Ports face rough seas as projects struggle to dock

Jul 31 2013, 10:16 IST
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SummaryThere is a renewed thrust on infrastructure projects with the PMO intently monitoring them. The targeted investments of a whopping R1 lakh crore in the sector in the remaining part of this fiscal are expected to give a fillip to the sagging economy. But the investor community doesn’t seem enthused. The short-term prospects of major infrastructure sectors like roads and ports are not very encouraging, with the award of new projects on the decline. In Part 3 of our series, we delve into the state of Indian ports

The capacity-to-throughput ratio at Indian ports needs to improve to handle rising foreign trade efficiently and public-private partnership (PPP) seems to be the best way to add to the port facilities.

The focus started to shift from the government sector to PPP when the 11th five-year Plan was conceived. But that promise has largely remained unfulfilled.

Between 2008 and 2010, there was a virtual stalemate in awarding new PPP projects in the major ports sector. Only a fraction of the targeted 23 projects were awarded in 2011-12.

Policymakers said the reason for the huge slippage was the delay in preparing the Model Concession Agreement. But things haven't really looked up after that problem was addressed.

In FY13, the shipping ministry awarded 13 PPP projects at a total cost of R2,274 crore, which is only about 20% of total amount that the ministry targeted for the year.

FE learnt that the ministry, which has set a target of awarding 30 PPP projects worth R30,000 crore in FY14, has given out only one project in the past three months. About 23 PPP projects, at a total cost of R16,793 crore, are up for bidding, according to shipping ministry data, while 19 projects at an outlay of R10,548 crore are currently under implementation in major ports.

Delays in project planning by the government, rigid tariff regulations at ports and slow environmental clearances have ensured that investor interest in the sector is subdued. Port trusts' failure to lease out land to private operators also hampered projects.

The PPP model in the major ports sector is important in augmenting port capacity in the country as roughly two-thirds of the over 1,200 million installed capacity is with this sector. PPP projects in the 13 major ports, as defined under the Major Ports Act and controlled by the Centre, are also hamstrung by a flaw in the bidding process.

Prior to the bidding, the tariff authority for major Ports (TAMP) fixes the tariff ceiling for the port services. The bidder who agrees to share the highest proportion of revenue with the port authority wins the project. In practise, investors promise a high proportion of the revenue – even 50% in some cases – constraining their ability to reduce tariffs and inflating the costs of port users.

Analysts have long said the bidding norms would be such that revenue share

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