Policy allowing captive port berths to PSUs by nomination likely soon

After several rounds of deliberations over the past two years, the Union government may soon launch a policy that will allow state-owned port-dependent industries to get captive berths at major ports by nomination, according to officials aware of the matter.

  A port-dependent industry (PDI) is one that is reliant on that major port for the import and/or export of at least 70 per cent of the cargo capacity of the proposed facility for captive cargo. Captive berths allow such industries to have benefits such as priority berthing for their own cargo, among others. 

In exchange, the operator pays royalty based on cargo volumes to the port authority. There are around 24 captive waterfront facilities at major ports. “The new proposed policy will allow central government departments, public-sector enterprises, and autonomous bodies to be nominated for new prospective waterfronts without having to enter a tendering process. Current deliberations with the Cabinet are in fairly advanced stages, so there should be progress soon,” a senior government official said. 

Queries sent to the Ministry of Ports, Shipping and Waterways remained unanswered till the time of going to press.

  The new rules will also allow existing PDIs that are currently operating a captive berth to renew their concession at the end of 30 years, solving a major issue of absurd bidding practices in the past, according to officials.

  Existing operators will be able to renew their captive facilities without entering a bidding war and risking losing key projects to competition. This will either be done via a floor price set by the port authority or the indexed value of their current royalty payments, whichever is higher.

  On the other hand, for the expansion of existing facilities, government bodies that had been allotted captive waterfronts in the earlier nomination regime can get an additional waterfront on nomination, while private entities would have to enter bidding, albeit with a right of first refusal (ROFR). This means the existing entity can match the highest bid.

  According to current regulations for captive berths, “Post a maximum of 30 years of operation, the waterfront and associated land in a major port will be allotted for construction of berths, offshore anchorages, transshipment jetties, single point moorings etc. as per the terms and conditions mentioned in the concession agreement (CA), which will be required to be entered into between the Port Authority and the PDI concerned.” These regulations had been approved by the Union cabinet in 2016. Sector experts feel an ROFR mechanism may manipulate price discovery, given that the market will know that the PDI wants to expand the facility, which may lead to absurd bidding.

  Government sources said there are multiple mechanisms under ROFR that will be considered for various areas, and some non-ROFR mechanisms in the proposal, based on the facility.

 

While a land management policy of major ports allows for allotment of land to central or state PSUs on a nomination basis, no such policy exists when it comes to captive berths for port-dependent PSUs. The government is also working on a new land management policy, where it will liberalise certain areas in terms of leasing of land.

 

THE UPSIDE

- Captive berths allow PDIs to have several benefits, such as priority berthing

- There are around 24 captive waterfront facilities at major ports

- Proposed policy to allow PSUs, autonomous bodies to be nominated for waterfronts without tendering process

- Existing operators will be able to renew their captive facilities without entering bidding war