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Govt. raises concession period for MMLPs from 30 to 45 years

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NEW DELHI : The Centre has extended the concession period for its ambitious Multi-Modal Logistics Parks (MMLPs) scheme from 30 to 45 years, a top official at the agency implementing the project said, a tweak that could attract more long-term investors seeking a share of India’s infrastructure story. The government has planned to build 35 such mega freight-and-transport hubs under its flagship Bharatmala scheme, aiming to smoothen freight mobility, improve efficiency and reduce logistics costs.

The extended concession period, among the longest in the infrastructure sector, will help investors recoup their investment and generate surplus, said Prakash Gaur, Chief Executive of National Highways Logistics Management Ltd (NHLML), a special purpose vehicle set up by the National Highways Authority of India.

The Union road ministry has mandated NHLML to execute MMLPs and implement connectivity, including links to ports.

“The MMLPs are set to be developed in phases with each phase (about three) of a five-year period. This would have given investors only around 15 years to recover their investment and generate a surplus. With each MMLP expected to require over ₹1,000 crore of investment, a longer 45-year concession period would give the necessary fillip to the scheme,” Gaur said in an interview.

Sprawled across at least 100 acres, MMLPs will be set up as public-private partnerships, entailing a total capital investment of ₹50,000 crore. These parks are aimed to transform the existing point-to-point logistics model to a hub-and-spoke model. Here, freight from various places will arrive at a hub, where it will be warehoused before being despatched to another hub, after which it will proceed to other smaller locations. Multi-modal logistics parks will allow seamless freight aggregation, warehousing and distribution, and will provide value-added services such as customs clearances and IT services.

This is expected to reduce India’s high logistics cost of around 13-14% of GDP to single-digit levels as in most advanced economies.

The government may conclude bidding for at least four multi-modal logistics parks under the new concession period this year, Gaur said. This includes the Chennai MMLP, which is likely to bid out in July, and the ones at Nagpur, Bengaluru and Indore in August.

Detailed project reports for a dozen other multi-modal logistics parks are in different stages of finalization, and once they are available, more bids could be invited this year or early next year, Gaur said.

However, at the end of 45 years, the facility will return to the government. Under the earlier 30-year plan, the operator had the right of first refusal for an extension of 30 years.

“Each MMLP would require an investment of over ₹1,000 crore, and in this context, a longer concession period would certainly enhance investor interest in these critical infrastructure projects. But more than the period of operation, the location of these facilities would hold the key to bringing investments. Multi-modal logistics parks closer to ports or airports would provide opportunity to develop right infrastructure for transhipment of goods and trading with single window facility for export and imports,” said Arindam Guha, partner and leader, government and public services, Deloitte India.

Apart from the longer concession period, the government has taken several other measures to make multi-modal logistics parks attractive for investors, including changing the bid parameters and linking it to minimum guaranteed revenue share, and easier exit clauses for original investors, with permission to bring joint venture partners at different stages of the project.

Gaur said multi-modal logistics parks are attracting good investor interests and the results would be visible when projects are awarded later this year.

“The focus on the logistics sector through the PM Gati Shakti plan will give a fillip to the economy,” said Anil G. Verma, executive director and president, Godrej & Boyce.

“Logistics costs in India count among the highest in the world. Creation of infrastructure is the best way to reduce the costs and introduce competitiveness in the economy to serve both the domestic market and exports. The initiative of spurring investments from the private sector by taking the lead through government investments of ₹7.5 trillion is laudable,” Verma said. 

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