Port BOT operators cheer as Centre mulls extending pact

Visakhapatnam The proposal for extension of concession agreement signed by the major port authorities with the BOT (build-operate-transfer) operators beyond 30 years has created jubilation among the investors’ community who have been batting for a long-term association for better returns and a level-playing field with the non-major (private) ports in tariff fixation. A BOT operator quoting sources in the Ministry of Ports, Shipping and Roadways told Bizz Buzz that as some of them had taken the berths on BOT basis by quoting high revenue sharing when the landlord policy was at the nascent stage, it makes sense for anyone to invest in mechanisation of berths if return on investment for a long-term is ensured.

Visakhapatnam Port Authority (VPA), which has set its eyes to increase its capacity to 100 MMTA by financial year 2025, 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 faster evacuation of cargo. VPA had to face a bitter experience with regard to investments made through 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/NS India) at an estimated investment of Rs 800 crore to Rs 1,000 crore.

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

With 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, VPA officials are confident of challenging the threat of cargo diversion by the private ports, which have come up and are under construction in the neighbourhood.

“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 alumni of IIM-Visakhapatnam and an expert on logistics and supply chain management, told Bizz Buzz.

Jawaharlal Nehru Port Authority (erstwhile JNPT) has turned into the first 100 per cent landlord port in India. Union Minister for Ports, Shipping and Waterways Sarbananda Sonowal announced recently saying this will lead to increase in container cargo substantially making it a prominent transhipment hub.