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Older port terminals to charge market rates: Panel formed
PORTS & SHIPPING

Older port terminals to charge market rates: Panel formed

28 Aug 2023 2 Min Read CW Team
Cargo handling terminals managed by private companies at major ports prior to the enactment of a new 2021 law governing state-owned ports are on the brink of gaining permission to apply market rates for their services. This landmark decision, seen as a game-changer in the ports sector, aims to balance the move towards market-driven pricing without violating existing concession agreements. The Ministry of Ports, Shipping, and Waterways has constituted a panel, led by Sanjay Sethi, Chairman of Jawaharlal Nehru Port Authority, to assess the feasibility of allowing older public-private-partnership (PPP) cargo terminal operators to adopt a market-driven pricing structure, similar to post-2021 operators.

The Major Port Authorities Act had originally empowered 11 state-run ports to determine market rates for new cargo terminals, leaving the fate of older handlers uncertain. The newly formed panel is tasked with formulating guidelines for transitioning these older cargo terminals to a market-driven rate framework, all while considering commercial aspects and port authority interests. This move aims to ensure that both the private operators' gains and the port authorities' benefits are fairly balanced.

Under consideration is a mechanism wherein older cargo terminals could charge market-based rates while adhering to the revenue share or royalty obligations outlined in concession agreements. This innovative approach aims to safeguard minimum throughput levels while enabling private operators to capitalise on market-driven rates. The potential for increased transparency is also on the horizon, with the requirement for terminals to display their market rates on their websites and provide advance notice of any rate revisions.

This significant policy shift is anticipated to level the playing field between different terminal operators while promoting viability and growth within the ports sector.

Cargo handling terminals managed by private companies at major ports prior to the enactment of a new 2021 law governing state-owned ports are on the brink of gaining permission to apply market rates for their services. This landmark decision, seen as a game-changer in the ports sector, aims to balance the move towards market-driven pricing without violating existing concession agreements. The Ministry of Ports, Shipping, and Waterways has constituted a panel, led by Sanjay Sethi, Chairman of Jawaharlal Nehru Port Authority, to assess the feasibility of allowing older public-private-partnership (PPP) cargo terminal operators to adopt a market-driven pricing structure, similar to post-2021 operators. The Major Port Authorities Act had originally empowered 11 state-run ports to determine market rates for new cargo terminals, leaving the fate of older handlers uncertain. The newly formed panel is tasked with formulating guidelines for transitioning these older cargo terminals to a market-driven rate framework, all while considering commercial aspects and port authority interests. This move aims to ensure that both the private operators' gains and the port authorities' benefits are fairly balanced. Under consideration is a mechanism wherein older cargo terminals could charge market-based rates while adhering to the revenue share or royalty obligations outlined in concession agreements. This innovative approach aims to safeguard minimum throughput levels while enabling private operators to capitalise on market-driven rates. The potential for increased transparency is also on the horizon, with the requirement for terminals to display their market rates on their websites and provide advance notice of any rate revisions. This significant policy shift is anticipated to level the playing field between different terminal operators while promoting viability and growth within the ports sector.

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