Govt sets terms for older cargo terminals at major ports to shift to a new rate regime

The government has opened a four-month window for public-private-partnership (PPP) cargo terminals at major port trusts operating under a restrictive rate regime of 2005 to migrate to a market-driven pricing structure finalised in 2013 for new projects and has set terms and conditions for the shift.

The window for migration ends on November 10.

After conveying its intent to migrate to the 2013 rate regime, the PPP operator will have to participate in an open re-bidding for the project to discover a new revenue share to be paid to the port trust concerned. The retendering will be for the balance period of the concession agreement signed by the PPP operator and the port trust concerned.

Right of refusal

The existing PPP operator will be granted a right of first refusal (RoFR) during the rebid wherein it will have to match the royalty quoted by the highest bidder.

The existing PPP operator will be allowed to exercise the RoFR and wrest the contract only if its bid is within 10 per cent of the highest bid. Otherwise, the project will be awarded to the highest bidder.

If the existing PPP operator is the highest bidder or the sole bidder, it will be awarded the project. If it declines, the project will be given to the highest bidder.

The PPP operator will have to settle all disputes ahead of the rebid. The litigation pending before any court including arbitration cases initiated by the operator against the port trust, Tariff Authority for Major Ports (TAMP) and Union of India should be withdrawn “unconditionally” before the bids are called.

The disputed amount arising out of operation of stay orders passed by courts should be kept in an escrow account while the PPP operator withdraws the litigations. The application seeking withdrawal of litigations from the courts should also seek the manner of utilisation of the disputed amount,” according to the guidelines issued by the Shipping Ministry. BusinessLine has reviewed a copy.

The project proposed for migration should be free of all encumbrances and liabilities. All outstanding dues to the port trusts and all liabilities arising out of litigation or otherwise should be settled mutually by the PPP operator and the port trusts.

If a new PPP operator takes over the project, the manpower of the existing PPP operator would be taken over by the new operator “at its option”. Or, the existing operator should settle the severance liability as per law.

The rate for the rebid project will be notified upfront by the rate regulator or any other authorised competent authority as per the rate norms of 2013.

Reserve royalty

The existing royalty or revenue share converted into royalty of the relevant project would be set as the reserve royalty for bidding purposes.

The guidelines on migration comes as the Ministry and seven older cargo handlers — some operating for more than 15 years — have been locked in a legal battle on the issue for many years.

The 2013 rate regime guarantees a raise of as much as 15 per cent on the base reference or ceiling rate (set upfront at the beginning of the contract by TAMP) during each year of the 30-year contract if the terminal operator complies with certain performance standards.

The PPP operators would also be entitled to a further hike every year to account for rising prices because the base rates are indexed to the WPI to the extent of 60 per cent.

In comparison, the 2005 rate guideline penalise operators for efficiency. If a terminal load more than the projected volumes in a tariff cycle, its rate will be cut in the next tariff cycle. Adopting this rule, TAMP has ordered rate cuts at many facilities, resulting in legal challenges that are languishing in courts.