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India Govt allows companies to set up captive ports at Major Ports

Jun 13, 2011 Port

The Indian Government has given companies that are key port users the green signal to develop their own captive berths/ports on lands and waterfronts owned by the Major Ports, eximin.net reported.

The Shipping Ministry's recently-released 'Draft Captive (port) Policy' says that port-based industrial units (which are large port users) would be allotted land and waterfront on nomination basis for setting up dedicated ports for their own use.

Initiated by the government for the first time, the uniform captive port policy aims at making Major Ports more competitive by empowering them to attract large and dedicated cargo.

While the land for the purpose would be leased out for a maximum period of 30 years, the company bidding for the port would have to ensure a "minimum guaranteed throughput", which should be at least 50 per cent of the capacity of the project, within two years of commercial operations.

In case there is only one bidder, the project would be awarded at a price calculated as the highest of the following: 50 per cent of the wharfage plus handling charges or 15 per cent return on investment (as per TAMP order) or a negotiated rate between the port and the entrepreneur.

If there is more than one interested bidder, the project would be awarded to the one offering the maximum net present value, which will be calculated by the following model: The minimum guaranteed throughput of each year multiplied with the quoted revenue for the corresponding year and discounted at a rate equal to 10-year government securities plus five per cent.

The draft policy, posted on the Ministry's website, makes it clear that the quoted revenue should not be less than 50 per cent of wharfage and handling charges according to the schedule of rates.

While the total cost of the project would have to be borne by the company, the captive user will be permitted to handle only the specified cargo. Moreover, the Major Port will have the right to assign the use of the port to others if the capacity is not fully utilised by the company according to the terms and conditions agreed.

An empowered committee, having the Shipping Secretary and representatives from the Planning Commission, the Department of Economic Affairs and Port Trusts, will evaluate the proposal for allotment of captive ports.