The Government of India’s union cabinet has approved a revised model concession agreement (MCA) for public private partnership (PPP) projects at major ports in the country with the aim of facilitating and attracting investment into the port sector.
The updated MCA intends to establish a dispute resolution mechanism, Society for Affordable Redressal of Disputes – Ports (SAROD-PORTS), based on the existing provision available for India’s highway sector.
It also aims to provide an exit route to developers by allowing them to divest their equity up to 100% after two years from the commercial operation date (COD) of new infrastructure.
In addition, as part of the provision of additional land to the concessionaire, land rent has been cut from 200% to 120% of the applicable scale of rates for the proposed piece of extra land.
The new MCA states that the concessionaire will be required to pay royalty on ‘per MT of cargo / TEU handled’ basis, which will be indexed to the variations in the wholesale price index (WPI) every year.
This provision will replace the current process of charging royalty and is expected to help resolve impending grievances from PPP operators who claim that revenue share is payable on ceiling tariff and price discounts are ignored.
The government also noted that the amended deal is anticipated to allow the concessionaire to use higher-capacity equipment, facilities and technology, as well as conduct value engineering for greater productivity and better utilisation and / or cost saving of project assets.
Furthermore, the deal includes a new definition of ‘Change in Law’ for imposing standards and conditions arising out of India’s Tariff Authority for Major Ports (TAMP) guidelines and orders, Environmental Law & Labour laws, among other provisions.
The definition also aims to increase and impose new taxes, duties and others when compensating the concessionaire.