Govt revises payment, insolvency rules for stuck PPP port projects

New guidelines allow ports to take over abandoned projects

As the Centre faces a number of stranded port projects, the ministry of ports, shipping and waterways has revised the guidelines for resolution of PPP projects that have been abandoned midway by the concessionaire.

Under the new guidelines, the port can make partial payment amounting to the value of useful work completed by the concessionaire for projects that were under construction and take over the project. Moreover, the revised guidelines also empower ports to bid for abandoned projects undergoing insolvency proceedings at the National Company Law Tribunal (NCLT).

The issue has come to light after several projects sanctioned under PPP mode were stranded in either pre-COD (Commercial Operation Date) or post-COD stage.

"Despite all the policy level initiatives to mitigate the possibilities of litigation and encourage EoDB and due diligence and caution at the time of conceptualizing these projects from various perspectives, the survival of some of the projects is at risk due to various reasons like aggressive bidding and optimistic projections with regard to volumes & charges, unforeseen dynamic changes in the business and absence of flexibility to overcome such dynamic changes in the Concession Agreements that were either not foreseen or are beyond the control of the collaborating partners, i.e., the Concessionaire and the Concessioning Authority," the shipping ministry said.

Union minister Sarbananda Sonowal believes these guidelines can restart the halted progress on projects.

“These Guidelines will facilitate early resolution of various issues and revival of stressed projects along with unlocking the immense potential of those projects resulting in creation of more trade and job opportunities,” the minister said.

Sources in the ministry said that it was faced with the prospect of increasing delay in projects as concessionaires realised midway that they would not be able to live up to their end of the commitment and the government was bound not to make payments until the project was completed.

An official added that a concessionaire of a stressed project has already been taken to NCLT and the committee of creditors (CoC) is finding it difficult to find a bidder, since it was gained through aggressive bidding and terms of the awarded contract were unfavourable for other players as well. Similarly, two projects at Kandla Port might also be headed for a similar situation.

"In this situation, the port can come in and bid for the project at NCLT, take over, and float fresh tenders for the remaining work," the official said.

Under the revised guidelines for pre-COD projects, a concessioning port can conduct a fair value assessment of the useful work done by the private player, which could be less than the expenses incurred by it. The port can also settle by paying 90 per cent of the debt due by the concessionaire to lenders.

This will result in unlocking the blocked cargo handling capacity of approximately 27 MTPA (million tonne per annum) thereby creating better trade opportunities for the prospective investors and port authority will start generating revenue, the ministry said.