Port of call: Govt may buy upto 20% stake in pvt projects

Industry:    April, 2016

Port of call: Govt may buy upto 20% stake in pvt projects

In a bid to woo private investors in the port sector, the government is likely to offer equity support for public-private partnership (PPP) projects of upto 20% of the total project cost.

According to the proposed model concession agreement (MCA), the government will provide the concessionaire with an outright grant in terms of equity support. It may also come up with funding for project-specific and management (O&M) operations.

As stated in the proposed MCA, the port trust will provide the O&M support in quarterly installments, with each one being 5% of the equity support. The trust will also have to disburse the equity element within 15 days of receiving a request from the concessionaire. The MCA has exempted a concessionaire from payment of additional concession fee to the port trust in case he seeks a grant from the government.

However, if a concessionaire is willing to bear the cost of the entire project without any government support, an additional concession fee of 2% of the total realisable fee will have to be paid to the trust per annum. This fee will be increased by 0.5% for each subsequent year of the concession agreement, subject to a ceiling of 20% of the total realisable fee.

The much-delayed MCA will be sent to the PM’s infrastructure committee and finally to the Cabinet for approval next month. The government is expecting an investment of $7.67bn in ports from private players by ’12. In the next five years, it’s expecting 54 new berths to be developed through PPP.

Apart from berth construction, the government is offering container, cruise and LNG terminals for PPP development. The 12 major ports, which are controlled by the Centre, have been facing capacity constraints and are hence have charted out an ambitious plan to increase capacities through private participation. The government is hopeful of attaining a capacity of 2,000mt at the major ports by ’16.

Priyanka Talwar & Subhash Narayan