Stalled PPP projects in Vizag port may get a new lease of life

The Shipping Ministry is looking to revive at least four stalled public-private-partnership (PPP) projects in Visakhapatnam Port Trust by working out an amicable solution to the vexed issue of storage charges.

To compete with private ports that offer free cargo storage for 120 days, PPP operators such as Vedanta, Essar, APSEZ and ALBA Asia have sought approval to cut the storage charges set by the rate regulator and offer longer free days for storing cargo from the present 10 days. This will help tackle the issue of payment of revenue share to the port trust – the PPP operators are now mandated by the concession agreement to pay the revenue share on the upfront ceiling rate set by the Tariff Authority for Major Ports (TAMP) on a normative basis. In effect, rate discounts given by the PPP operators to attract cargo are ignored while paying revenue share to the port trust.

Separately, TAMP has requested the Shipping Ministry to issue a direction under Section 111 of the Major Port Trusts Act to allow it to review and revise the rates downwards.

“Either the PPP operators will have to sign a supplementary concession agreement with the port trust to enable payment of revenue share on the actual revenue realised by them or the storage charges itself have to be revised downwards. Both the options are before the government,” a Shipping Ministry official said.

In the existing set-up, the storage charges go up exponentially the longer the cargo stays in the port after the free days.

Apart from the storage charges, the PPP operators have also sought permission to handle alternate similar bulk cargo till such time the demand picks up, he said.

On January 3, the Cabinet approved a new model concession agreement for future PPP projects at major ports by scrapping the practice of setting storage charges and collecting revenue share on storage charges by shifting to a royalty per tonne of cargo or TEU handled from the revenue share model.

Currently, PPP contracts are decided on the basis of revenue share — the entity willing to share the most from its annual revenue will win the deal.

“Once the storage issue is tackled, at least four PPP projects in Vizag port will come back to life,” the official said. “They will be able to attract cargo,” he added.

The solution worked out by the government could be applied in stalled PPP projects at other major ports also where storage charge is an issue, he said.

“There is no point in having stalled projects. Because, these operators have taken loans from banks and financial institutions and they are also stuck. Banks will not give additional money unless the operators repay the earlier loan. Otherwise, they may refer the case for bankruptcy under the Insolvency and Bankruptcy Code,” he said.

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