Port BOT operators cheer as the center considers extending the pact

The proposal to extend the concession agreement signed by the major port authorities with the BOT (build-operate-transfer) operators beyond 30 years has sparked jubilation from the investor community, which has advocated long-term collaboration for better returns and a level playing field with the not large (private) ports in the tariff commitment. A BOT operator, citing sources in the Department of Ports, Shipping and Roads, told Bizz Buzz that it makes sense for everyone to do so, as some of them are berthing on a BOT basis and have a high revenue share indicated when rental policy was still in its infancy invest in mechanization of berths when a long-term return on investment is assured.

The Visakhapatnam Port Authority (VPA), which aims to increase its capacity to 100 MMTA by FY2025, is keen to follow the landlord port model. There are several projects in the development pipeline that aim to handle cargo in a fully automated environment to achieve world-class standards for faster cargo evacuation. VPA had a bitter experience in terms of investments through the BOT route which included 6.5 MTPA Adani Steam Coal Handling Terminal, 7.5 MTPA SEW Steam Coal and Albas 6 MTPA Cargo Handling Facility. Due to financial difficulties, Essar Vizag Terminal Ltd iron ore handling complex and associated facilities are being acquired by ArcelorMittal and Nippon Steel India (AM/NS India) with an estimated investment of Rs 800-1,000 crore.

Meanwhile, the VPA authorities have also signed a concession agreement for the mechanization and operation of West Quay seven and eight for bulk handling by AM/NS India and Bothra Shipping Services Pvt Ltd. Another agreement has been signed with Orissa Stevedores Ltd (OSL) for modernization and operation of the WQ-6 terminal.

With a vast hinterland and moorings stretching over 100 acres in the Inner Harbor and 200 acres in the Outer Harbor with Panamax vessel compatibility, VPA officials are confident of counteracting the threat of cargo diversion through the private ports that have sprung up and are under construction in the neighborhood.

“Extending concession contracts beyond 30 years, subject to certain conditions being met, will bode well for the port sector at a time when there is fierce competition for faster handling at an affordable cost,” said Srinivasu Chaganti, a graduate of IIM-Visakhapatnam and a logistics and supply chain management expert, said Bizz Buzz.

The Jawaharlal Nehru Port Authority (formerly JNPT) has emerged as the first 100 percent landlord port in India. The Union Minister for Ports, Shipping and Waterways, Sarbananda Sonowal, recently announced that this will lead to a significant increase in containerized cargo and make it a major transhipment point.

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