Port Wings Maritime Exim Weekly Newspaper 24 Nov 2021

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Published from Chennai and Circulated among the trade across the country RNI TNENG/2014/59741 Wednesday, November 24, 2021 8 Pages

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Private Investors Decry Sonowal announces New Model Concession Retaining MGC Clause In Agreement - 2021 for Public-PrivateRevised Pact For Terminal Deals Partnership (PPP) Projects at Major Ports Chennai

New Delhi Port Wings News Network nion Minister for Ports, Shipping & Waterways Shri Sarbananda Sonowal on 18 November announced the revised Model Concession Agreement (MCA) - 2021 for PPP projects at Major Ports. In a statement he said, the new MCA will be applicable to all the future PPP projects at major ports, as well as projects which are already approved by the Government but are still under bidding stage. He informed that at the moment, there are more than 80 PPP/landlord projects in the sector with investment of over Rs 56,000 crore at various stages. Of these, 53 projects of Rs 40,000 crore are under operation, whereas 27 projects of more than Rs 16,000 crore are at implementation stage. The Minister informed that with many changes drawn from best practices from across the sectors and extensive stakeholder consultation, the Model Concession Agreement – 2021 (MCA), will bring more confidence of developers, investors and lenders and other stakeholders in the Ports sector and catalyze the investment in the sector. Looking ahead, Ministry of Ports, Shipping and Waterways has clearly defined pipeline of 31 projects of more than

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Rs 14,600 crore to be awarded on PPP till FY25, and it expects that the new MCA - 2021 will generate enthusiastic response from the stakeholders. Talking about the key changes made in the Model Concession Agreement (MCA) – 2021, Shri Sonowal informed that provision

of Change in Cargo due to Change in Law or Unforeseen Events has been introduction for the first time. He said, there have been cases in the past wherein due to external and unforeseen factors, traffic for a particular commodity has dropped during the concession period thereby impacting the overall viability of the terminal. The concessionaire did not have flexibility to handle a different cargo and the asset constructed was not being utilized optimally. The Minister said, this provision will give the flexibility to undertake change in cargo in such situation and reduces risk for the concessionaire.

Shri Sonowal added that under the new MCA, provision has been made for providing flexibility to the concessionaires to fix their tariff based on market conditions which will allow level playing field for the private terminals at Major Ports to compete with private ports for cargo. Further, to reduce risk to the lenders and make the project more bankable, provision of compensation for Concessionaire’s event of default before Commercial Operations Date (COD) has been added. Another provision which lays out process for extension of concession period on the basis of performance and mutual agreement has been introduced. Shri Sonowal said, overall, more clarity has been provided in terms of responsibilities of both public as well as private party while balancing the risks. The first Public Private Partnership (PPP) Project in the Port sector was launched in 1997 when a terminal at Jawahar Lal Nehru Port Trust (JNPT) was awarded to a private party. There has been huge progress in the PPP environment in the Port sector of the country ever since. The Model Concession Agreement (MCA) governing the PPP Projects in the Ports Sector was first introduced in the year 2008 and was subsequently revised in 2018 based on the stakeholder feedback.

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Port Wings News Network rivate investors have decried the Government’s decision to retain the minimum guaranteed cargo (MGC) clause in the revised model concession agreement for private participation in cargo handling projects at major ports, despite calls to dispense with it, reports The Outreach. “The first concern we have as a bidder is there should be no minimum guaranteed cargo.

consultations on revising the model concession pact, a proposal was mooted to give freedom to private terminal operators to indicate the minimum guaranteed cargo they will handle in a year while placing bids instead of the port authorities setting this target. According to the proposal, the bidders had to set the MGC for the initial 7 years, the highest of which will be the MGC for the balance period of the contract. This proposal was vetoed by File Photo

The ministry of ports, shipping and waterways has retained this condition in the revised model concession pact. This is a draconian clause,” said the chief executive of a port company, operating terminals at major ports. The MGC clause assumes significance because the royalty to be paid by the private terminal operator to the port authority is based on the actual volumes handled in a year or on the MGC, whichever is higher. The port authority can terminate the contract if the MGC is not met for three consecutive years. During the inter-ministerial

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NITI Aayog, officials briefed on the discussions said. Instead, based on suggestions by NITI Aayog, the ministry has in a Guiding Note to the MCA, asked the major ports to elicit bidders’ views on MGC while preparing the draft concession agreement (DCA) for individual projects. “The MGC level (has) to be defined by the concessioning authority based on project economics. In some cases, the MGC levels may not have a Y-o-Y increasing trend across the concession period. The concessioning authority (has) to evaluate the project dynamics and provide a realistic projection of the MGC levels,” the ministry wrote in the Guiding Note issued to the major ports on November 12 along with the revised MCA. “A port may consider providing MGC in the project’s draft concession agreement only where Contd. on page -2

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RNI No. TNENG/2014/59741 Postal Registration No. TN/CNIGPO/067/2021-2023 Posted at Pathrika Channel, Egmore, RMS, Chennai-8. Date of Publication - Wednesday, Posted on Tuesday/Wednesday


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