PSUs likely to get captive berths by nomination at major ports

Govt close to finalising changes to captive berth policy

Port-dependent public sector undertakings (PSUs) that want to set up captive berthing facilities in areas falling under major ports may no longer need to enter competitive bidding, as the Union government is looking to tweak its captive waterfront policy and ease various regulations, Business Standard has learnt.

“Owing to some representations, the ministry (of ports, shipping and waterways) plans to have a provision of allowing PSUs to set up captive berths on a nomination basis,” a senior government official said. 

The proposal, among others in the captive berth policy, is being deliberated at the Union cabinet level.

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

In exchange, the operator pays royalty based on cargo volumes to the port authority.

Another significant change the ministry is looking to bring into force is a provision to extend the concession period beyond 30 years for organisations currently operating captive berths at major ports.

This will be done through a right-of-first-refusal (ROFR) mechanism, under which the berth goes for re-tendering for price discovery, and the existing holder (irrespective of public and private sector) gets the right to retain it by matching the highest bid.

Experts expect this to add to royalty payments to be made by captive berth operators as re-tendering and fresh price discovery shall most likely increase valuation of the berth, even if the existing operator manages to retain it through a right of first refusal.

The ministry of ports, shipping, and waterways did not respond to queries sent by Business Standard.

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. 

Nomination rules unclear

According to experts, the new rules must be framed in a way that is in line with the Union government’s general financial rules which make it binding upon government departments to treat PSUs at par with private firms.

“If the nomination of a prospective captive berth to a PSU will be known in advance (through ROFR), the price discovery mechanism may be subjected to manipulation, with chances of absurd bidding. One hopes that the ministry has worked around that,” said an analyst at a leading credit rating agency.

“The discussions have reached advanced stages and there should be progress on the policy very soon. Deliberations are currently on to decide the methodology for waterfront nomination,” said a second official working on the proposal.

The ministry is deliberating on whether to nominate PSUs for a waterfront on an ROFR basis or a “ready reckoner” basis, which is essentially valuation determined through state government calculations.

The ministry of railways, in 2022, had also launched a liberalisation policy for its land parcels, primarily aimed at removing obstacles around the disinvestment of the state-owned Container Corporation of India.