POLICY FOR AWARD OF WATERFRONT AND ASSOCIATED LAND TO PORT
DEPENDENT INDUSTRIES IN MAJOR PORTS
Background
1. The Government of India is committed to improving the level and quality of
physical and social infrastructure in the country in pursuit of its goal of achieving
national economic prosperity. In pursuance of this goal, the Government has
envisaged a substantial role for Public Private Partnerships (PPPs) as a means for
harnessing private sector investment and operational efficiencies in the provision of
public utilities and services. Allocation of waterfront and associated land to Port
based Industries on PPP/captive basis is one of the areas which have been
identified for participation/investment by the private sector in Major Ports.
Existing Guidelines
2. Under the existing guidelines for private sector participation in Major Ports
issued by the Ministry of Shipping(MoS) in 1996 and 1998, provisions have been
made, inter alia, for allotment of waterfront and land on a captive basis to Port Based
Industries including Central/State Public Sector Undertakings(PSUs) which fulfil the
prescribed eligibility criteria. As per these guidelines, cases where 100% captive
facilities(land/waterfront) including captive oil jetties, platforms or Single Buoy
Moorings (SBM) are sought to be created by Port Based Industries may be
considered without recourse to a tender, if they do not conflict with the Master Plan
of the Port, are port specific, are approved by the concerned Administrative
Ministries and the industry is willing to pay the maximum realization which the port
may determine taking into account all relevant factors. For this purpose, a Port
Based Industry has been defined in the Guidelines as one which requires 100%
captive berths/back up area for the purpose of import of raw material and/or export of
finished products and/or transportation of raw materials/finished products. General
guidelines of BOT, wherever applicable, are being applied to cases of captive
facilities also.
3. Though, some berths and facilities have been set up in some Major Ports
following these Guidelines, the potential for development of such facilities is not yet
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fully realized. This is attributable, mainly, to the absence of clearly defined
benchmarks for price discovery for the proposed allotment and lack of clarity in the
existing guidelines about the processes to be followed. Based on the experience
gained and the developments in the field of Public Private Partnerships(PPPs) which
have taken place over the years, a need has been felt for formulating a structured
policy for facilitating the process of allotment of waterfront and associated land for
development and operation of port facilities/services by any industry substantially
dependent on a Major Port for import and/or export of cargo for carrying out their
legitimate business operations within the larger PPP framework which could replace
the existing guidelines for allotment of land and waterfront for port based industries.
Objective
4. Govt. of India has focussed on Port led development through the Sagarmala
program as a key enabler for economic growth. Optimal utilization of land and
waterfront at the disposal of the Major Ports is of critical importance in this context.
The objective of this Policy is to ensure uniformity and transparency in the procedure
for awarding captive facilities. The policy will help generate committed business for
the Major Ports on a long term basis by facilitating the development and operation of
dedicated port facilities by industries which are substantially dependent on a
particular Major Port for import and/or export of their cargo and thus play a catalytic
role in the eventual realization of the objectives of Port led development.
Scope and Applicability
5. The Policy envisages the grant of concession to Port Dependent Industries
(PDI) for setting up dedicated facilities in Major Ports for import and/or export of
cargo and their storage before transportation to their destination, for a period not
exceeding 30 years. Extension of concession period on conditions including under
utilization of asset as per the Concession Agreement may be allowed.
6. 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,
transhipment jetties, single point moorings etc. as per the terms and conditions
mentioned in the Concession Agreement (CA) which will be required to be entered
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into between the Port Authority and the PDI concerned. The ambit of the Policy
includes creation of new assets as well as utilization of currently unutilised existing
assets such as vacant berths. The Policy will be applicable to all the Major Ports.
Date of Effect
7. This Policy shall come into effect immediately.
Definitions
8. For the purpose of this Policy:
(i) “Captive Cargo” means cargo handled by a Port Dependent Industry at a
Facility for its own use;
(ii) ‘Designed Capacity’ means the capacity of the envisaged Facility
as indicated in the Feasibility Report prepared for the Facility and
accepted by the Major Port concerned.
