredging, channel maintenance, conservancy in port water, inter-port and intra-port competition, pricing of services, technological up-gradation of facilities.

It should also safeguard the interest of shippers/other port users while ensuring competitive return to the investors/ports and analysis of alternative models to revenue sharing as the basis for award of project, taking into account the international experiences.

It should also prescribe minimum technical specification of project and output in term of service quality and performance that should form part of Model Concession Agreement, the Ministry said.

The bidder should have prepared/drafted at least three concession agreements for different Government/public entities during the last seven years for award of projects on BOT/BOOT basis in the transport infrastructure sector — at least two of these agreements must be for port sector projects with minimum capital cost of Rs 450 crore or $100 million each, the request for proposal said.

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