Shri Sonowal announces New Model Concession Agreement – 2021 for Public-Private-Partnership (PPP) Projects at Major Ports

Union Minister for Ports, Shipping & Waterways Shri Sarbananda Sonowal today announced the revised Model Concession Agreement (MCA) – 2021 for PPP projects at Major Ports. In a statement he said, the new MCA will be applicable to all the future PPP projects at major ports, as well as projects which are already approved by the Government but are still under bidding stage. He informed that at the moment, there are more than 80 PPP/landlord projects in the sector with investment of over Rs 56,000 crore at various stages. Of these, 53 projects of Rs 40,000 crore are under operation, whereas 27 projects of more than Rs 16,000 crore are at implementation stage.

The Minister informed that with many changes drawn from best practices from across the sectors and extensive stakeholder consultation, the Model Concession Agreement – 2021 (MCA), will bring more confidence of developers, investors and lenders and other stakeholders in the Ports sector and catalyze the investment in the sector. Looking ahead, Ministry of Ports, Shipping and Waterways has clearly defined pipeline of 31 projects of more than Rs 14,600 crore to be awarded on PPP till FY25, and it expects that the new MCA – 2021 will generate enthusiastic response from the stakeholders.

Talking about the key changes made in the Model Concession Agreement (MCA) – 2021, Shri Sonowal informed that provision of Change in Cargo due to Change in Law or Unforeseen Events has been introduction for the first time. He said, there have been cases in the past wherein due to external and unforeseen factors, traffic for a particular commodity has dropped during the concession period thereby impacting the overall viability of the terminal. The concessionaire did not have flexibility to handle a different cargo and the asset constructed was not being utilized optimally. The Minister said, this provision will give the flexibility to undertake change in cargo in such situation and reduces risk for the concessionaire.

Shri Sonowal added that under the new MCA, provision has been made for providing flexibility to the concessionaires to fix their tariff based on market conditions which will allow level playing field for the private terminals at Major Ports to compete with private ports for cargo. Further, to reduce risk to the lenders and make the project more bankable, provision of compensation for Concessionaire’s event of default before Commercial Operations Date (COD) has been added. Another provision which lays out process for extension of concession period on the basis of performance and mutual agreement has been introduced. Shri Sonowal said, overall, more clarity has been provided in terms of responsibilities of both public as well as private party while balancing the risks.

The first Public Private Partnership (PPP) Project in the Port sector was launched in 1997 when a terminal at Jawahar Lal Nehru Port Trust (JNPT) was awarded to a private party. There has been huge progress in the PPP environment in the Port sector of the country ever since. The Model Concession Agreement (MCA) governing the PPP Projects in the Ports Sector was first introduced in the year 2008 and was subsequently revised in 2018 based on the stakeholder feedback.