Decision on migration to market rates for old PPP terminals expected in a month, says a top official

Time of India

a day ago

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ETInfra
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The Ministry of Ports, Shipping and Waterways will take a call 'within the next one month' on permitting old public-private-partnership ( PPP ) cargo terminals that started operations before a new law was enacted in 2021 to govern state-run major ports to migrate to a market-driven pricing regime to bring all operators on par, a top official has said.'That is in the final stages of deliberations. We are expecting to see something happening within the next one month,' T K Ramachandran, Secretary, Ministry of Ports , Shipping and Waterways said in Mumbai on August 12.The Major Port Authorities Act, passed by Parliament and notified in the gazette on February 18, 2021, gives freedom to the 11 ports it governs, and new cargo handling terminals set up by private firms at these ports, to levy market determined rates, by scrapping the Tariff Authority for Major Ports or TAMP, the erstwhile rate regulator for state-run ports.However, the fate of the old cargo handlers was uncertain, with no clarity on allowing them to levy market rates. The old cargo terminals include those run by D P World Ltd, A P M Terminals Management B V and PSA International Ltd at Jawaharlal Nehru Port and Chennai Port, among others.In 2023, the Ministry of Ports, Shipping, and Waterways set up a three-member panel of port chairmen headed by Sanjay Sethi, the then Chairman, Jawaharlal Nehru Port Authority to examine the issue of permitting the regulated old PPP cargo terminal operators to migrate to a market pricing regime, similar to the freedom available to private cargo handlers that started operations after the new law took effect in 2021.The Sethi-led panel suggested a set of guidelines for migrating the old cargo terminals to a market-driven rate regime with prospective effect keeping in view the commercial and other aspects.There will be no change in royalty per unit/metric ton/twenty-foot equivalent unit/ forty-foot equivalent unit or royalty on revenue share basis per the original concession agreements, the panel suggested.'As an additional measure, the royalty as revenue share of the major port, would not under any circumstances go below what it would have got under the regime when tariff was fixed/determined as per the tariff guidelines. This would be done by converting the revenue share to royalty based on the Annual Revenue Requirement (ARR) of the project as determined earlier,' it noted.Some of the old PPP cargo terminals are operating on the revenue share model wherein they share a percentage of their annual gross revenue (discovered through a competitive bidding process) with the port authority.Since 2021, the new PPP terminal operators pay royalty per tonne or per twenty-foot equivalent unit (TEU) handled at their facilities to the port authority.The royalty that the private operators are contractually mandated to pay the port authorities, will be based on the market rates set by them, subject to the minimum guaranteed throughput (MGT) written into the contracts. The royalty payouts will be based on actual traffic or MGT, whichever is higher, the panel recommended.The old terminal operators have been lobbying for such a shift, arguing that it was needed to 'improve the efficiency of the old terminals and for their financial viability'.'PPP projects are the backbone of the port industry, and the stress points need to be addressed with promptness,' said Devki Nandan, President, Indian Private Ports and Terminals Association (IPPTA), a lobby group.The tariff migration process has gone through two rounds of stakeholder consultations, and a decision is eagerly awaited by the old cargo terminal operators.