The Hindu Business Line : Non-compete clause mooted for fixed period in public-pvt bids

A high-level task force, that was set up to fix the bidding parameters for the public-private-partnership (PPP) projects in major ports, has recommended providing a ‘non-compete clause’ to the concessionaire for a fixed period. “During this period, port trusts should only award those projects, which have been included in their plan and made known to the bidder,” the task force has said in its recommendations.

Certainty to bidders

This would provide some certainty to the bidders and enable him to project their revenue streams with a view to making better/higher bids to the port trusts, the task force has said.

It has also recommended setting the tariff caps upfront for different ports and inviting competitive bids on a revenue share basis from port operators. The tariff caps would be different for terminals handling various categories of commodities.

Tariffs at economic levels

This recommendation is with the recognition that the primary objective of the port trusts was not to maximise their rental revenue – rather, the objective should be to keep tariffs at economic levels with a view to making India globally competitive. It has suggested that tariff caps be indexed to inflation (to an extent of 60 per cent of the variation in wholesale price index). This is broadly similar to the proposed toll price mechanism for PPP projects in the road sector.

Draft guidelines

Based on the recommendations of the task force, the Department of Shipping has issued draft guidelines on the PPP projects as well as the tariff setting mechanism and sought comments and suggestions from various parties concerned with the maritime industry. These comments would be key for the new model concession agreement (MCA) and tariff setting regime for major ports, which are under formulation. This is almost two-and-half years after the Prime Minister’s Committee on Infrastructure mandated forming a programme to create world-class port infrastructure within a given time frame.

The task force under the chairmanship of Mr Anwarul Hoda, Member, Planning Commission, and Shipping Secretary as one of the members, has favoured the ‘non-compete’ clause for a period of seven years from the commencement of the concession or five years after the completion of the project, whichever is shorter.

The draft note also records several points of disagreements between the Secretary, Department of Shipping, and the Advisor to the Deputy Chairman Planning Commission. One of the disagreements is on the words used to describe the shortcomings of the current revenue share and tariff setting regime as they might jeopardise the Government’s position in ongoing Court cases with one of the concessionaires.

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