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Govt. makes a bid to revive private investment in Ports

Aditya Sabharwal
With an aim to revive private sector investments in the port sector, the Narendra Modi government has revised some much awaited changes to the Model Concession Agreement (MCA).
From amending changes in exit route for developers to revenue share the government has made an effort to modify some of the most pertaining policy issues that this sector has been faced with.
Commenting on this recent development, Mr Jaideep Gosh, Partner, KPMG told Vizag Industrial Scan ‘Revisions to MCA is a welcome step and one that would bear a lot more fruit with enactment of the Major Port Authority Act (MPA) that gives greater autonomy to the Port’.
He further added ‘Shifting from Revenue Share to Royalty is not the change per se. But what helps is the move away from Revenue Share based on the TAMP ceiling tariff. Now each bidder may assess an average realizable tariff (“ART”) and offer a royalty based on that’.
While most of the regional industry welcomes this development they however hope that these new set of rules are soon applied to existing projects too (See Industry Comments).
Below are some of the salient features of the revised MCA:
Ø Providing exit route to developers by way of divesting their equity upto 100% after completion of 2 years from the Commercial Operation Date(COD). This is now similar to the MCA provisions of Highway Sector.
Ø Under provision of additional land to the Concessionaire, land rent has been reduced from 200% to 120% of the applicable scale of rates for the proposed additional land.
Ø Concessionaire would pay Royalty on “per MT of cargo/TEU handled” basis which would be indexed to the variations in the WPI annually. 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). 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.
Ø Concessionaire would be free to deploy higher capacity equipment/facilities/technology and carry out value engineering for higher productivity and improved utilization and/or cost saving of Project assets.
Ø “Actual Project Cost” would be replaced by “Total Project Cost”.
Ø Provision for commencement of operations before COD. This will lead to better utilization of assets provided by the Port in many projects before the formal completion certificate.

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