(iii) “Facility” means the dedicated facilities as envisaged in para 5 of this
Policy;
(iv) “Gross Revenue” means the aggregate of all revenues chargeable from
handling cargo other than Captive Cargo at a Facility and the notional revenue
from Captive Cargo to be calculated on the basis of the notified tariff being
charged at the Facility for cargo other than Captive Cargo;
(v) “Minimum Guaranteed Cargo” means the minimum cargo handling
levels for a Facility fixed in terms of this Policy;
(vi) “Policy” means the policy for ‘Award of Waterfront and Associated Land
to Port Dependent Industries in Major Ports’ as set out in this document;
(vii) “Port Dependent Industry” means, with reference to a particular
Major Port, any entity (including any of its Affiliates) which is dependent on
that Major Port for import and/or export of at least 70% of the Designed
Capacity of the proposed Facility for Captive Cargo. Such entity includes a
Special Economic Zone (SEZ) and Free Trade Warehousing Zone(FTWZ)
established under the SEZ Act. For determining the extent of dependence for
import/export as indicated above, the average actual import/export by the said
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Port Dependent Industry (PDI) through the said Major Port during the three
financial years immediately preceding the date of application for a Facility will
be taken into account. Alternatively, the PDI may provide actual import/export
details through some other Port in the last 3 years which is proposed to be
shifted to the Facility. For, entities yet to commence operations or entities in
operation for less than 3years the cargo projections will be considered for
determining whether the entity can be classified as a PDI. The entity would
need to furnish to the port the cargo requirement projections as part of the
feasibility report. The port shall examine the projections either in-house or
have it evaluated by engaging Consultants. If the projected cargo requirement
for the entity for a period of 3 years starting from no later than 3rd year of the
expected COD is at least 70% of the Designed Capacity of the proposed
Facility for Captive Cargo, the entity will be classified as a PDI.
Note: The terms ‘import’ and ‘export’ as used in this document refer to
unloading/loading of cargo from/to any port irrespective of whether the
origin/destination port is in India or overseas.
(viii) “Royalty” means the charge per Metric Tonne payable by the
Concessionaire to the Port Authority in terms of this Policy.
(ix) Terms not specifically defined in this document, unless the context
otherwise requires, shall have the same meaning assigned/ ascribed to them
in the Model Concession Agreement for Private Sector Projects in Major Ports
issued by the Ministry of Shipping(MCA).
Methodology
9. Any PDI, desirous of setting up a Facility shall have a feasibility report
prepared for the same and submit the report to the Major Port concerned. The
feasibility report should inter alia, indicate the Designed Capacity envisaged and the
land and waterfront required for setting up the Facility. The designed capacity as
worked out by PDI should not be less than the capacity as worked out by the TAMP-
2008 guidelines and the Berthing Policy 2016 for all commodities. The Major Port
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shall evaluate the feasibility report either in-house or have it evaluated by engaging
Consultants for the purpose within a period of three months. On evaluation and
acceptance of the need for a Facility for the PDI or PDIs in question, the Major Port
will examine the proposal keeping in view the availability of waterfront/land and
surplus capacity, if any, available for the particular commodity for which a Facility is
desired. Once a decision is taken to set up the Facility, the Major Port Authority will
initiate the process for selection of a PDI for award of the Facility. Selection of the
successful PDI will be made through open competitive bidding, comprising the RFQ
and RFP stages.
10. PDIs as defined in Para 8 above and having a minimum Net Worth equivalent
to 50% of the Estimated Project Cost of the Project will be eligible for submitting the
Request for Qualification and, on prequalification, participate in the Request For
Proposal (RFP) stage for the Facility. The procedures as laid down by the
Government from time to time for appraisal and approval of PPP projects will be
followed after making suitable modifications in the eligibility criteria for participation in
the bidding for the Facility. In case of new entities who are covered under the
definition of PDIs as per para 8 above, the promoters of the said new entity will need
to have a minimum net worth equivalent to50% of the Estimated Project Cost of the
Project.
11. Selection of the successful Bidder will be made on the basis of the
royalty rate to be shared with the concessioning authority by the bidders. The
royalty rate is to be expressed as Rs per Metric Tonne rate and will be the bidding
criteria.
12. The Port Authority shall fix a floor level for royalty per Metric Tonne to be
offered by the Bidders.
12.1 Royalty from comparable captive berths either in the same Port or
comparable captive berths from some other Major Ports.
12.2 Wharfage for the commodity fixed for the Port.
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The Port may decide the Reserve Royalty per tonne by taking the above
factors into consideration.
13. Floor royalty rate is to be adjusted based on whether the concessionaire or
the port is investing in developing the berth. In case the port is investing in
developing the berth, the floor royalty rate should ensure a fair rate of return on
investment through the projected cargo volumes.
