Visakhapatnam storage charge solution

India's Shipping Ministry is seeking to breathe a new lease of life into at least four stalled public-private-partnership (PPP) projects in Visakhapatnam Port Trust Photo: Sureshiras at English Wikipedia/Wikimedia Commons/CC BY-SA 3.0 India's Shipping Ministry is seeking to breathe a new lease of life into at least four stalled public-private-partnership (PPP) projects in Visakhapatnam Port Trust Photo: Sureshiras at English Wikipedia/Wikimedia Commons/CC BY-SA 3.0
Industry Database

The Hindu Business Line has reported that the country's Shipping Ministry is seeking to breathe a new lease of life into at least four stalled public-private-partnership (PPP) projects in Visakhapatnam Port Trust by reaching an amicable solution regarding the issue of storage charges.

According to the business newspaper, a Shipping Ministry official commented: “Either the PPP operators will have to sign a supplementary concession agreement with the port trust to enable payment of revenue share on the actual revenue realised by them, or the storage charges itself have to be revised downwards. Both the options are before the government.”

PPP operators like Vedanta, Essar, Adani Ports and Special Economic Zone and ALBA Asia, in order to compete with private ports that offer free cargo storage for 120 days, have asked to cut the storage charges set by the rate regulator and make available longer free days for cargo storage from the current 10 days.

This will help tackle the problem of revenue share payment to the port trust, as PPP operators, according to the concession agreement, must now pay the revenue share on the upfront ceiling rate, set by the Tariff Authority for Major Ports, on a normative basis.

Rate discounts, which are granted by the PPP operators to attract cargo, are therefore effectively ignored while paying revenue share to the port trust.

Currently, storage charges increase exponentially the longer the cargo stays in the port after the free days.

The Shipping Ministry official reportedly also said that the PPP operators have also sought approval to handle alternate similar bulk cargo until demand picks up.

The Indian Cabinet gave the green light earlier in the month to a new model concession agreement for future PPP projects at major ports by abolishing the setting of, and revenue share collection on, storage charges, by instead opting for a royalty per tonne of cargo - or TEU - handled from the revenue share model.

Currently, PPP contracts are decided on the basis of revenue share, in that the winning bidder will be the one willing to share the most from its annual revenue.

“Once the storage issue is tackled, at least four PPP projects in Vizag port will come back to life. They will be able to attract cargo,” the Ministry official also reportedly said.

He added that the government solution could be used for stalled PPP projects at other major ports where storage charge is also a problem.

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