PUBLIC PRIVATE PARTNERSHIP IN PORTS SECTOR By Rajeeva Sinha Director, Mundra Port & SEZ Ltd. South Asia Conclave on Enabling Regulation for Investment in Infrastructure 3-4 November 2009 New Delhi
GDP vs Cargo Growth at Ports 12.0% 10.0% GDP Port Cargo 8.0% 6.0% 40% 4.0% 800 700 600 500 400 300 % Mil T 2.0% 0.0% 200 100 2008 2009 2006 2007 2004 2005 1985 1987 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year 0
Policy & PPP Framework in Indian Ports Indian Ports All Indian Ports are governed by Indian Ports Act 1908 Major Ports Governed by Major Port Trust Act 1963 Governed by Respective State laws Minor Ports S.N. Parameter Major Ports Minor Ports 1 Scope of PPP Terminal within port Green field sites 2 Methodology 2 stage bidding Bidding g/ Nomination 3 Income to Port / Govt Revenue share Revenue share; Per MT royalty 4 Tariff Regulator Yes No 5 Environment approval Taken by the port By Developer 6 Minimum Throughput Cargo Guarantees Yes 7 Rail / Road Connectivity By Port By Developer No
Evolution of PPP Framework in Major Ports 1996 2003 2009 Qualification Threshold Networth; Cash accruals Threshold Net Worth and Cash accruals plus O & M experience Point system; top 6-7 scorers selected Tariff Fixed by TAMP at time of operating the terminal; tariff reviewed and reset at intervals Same as earlier system; revenue share not allowed as pass through cost Upfront tariff setting with pre determined escalation. Selection of Developer Competitive bidding; Single stage 2 bid system Competitive bidding; Two stage 2 bid system Competitive bidding; Two stage single bid system Bid Parameter Rs / TEU Royalty + Upfront Fees + Annual Minimum Guaranteed Throughput % Revenue share % Revenue share
PPP Framework in Major Ports - Observations S.N. Framework Comments 1 Upfront Tariff Setting Ports are becoming competitive market place and the tariff may be pricing services out of market after 5 10 years due to automatic escalation The tariff does not cover all the activities for a business. For example, in some case the bagging cost of fertilizer import has not been considered. 2 Productivity norms Intended to benefit users but are impractically high in some cases. 3 Environmental approval Since ports already obtains the approval, terminal operator can immediately start construction. 4 Exclusivity / Noncompete In case of general cargo non-mechanized berths, ports are not guaranteeing exclusivity and the same cargo can be handled at other berths by stevedores whose tariff is lower than TAMP s upfront tariff for similar level of service. 5 Exclusion Not allowing a selected bidder to bid for next berth irrespective of type of Berth bidder has won will not enhance competition in the port.
Investments under PPP in Major Ports S N Port Capacity Investment A Container Mil TEU US$ Mil Terminals 1 JNPT ( NSICT) 1.2 178 2 Tuticorin 0.3 22 3 Chennai 1.0 109 4 Vizag 0.35 22 5 JNPT ( GTI) 1.3 200 6 Mumbai Off shore CT 0.8 300 7 Kandla 0.5 60 8 Cochin 3.0 497 TOTAL 8.5 1368 S N Port Capaci ty Investmen t B Liquid Terminal Mil T US$ Mil 1 JNPT ( BPCL) 5.5 44 2 Kandla ( IFFCO) 2.0 5 3 Kandla(IOC) 2.0 9 4 Paradip ( IOC SBM) 15 150 5 TOTAL 25 210 S Port Capaci Investmen N ty t C Dry / Bulk Cargo Mil T US$ Mil 1 Paradip 25 322 2 Goa 10 150 3 Haldia 2.0 40 4 Vizag 1.8 45 5 NMPT 70 7.0 80 6 TOTAL 46 640
PPP in Major Ports Need for Captive Jetties Major Ports Competition from Minor Ports Increase the % of tied up cargo by creating switching barrier Assured cargo Minimum Throughput Guarantee Captive Cargo handling Facilities for Power Plants, Steel Mills, Crude Oil refineries Advantage To Port Assured Revenue Spare capacity at captive terminal can be Used by the port for other cargo Other indirect Costs Recovery
PPP in Minor Ports FOR COMMON USER FACILITY S.N. State License/ Concession Fees Duration 1 Andhra Pradesh 2 5% revenue share 30 years 2 Gujarat Waterfront Royalty Rs / MT basis with 20% escalation every 3 years 30 Years 3 Maharashtra Royalty Rs / MT 50 Years 4 Orissa Revenue share; 5% initially increasing to 12% in 15 years 5 Pondicherry 2% Revenue share 30 year 140 PPP Framework in Gujarat Private Ports Private Jetties Captive Jetties 30 Years with 2 X 10 Years renewal GMB Own Jetties 120 Private Jetties 100 Captive Jetties 80 Private Ports 60 40 20 0 2003-04 '04-05 '05-06 '06-07 '07-08 '08-09
Investment Flows in Minor Ports To be filled in Pondicherry Maharashtra Karnataka Andhra Gujarat 0 5000 10000 15000 20000 25000
Constraints in Investment Flows in Minor Ports Suitability of the site Land acquisition for port development Land acquisition for rail / road connectivity High upfront cost of breakwater development Environment clearance
Conclusion Significant capacity creation through PPP route is under progress both in major and minor ports The regulatory regime of major ports has improved in last 10 years but there is ample scope for improvement. Emerging trends in port sector Coastal power plants being set up Large users of coal East cost to West coast movement of coal for power plant. Both major and minor ports are competitive today wrt productivity with overall benefits passing on to trade.
THANK YOU