Maharastra To Levy 3% Royalty On Cargo Handled At Vadhwan Port

The Maharastra government has decided to levy a royalty of Rs 3 per tonne on cargo passing through the Vadhwan private sector port being developed by the Australian company P&O Ltd.

The decision was taken on the logic that while the land was acquired by the state government and licensed to P&O for a period of 30 years, it was provided free of cost to the licensee, reliable sources said.

However, the approach road to the port and the railway linkages to the port are being developed by the state government. These costs are currently not included in the Vadhwan port development in the project estimates prepared by P&O and is instead being developed by the Maharastra Maritime Authority, the sources said.

 

The project cost for Vadhwan is currently estimated at about Rs 1,200 crore, for which the equity component is being provided entirely by P&O and the Indian partner on a 74 :26 basis. The state governments maritime authority would not be participating in the equity of the Vadhwan Port Ltd.

The costs for developing the road and rail linkages are expected to be close to Rs 500 crore. These two projects are being funded by through a mix of debt and equity raised state governments special purpose vehicles, the Maharastra Road development corporation (MRDC) and the state governments Railway Development Corporation where the Indian Railway is expected to provide a portion of the equity.

The debt being raised through these corporations would have to be serviced and the way method was to make the project raise the revenues, the sources said. They added that the state government had considered tolls, but had opted in favour of cargo based levy since it would cover the costs incurred on both the rail and the road linkages.

A cargo based levy would also eliminate the delinquency rate that is possible in the case of a toll road, and would be levied at the point of entry into the port instead of the road, thereby eliminating the requirement of setting up toll plazas, the sources said. This formula is expected to be adopted for all the remaining 47 ports which have been thrown open the private sector development.

The Maharastra governments concession agreement with P&O is expected to act a model for all the maritime authorities to be set up to evaluate concession pacts with the private sector parties bidding for setting up ports. States, like Andorra Pradesh, Karnataka, Guajarat, Orissa, Kerala and Tamilnadu have also offered a slew of minor ports for private sector development.