Decision on private play in ports soon

NEW DELHI: The Planning Commission and the ministry of shipping, road transport & highways are likely to resolve the long-standing issue of tariff setting for private sector participation in the ports sector.

Prime Minister Manmohan Singh has asked the shipping ministry and Planning Commission to reach a consensus on this issue. The ministry and Commission officials will be meeting on Friday to discuss the details.

“The Planning Commission has suggested a one-time upfront tariff linked to the wholesale price index (WPI), similar to the current practice in the road sector, as the alternative to the present revenue-sharing model for public-private partnership (PPP) projects in the ports sector,” a senior official in the ministry of shipping, road transport & highways said. “The ministry, however, has questioned this since the Commission has not said how the upfront tariff will be decided,” he added.

“Tariff Authority for Major Ports (TAMP) sets the tariff model for major ports. If they have to implement the Commission’s suggestion, they must atleast be told on what basis to set the upfront tariff. The Planning Commission has not yet cleared the ambiguities,” he said.

The delay in finalising tariff guidelines is also delaying the model concession agreement (MCA) for PPP projects in the sector. Awarding of new PPP projects was being held up on account of this delay, the official said. The ministry had prepared the new MCA in March this year, and has made certain refinements to iron out loopholes. The ministry is likely to meet on Tuesday to review the situation.

The Planning Commission had expressed doubts over the revenue-sharing model and rate of return fixed on cost plus approach. The revenue sharing model is used as the bidding parameter for PPP projects in the ports sector. TAMP fixes a 15% rate of return on capital employed by the build-operate-transfer (BOT) operator.

The Planning Commission has questioned the validity of this model on the grounds that it leads to excess income. However, the shipping ministry has said that any excess income is adjusted in subsequent tariff setting.