Bidding for the fourth container terminal project at Navi Mumbai’s Jawaharlal Nehru Port Trust may signal a trend of aggressive bidding in future public-private partnership (PPP) projects in the sector. It might also mean costlier services.
The winning bid of a consortium of the Port of Singapore and the ABG consortium offered the government 50.8 per cent of revenue, higher than even the high 45.99 per cent offered by the GMR group for Delhi airport.
“It is a transparent model of bidding and the revenue share is good for the ports but in the overall interest of trade, a higher revenue share would imply that tariffs (rates) cannot be reduced, so that is the flip side,” said K Mohandas, shipping secretary.
Aggressive bidding is a trend being noticed even in the highways sector, though the award of contracts is not on revenue shares but on the lowest subsidy asked for.
The Rs 6,500-crore fourth container terminal of JNPT, with a capacity for 4.8 million twenty-equivalent units, is one of 23 projects the shipping ministry aims to award through the PPP route by the end of 2011-12l. The total cost of these is estimated at Rs 17,000 crore.
In a high revenue share scenario, the money has to come from the pockets of the trade. “It will reflect as part of the cost of logistics of the entire supply chain of the country. It can also set a very bad trend,” said Hemant Bhattbhatt, senior director, Deloitte.
Despite apprehensions, L Radhakrishnan, chairman, JNPT, defends the revenue sharing model, saying it helps the ports undertake development and maintenance work such as dredging.
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“It is going to reap the company (PSA and ABG consortium) huge benefits in the long run, especially after dredging is complete. This expenditure is being undertaken by the port trust currently. Private players cannot build a port till we provide them with infrastructure, which requires investment,” he said.
Often, the process of selection and delays in clearances are blamed for the slow progress in the port sector. A Deloitte report says the failure of PPPs in port projects in India is at the outset, start-up stage itself.
“This is due to bureaucratic delays, permission and clearances, local community opposition, site squatting by concession holders and overcrowding by small-scale proximate port facilities,” says the report.
During the 11th Plan (2007-12), total investment in the port sector is projected at Rs 40,647 crore, less that half the original projection of Rs 87,995 crore. The ministry of shipping revised the original target of 545 mt of additional capacity in major ports to 393.3 mt.
Private investment in the port sector is also expected to be almost 40 per cent lower as compared to the projections made at the beginning of the Plan.
Experts say PPP has not seen much headway in the sector and there may be a need to revisit the government’s approach towards this model.
The government is in the process of finalising two more major ports, of which one is to come up in Andhra Pradesh. The shipping ministry has written to all maritime states to send in proposals for setting up new port facilities. With the objective of increasing port capacity to 3,000 mt by 2020, with an investment of Rs 3 lakh crore, the government has also started work on reframing of a model agreement.