Major Port's Lease To Be Extended Beyond 30 Years As Centre Plans Policy Rejig

The Centre is working on a policy that will allow contracts for port terminal to be extended beyond their 30-year lease period, a report in The Economic Times (ET) said. However, the extension will be allowed under certain conditions.

Citing a senior official of the Ministry of ports, shipping and waterway, the report said "The policy will govern major ports and allow them to offer a lease extension for existing terminal operators, subject to certain conditions.

India has a total of 12 major ports which are managed by the Shipping Ministry. Under existing framework, there is no provision to extend port operating agreements that were signed in the late 90s and the early 2000s.

For example, D P World’s two terminal contracts in Jawaharlal Nehru port — India’s biggest container port — are completing their tenures sometime in 2028. This has become a concern for port terminal operators who are unsure if they will be able to hold on to their assets for a longer period, the report said.

Representatives from a private port terminal operator were quoted in the ET report as saying, "Since large investment is involved, the private sector wants visibility over a longer period to know whether the amount spent can be recovered".

On their part, existing terminal operators want right of first refusal in bids, along with bid preferences for lease holders.

Landlord Model

The terminal lease extension policy will usher stable regime for private sector and help in implementation of landlord model.

As part of Maritime Agenda-2020, the Ministry of Shipping wants to convert all the major ports into landlord ports to encourage private sector participation.

This model envisages that State government sets up the basic infrastructure for the port while the private concessionaire takes care of the superstructure and operations.

Privatisation of cargo terminals has become necessary as the ‘port authority’ formed for each of the 12 ports under the Major Port Authorities Act will play the role of a landlord — a model widely followed globally, wherein the publicly governed port authority acts as a regulatory body and as landlord, while private firms carry out port operations, mainly cargo handling activities.

The landlord port, in return, gets a share of the revenue from the private entity.