14. Bid offers which are below the floor royalty rate fixed by the Major Port
Authority shall be rejected.
15. The Bidder (from amongst those whose offer is either equal to or above the
floor level royalty rate) who offers the highest royalty rate from the Facility to the Port
Authority will be declared as the selected Bidder. Single bids may also be considered
if they are equal to or above the floor level royalty rate.
16. The newly incorporated Special Purpose Vehicle by the selected Bidder for
award of the Facility will sign a Concession Agreement with the Major Port. For this
purpose, the Port shall adopt the MCA. The respective Port Authority
shall ensure that Facility specific deviations as may be necessitated by the terms
and conditions envisaged under the Policy are incorporated in the Concession
Agreement to be signed with the selected Bidder.
Minimum Guaranteed Cargo
17. Minimum Guaranteed Cargo (MGC) will be fixed for a Facility by the Port on a
project specific basis before calling for RFP. The Minimum Guaranteed Cargo
(MGC) will set at a minimum of 70% of the designed capacity including both
captive cargo and other cargo. The concessionaire will need to pay royalty
commensurate of the MGC irrespective of the actual volume handled by the
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berth. The MGC will be applicable within four years of award of the facility to the
concessionaire or two years from COD whichever is earlier.
18. The concessionaire shall be allowed to handle non-captive cargo upto
30% of the designed capacity of the berth. Cargo other than captive cargo
handled by the concessionaire shall meet norms relating to environments issued
from time to time. Further no change in cargo profile shall be allowed except with the
prior approval of the Concessioning Authority. The concessionaire would need to
submit monthly report to the port. on captive and non-captive cargo handled in the
facility.
19. The cap on non-captive cargo volumes at 30% of the designed capacity can
be relaxed under exceptional circumstances by the port authority. The cap is
recommended to be relaxed only in the scenario of low utilization of the captive berth
and concurrent shortage of handling facilities in the port for other non-captive cargo.
Performance criteria
20. The Berthing Policy 2016 shall be applicable for both captive and non-captive
cargo handled in the facility by the concessionaire. The productivity levels, that the
concessionaire shall need to meet, is to be estimated basis
guidelines laid down in the Berthing Policy and calculated specifically for the
equipments installed in the respective facility & type of vessels expected in the
berth.
21. The Concessionaire would need to pay a penalty for failing to meet the
productivity standards set by the port as per the Berthing Policy.
22. Failure to meet the performance norms on an average for a period of 12
months shall be treated as an event of default.
Designed capacity
23. The designed capacity for the facility should not be less than the capacity as
worked out by the TAMP-2008 guidelines and the Berthing Policy 2016 in respect of
all commodities.
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24. The designed capacity shall be revised by the Port Authority on occurrence of
the following events
Addition or upgradation of berth, yard, evacuation equipments
Increase in draft of the berth
Change in vessel profile
Any breakthrough in technology with potential to improve productivity for the
respective cargo
Any other event that can substantially increase the capacity of the facility
25. The Minimum Cargo Guarantee (MCG) will be re-evaluated on revision of the
designed capacity.
Priority and Preferential Berthing
26. Captive Cargo will have preferential and priority berthing over any other
cargo.
27. The Concessionaire may offer preferential or priority berthing to any one or
more shipping lines or vessel owners/operators to optimize the use of the project
facilities and services subject to the ceiling indicated i below for handling cargo other
than Captive Cargo. Such preferential or priority berthing shall be subject to the
priority berthing norms as may be mutually determined by the Parties in accordance
with Applicable Laws or guidelines issued by the Government from time to time in
respect thereof, if any.
28. In case of others, the Facility will be available on a first come-first serve,
common-user basis open to any and all shipping lines, importers, exporters,
shippers, consignees and receivers, and the Concessionaire shall refrain from
indulging in any unfair or discriminatory practice against any user or potential user of
the Facility.
Tariff
29. For cargo other than Captive Cargo handled, the Concessionaire shall be
entitled to recover from the users of the Facility, Tariff as notified by the Competent
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Authority in accordance with the Revised guidelines for Determination of Tariff for
Projects. At present, Tariff Authority for Major Ports (TAMP), a statutory authority
constituted under Major Port Trusts Act, 1963 is the Competent Authority for
notifying Tariff in Major Port Trusts. In case of any change in Role for TAMP in
future, new guidelines on tariff fixation fixed by the authority will be applicable on the
non-Captive cargo.
