Union Cabinet approves revised Model Concession Agreement for building ports

Jan 4, 2018 11:21 IST
Union Cabinet approves revised Model Concession Agreement for building ports

The Union Cabinet on 3 January 2018 approved amendments in the Model Concession Agreement (MCA) to make the  Port Projects more investor-friendly and make investments more attractive in the Port Sector.

The amendments in the MCA call for setting up of the Society for Affordable Redressal of Disputes - Ports (SAROD-PORTS) as dispute resolution mechanism, similar to provision available in Highway Sector.

Provisions of the revised Model Concession Agreement
• Providing exit route to developers by divesting their equity up to 100 per cent after completion of 2 years from the Commercial Operation Date(COD).

• Under provision of additional land to the Concessionaire, land rent has been reduced from 200 per cent to 120 per cent of the applicable scale of rates for the proposed additional land.

• Concessionaire will be free to deploy higher capacity equipment or technology and carry out value engineering for higher productivity and improved utilization of Project assets.

• The Actual Project Cost will be replaced by the Total Project Cost.

• It provides for commencement of operations before COD. This will lead to better utilization of assets provided by the Port in many projects.

• Provision regarding refinancing is aimed at facilitating availability of low cost long term funds to Concessionaire to improve the financial viability of the projects.

Royalty to be paid by Concessionaire
• Concessionaire will now be required to pay Royalty on 'per MT of cargo/TEU handled basis' which will be indexed to the variations in the Wholesale Price Index (WPI) annually.

• This will replace the present procedure of charging royalty which is equal to the percentage of Gross revenue, calculated as per Tariff Authority for Major Ports (TAMP).

• This will help to resolve the long pending grievances of Public Private Participation (PPP) operators regarding the Revenue share which is payable on ceiling tariff and regarding the ignorance on discounts.

New definition of "Change in Law"
The 'Change in Law' is now defined as:
• Imposition of standards and conditions arising out of TAMP guidelines, Environmental Law & Labour Laws

• Increase and imposition of new taxes and duties for compensating the Concessionaire. Concessionaire will now be compensated for the increase and imposition of new taxes, duties etc. except in respect of imposition/increase of a  direct tax both by Central and State Government.

Introduction of Complaint Portal for port users
A Monitoring Arrangement has been introduced for keeping periodical status report of the project. It will act as a complaint portal for the port users.

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