Source: ET Infra
After navigating strident opposition from green groups, fishermen and locals, the mega port planned at Vadhavan in Maharashtra’s Palghar district is facing a last minute ‘structuring’ challenge with the Prime Minister’s Office (PMO) floating an idea to adopt the Hybrid Annuity Model (HAM) – widely used in highways – for implementing the Rs76,220 crores project.
“At the suggestion of the PMO, we are looking at the HAM model for developing Vadhavan Port,” a senior government official said, asking not to be named.
The PMO’s suggestion has spooked those tracking and involved in the project as it came when the Ministry of Ports, Shipping and Waterways piloted the final investment proposal to the Union Cabinet after securing nod from the Public Investment Board led by T V Somanathan, Finance and Expenditure Secretary, Finance Ministry, as well as the key environmental and coastal regulation zone clearances from the Ministry of Environment, Forest and Climate Change, all in February.
The 298 million tonnes (mt) capacity a year port will be constructed by Vadhvan Port Project Ltd, a joint venture between state-owned Jawaharlal Nehru Port Authority (74 percent stake) and Maharashtra Maritime Board (26 percent equity), in two phases under the landlord model, per the government policy.
In the landlord port model widely followed globally, the publicly governed port authority acts as a regulatory body and as landlord constructing the basic infrastructure such as breakwater, reclamation and dredging, while cargo handling operations are outsourced to private firms on a public-private-partnership (PPP) mode. The landlord port, in return, gets a share of the revenue from the private operators.
The “last minute suggestion” from the PMO has stalled Cabinet clearance for the project which was expected before the dates for the ensuing Lok Sabha polls were announced by the Election Commission.
The Cabinet approval now will have to wait till a clarity emerges on the model to be adopted for constructing the new port and after a new government assumes office in June.
If the HAM model is approved, it will be the first for a port project, necessitating a large-scale restructuring of the Vadhavan project parameters.
Under the HAM Model followed by the National Highways Authority of India (NHAI), the private operator will be picked on the basis of the life cycle cost (net present value of the project cost plus NPV of the O&M cost for the entire operations period).
NHAI will pay 40 percent of the project cost in cash as construction support to the private operator in five equal instalments linked to project completion milestones.
The private operator will have to initially bear the balance 60 percent of the project cost through a mix of equity and debt and construct the highway.
On completion of the highway, the NHAI will make semi-annual annuity payments to the private operator for 60 percent of the project cost which is aligned with the revenue profile. Along with the annuity payments, NHAI will pay interest on the reducing balance cost at bank rate plus 3 percent.
The project cost will be inflation indexed through a Price Index Multiple and the private operator will be responsible for the maintenance of the project till the end of the concession period while the NHAI will be responsible for toll collection.
The NHAI will pay O&M costs to the private operator per the amount quoted in the tender which will be inflation indexed.
Port industry sources are skeptical of adopting the HAM model for port contracts, citing challenges associated with cargo handling activities and collection of vessel related and cargo related charges from the users of the facility.
In the landlord port model, the port authority will invest in common basic infrastructure while attracting private funds for cargo terminals.
“Splitting up the Vadhavan Port into separate terminals and bidding them out results in attractive investment opportunities for private operators while maintaining strategic control over the port assets with a public entity,” said a port industry consultant.
Under the PPP model, the government grants a right to the private partner to design, build and operate the terminal and levy tariffs from the users of the facility.
“The ownership of the land, enabling infrastructure and waterfront for the port will be with the VPPL, whereas the responsibility for construction and operations of the respective terminals will be with the private partners while the ownership is retained by the public sector at the end of concession,” the consultant said.
Vadhavan Port will be designed to handle 24.5 million twenty-foot equivalent units (TEUs) a year – a capacity that no other Indian ports have due to natural limitations – from 9 container terminals each with a straight 1,000 metres long quay (berth) of which 7 terminals will have container storage yard located directly behind the quay apron while the back-up area for two terminals is located about 1 km behind the quay. The deep-water port will be designed to accommodate container ships with a capacity to carry over 24,000 twenty-foot equivalent units (TEUs).
It will have four multi-purpose berths each having a berth length of 250 metres, four liquid bulk berths, a Ro-Ro berth, small craft (pilot boats and tugs) and coastguard berths and rail terminal.
The core and common infrastructure including a 10.14 km long breakwater, dredging, reclamation, shore protection bund, tug berth, approach trestles and unpaved developed land, rail and road linkages, off dock rail yard, rail exchange yard, power and water and internal road will be built by Vadhvan Port Project Ltd (VPPL) with an investment of Rs43,622 crores.
This includes an investment of Rs1,765 crores by the Ministry of Railways for external rail connectivity, Rs2,881 crores for external road connectivity by the Ministry of Road Transport and Highways/National Highways Authority of India and Rs356 crores as depositary works from Maharashtra Jeevan Pradhikaran and Maharashtra State Electricity Distribution Company Ltd.
The remaining project cost of Rs37,244 crore will be invested by the private operators of container terminals, multipurpose berths, coastal cargo berths, RO-RO and liquid berths selected by VPPL.
“If the HAM model is adopted for Vadhavan Port, it is not clear who will bid out the individual cargo terminals and whether the private entity picked under the HAM model will be responsible for the entire port and the cargo operations,” the port consultant added.
