The government today approved a revised model concession pact for projects based on public private partnership (PPP) design at major ports to make the investment climate more investor friendly. The revised Model Concession Agreement (MCA) includes providing an exit route to developers by way of divesting their equity up to 100 per cent after completion of two years from the Commercial Operation Date (COD), similar to the MCA provisions of the highway sector.
“The Union Cabinet chaired by Prime Minister Narendra Modi has approved amendments in the Model Concession Agreement to make the port projects more investor-friendly and make investment climate in the port sector more attractive,” the Ministry of Shipping said in a statement.
The amendments in the MCA envisage constitution of the Society for Affordable Redressal of Disputes – Ports (SAROD- PORTS) as dispute resolution mechanism similar to provision available in highways sector.
The government said under provision of additional land to the concessionaire, land rent has been reduced from 200 per cent to 120 per cent of the applicable scale of rates for the proposed additional land.
“Concessionaire would pay royalty on “per MT of cargo/TEU handled” basis which would be indexed to the variations in the WPI annually,” the statement said. This will replace the present procedure of charging royalty which is equal to the percentage of gross revenue, quoted during bidding, calculated on the basis of upfront normative tariff ceiling prescribed by Tariff Authority for Major Ports (TAMP).
The government said this will help to resolve the long pending grievances of public private participation (PPP) operators that revenue share is payable on ceiling tariff and price discounts are ignored.
The problems associated with fixing storage charges by TAMP and collection of revenue share on storage charges which has plagued many projects will also get eliminated. The statement said concessionaire would be free to deploy higher capacity equipment/facilities/technology and carry out value engineering for higher productivity and improved utilisation and/or cost saving of project assets.
In the new agreement, “actual project cost” would be replaced by “total project cost”.
The new definition of “change in law” will also include imposition of standards and conditions arising out of TAMP guidelines/orders, environmental law and labour laws and increase and imposition of new taxes, duties, etc for compensating the concessionaire.
Since the viability of the project was affected, concessionaire will now be compensated for the increase and imposition of new taxes, duties etc except in respect of imposition/increase of a direct tax, both by central and state government.