Government set to tweak captive berth policy for major ports

NEW DELHI : Cargo berths run by port dependent industries for their captive use at state-owned major ports will be allowed to extend their contract beyond the original time frame through a right of first refusal (RoFR) mechanism when such facilities are put to re-tender on completing the term, according to a proposal drafted by the Ministry of Ports, Shipping, and Waterways.

The proposal for extension of the agreement for captive berths forms a key part of the plan to amend the ‘Policy for Award of Waterfront and Associated Land to Port Dependent Industries (PDI) in Major Ports’, which was approved by the Cabinet in 2016, government sources said.

“The existing captive policy does not have the provision for extension of the agreement. So, we are now proposing to make provision for extension also because normally the concession period is 30 years, and if the investor has established the facility with dedicated business to the port, they may ask for continuation also,” said an official.

The extension of the concession period for captive berths will be on bidding basis to factor in the changes that have taken place since the facility was first awarded, both trade wise and tariff regime wise.

The aim is to go for a fresh price discovery for the facility taking “contemporary issues” into consideration. “This is necessary to re-evaluate the asset based on the current market scenario/dynamics, while extending the concession period,” the official stated.

“On completing the duration, a captive berth will be re-tendered wherein the existing operator will be given the first right of refusal to match the highest bid and continue running the berth,” the official said.

The changes being worked out will make the captive berth policy “uniform” across major ports. Many of the captive berths currently in operation pre-dates the policy that was introduced in 2016 with the approval of the Cabinet. These captive berths are now governed by different agreements for different durations. Some of them are coming up for renewal soon.

The proposed amendments will have to be ratified by the Cabinet.

“Many industries in and around a major port are dependent on the captive facility. If the captive berth is taken away suddenly, all of them will be in jeopardy. So, it is imperative to offer the right of first refusal to the existing operator,” said the Deputy Chairman at one of the major ports on the eastern coast.

The 2016 policy is being tweaked to bring all the facilities onto one platform, he added.

With reference to a major port, a port dependent industry (PDI) is defined as an entity (including any of its affiliates) which is dependent on that major port for import and/or export of at least 70 per cent of the designed capacity of the proposed facility for captive cargo.

Optimal utilization of land and waterfront at the disposal of the major ports is of critical importance, the Cabinet said while approving the Captive policy in 2016.

“The objective of the 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,” it said.

Allocation of waterfront and associated land to port-based industries on public-private-partnership (PPP) and captive basis is one of the areas which have been identified for investment by the private sector in major ports.

Port Dependent Industries (PDI) will be granted concessions for setting up dedicated facilities in major ports for import and export of cargo and their storage before transportation to destination for 30 years, per the policy finalised in 2016.