Potential extension of concession agreements brings joy to port BOT operators

The proposal for the extension of the concession agreement signed by the major port authorities with BOT (build-operate-transfer) operators beyond 30 years has created jubilation among the investors’ community seeking a long-term association to gain better returns and have a level playing field for small (private) ports in tariffs fixation.

Since some of the BOT operators took the berths on a BOT basis, quoting high revenue sharing at the time when the landlord policy was at the nascent stage, it makes sense for anyone to invest in the mechanization of berths if the return on investment for a long-term is ensured, said a BOT operator quoting sources in the Ministry of Ports, Shipping, and Waterways.

Looking to increase its capacity to 100 MMTA by FY25, the Visakhapatnam Port Authority (VPA) is keen on following the landlord port model. It has several projects in the pipeline for development to handle cargo in a fully automated environment to achieve world-class standards in the faster evacuation of cargo. VPA had to face a bitter experience about investments made through the BOT route which included 6.5 MTPA Adani Steam Coal Handling Terminal, 7.5 MTPA SEW Steam Coal, and Alba’s 6 MTPA cargo handling facility. Following financial woes, Essar Vizag Terminal Ltd’s iron ore handling complex and allied facilities are being acquired by ArcelorMittal and Nippon Steel India (AM/S India) at an estimated investment of Rs 800 crore to Rs 1,000 crore.

VPA authorities also signed a concession agreement for the mechanization and operation of West Quay 7 and 8 for bulk handling by AM/NS India and Bothra Shipping Services Pvt Ltd. Respectively. Another agreement was penned down with Orissa Stevedores Ltd (OSL) to revamp the operation of the WQ-6 terminal.

VPA has a vast spread of hinterland and berths spread over 100 hectares in the Inner Harbour and 200 hectares in the Outer Harbour with Panamax vessel compatibility, making the authorities confident of challenging the threat of cargo diversion by the private ports, which have come up and are under construction in the neighborhood.

“The extension of concession agreements beyond 30 years subject to adherence to certain conditions will augur well for the port sector at a time when there is stiff competition for faster handling of throughput at an affordable cost,”

Srinivasu Chaganti, an alumnus of IIM-Visakhapatnam and an expert on logistics and supply chain management.

Transforming itself into India’s first 100% landlord port is the Jawaharlal Nehru Port Authority (erstwhile JNPT).

According to Sarbananda Sonowal, the Union Minister for Ports, Shipping and Waterways this will lead to an increase in container cargo substantially making it a prominent transhipment hub.

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