Payments to the Concessioning Authority
30. The Concessionaire will make payments to the Concessioning (Port) Authority
towards License Fee, Royalty and rent and other charges for additional utilities or
services made available to them by the Port Authority in the following manner:
a) License Fee as fixed by the Port Authority concerned, as
consideration for the use, in its capacity as a bare licensee of
the Project Site and equipment comprised in the Port’s Assets, if
any, made available to it as per the Concession Agreement. Such
amount shall be paid by the Concessionaire as agreed upon in lump
sum or in half yearly/yearly instalments. Where the fee is paid in half
yearly/yearly basis, it will contain an annual escalation as may be
stipulated by the Port Authority. In addition, in cases where an
existing facility is being given under the Concession, the value of
assets including berth, back up area created by the Port (other than
those covered by the term “Port’s Assets” as defined in the
Concession Agreement) and handed over to the Concessionaire
shall be determined on replacement cost basis and recovered from
the Concessionaire upfront at the time of award of the Concession.
b) Royalty per month for the volume handled by the
Concessionaire will be payable for both captive & non-captive
cargo handled at the Facility. Royalty rate will get escalated
year on year basis WPI. It is clarified in this connection that in the
event of failure of the Concessionaire to achieve the Minimum
Guaranteed Cargo levels (MGC) in a year as prescribed in the
Concession Agreement, the Concessionaire is obligated to pay
royalty amount for the Minimum Guaranteed Cargo.
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c) Rent or other charges for any premises (other than the Project
Site/Project Assets) or additional utilities or services, made available
by the Port Authority to the said entity as per rates specified in the
Concession Agreement. Such rates shall be twice the Scale of Rates
as notified by the competent authority in respect thereof from time to
time.
31. Occurrence of the following events will be treated as Events of Default:
i) Failure to achieve MGC as stipulated above for three consecutive
years by the Concessionaire;
ii) Failure to meet performance norms set by the Port Authority on an
average over a period of 12 months
However, the Concessionaire shall not be deemed to be in default if such non
achievement of either of the two levels of cargo handling is due to substantial
change in economic policies including the policy regarding import/export of a
particular commodity as a result of which the throughput could not be achieved and
the Concession is liable to be terminated following due procedure as laid down in
the Concession Agreement.
32. Any delay in payment of Royalty for two consecutive months or more than
five times in the aggregate during the Concession period shall be treated as a
Concessionaire Event of Default and the Concession is liable to be terminated
following due procedure as laid down in the Concession Agreement.
Note: Liability for termination on occurrence of the above Events of Default is
without any prejudice to the liability including termination on account of any other
Event of Default as may be specified in the Project Concession Agreement.
Concessioning Authority’s Rights to Step-in
33. In the event a Termination Notice due to a Concessionaire Event of Default is
issued by the Concessioning Authority to the Concessionaire, the Concessioning
Authority shall have the rights to re-enter upon and take possession and control of
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the Project Site and the Facility and also assume such of the rights and obligations
of the Concessionaire as may be specified in the Project Concession Agreement and
reuse the Facility in accordance with the Project Concession Agreement from the
date of Termination of Contract.
Compensation
34. Upon termination of a Concession Agreement due to a Force Majeure Event
or an Event of Default by the Concessioning Authority/Concessionaire,
Compensation as per provisions of the Project Concession Agreement shall be paid
to the Concessionaire. However, in the Event of expiry of Concession by efflux of
time, the Concessionaire shall hand over/transfer peaceful possession of the Project
site, Port’s Assets, the Facility etc. free of cost and Encumbrance to the
Concessioning Authority.
Escrow Account
35. The Concessionaire shall maintain an Escrow Account for the period, purpose
and in the format as provided for in the Concession Agreement.
Process timelines
36. Port authorities shall ensure timely processing of bids and awarding of
contract. The process steps from the submission of proposal by the PDI to the
signing of concession agreement shall be completed within the timelines specified in
the following schedule:
Submission of Proposal with Feasibility Report - T
Evaluation of proposal and providing response to proposal - T + 3 months
Bidding process commences - T + 5 months
Identification of concessionaire T+8
Signing of concession agreement T+12 months
General
37. Other terms and conditions will, in general, be as per the provisions in the
MCA subject to deviations as approved by the Competent Authority.
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38. The existing guidelines referred to in para 2 above stands withdrawn with
immediate effect.
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