Government of India Ministry of Shipping Ports Wing PD-25021/6/2006-Pvt(pt) Subject:Captive use Policy.

The Policy for Award of Ports waterfront and associated land on captive user basis is being hosted in the website for information to all concerned.
A.R.SENGUPTA UNDER SECRETARY PORT DEVELOPMENT -III ROOM NO. 543 TELEFAX NO. 23311659

Policy directives for Award of Ports waterfront and associated Land on Captive user basis.

Title: Policy for Award of Ports waterfront and associated land on captive user basis.
2. Objective: To make operations of the Major Ports more competitive by empowering them to attract large and dedicated cargoes. 3. Scope: Handing over of water front and associated land or other port facilities like existing berths, offshore anchorages, transhipment jetties etc. on captive basis for development of new port related facilities for transporting of cargoes from/ to a Port based industry for a predetermined period (maximum 30 years) on payment of prescribed charges and other terms and conditions as per the model concession Agreement for captive facility. 4. Eligibility Criteria: (1) Port based industry which is basically dependent on port facilities for handling its raw material/ other inputs /products. Such industries shall submit approvals, wherever required, from the concerned Ministry/Department for establishment of industry.

(2) There is no restriction on distance between the Port and the Port based Industry. (3) It is, however, clarified that port based logistic parks, consortium of two or more port based industries of specific cargo, any intermediatory organisations handling cargo on behalf of various end users, etc. are not eligible for consideration. (4) Request for allotment of additional water front and associated land from existing captive facility user of the same port will be treated as a new allotment. 5. Methodology: i. On receipt of a reference from a Port based industry, the Port will verify whether enough capacity for handling that particular commodity is available to cater to common user facilities at least for next 5 years and that the Applicant meets the eligibility criteria. ii Port shall ask the applicant to submit Feasibility Report for the applied facility along with a non-refundable processing fee of Rs.10 lakhs.

iii.

The port shall, either in house or by engaging from the panel of Consultants /Transaction Advisors of M/o Finance evaluate the Feasibility Report and arrive at an Estimated Normative Cost of Project and work out optimal capacity as well as normative revenue as per the guidelines for fixing upfront tariff, 2008, as may be amended from time to time.

iv.

In order to ascertain whether some more parties are interested in the facility, the Port shall invite Expression of Interest (EoIs), publishing in at least one National Daily and on the Port and Ministry Website, indicating that Minimum Guaranteed Throughput (MGT) should be at least 70% of the optimum capacity of the project within three years of Commercial Operation.

v.

In case, more than one eligible response is received, the Port will examine if adequate facilities like land and water front are available for allowing all the eligible applicants. If the facilities are available, each of the eligible bidders can be considered for the award of captive facilities.

vi.

If such facilities are not available for all the eligible bidders, bids will be invited from eligible applicants for quoting MGT (in MT for each year) and revenue payable to the port for the corresponding year for the entire concession period. Bidders have to furnish 1% of estimated cost as Bid security.

vii.

Before offering an existing facility for captive use, ports will first exhaust BOT route failing which it will resort to captive route, after taking care of labour interests as per Government of India guidelines. (Extracts enclosed) Also, the value of back up assets created by the port and handed over to the captive user should be determined on replacement cost basis and recovered from the captive user as upfront at the time of award of concession.

viii

Lease rentals for the land allotted should be payable as per the prevailing scale of rates prevailing from time to time or market value, whichever is higher as per Land Policy guidelines. Before the initial allotment of land, the prevailing scale of rates pertaining to the concerned zone

of land should be updated to reflect the market value of land. ix. The Port has to get the Security Clearance of short listed captive users from the competent authority, before the price bids are opened. 6) Evaluation criteria i. In case of bidding, the Quoted MGT (in MT) of each year shall be multiplied with quoted revenue for the corresponding year and discounted at discount rate equal to 10 year GSec+5%. The party offering Maximum NPV shall be given approval for the facility. The quoted revenue shall not be less than 51% of the normative revenue determined by upfront tariff guidelines. ii. The cases where there is no competition, the captive facility shall be awarded to the Applicant on payment of revenue share determined as under : a) Upfront tariff will be set by TAMP following the provisions of the upfront Tariff guidelines. As tariff is not recoverable from captive user, unit normative Revenue will instead be calculated. The captive user has to pay 51% of Unit Normative Revenue multiplied by MGT (or) actual throughput whichever is higher. b) The revenue share payable by captive user will be escalated annually by 60% of WPI, as envisaged in the upfront tariff guidelines.

c) Port will collect all vessel related charges except berth hire, if berth is constructed by the captive user. If an existing berth is given to captive user, port will collect berth hire also as per the scale of rates in force. iii. The cost of construction, repair & maintenance and

management of the captive facility during the license period shall be borne by the concerned port based industry and no liabilities whatsoever shall devolve on the port at any point of time. Capital dredging and maintenance dredging thereafter alongside the berth should be the responsibility of captive user. iv. Captive user has to ensure navigational safety during operation and comply with all requirements of the port like MARPOL, ISPS code compliance etc. v. Captive user has to handle only the dedicated cargoes in the captive port facility. vi. If a captive facility is not fully utilized, the port shall have the right to assign the use of the berth to other users and collect charges such as wharfage, port dues, pilotage etc. from such other users. The berth hire charges shall also be collected by the Port and passed on to the captive user/ concessionaire, in case berth is constructed by the port user. vii. The Traffic handled at the captive facility shall be monitored by the Port to ensure compliance of MGT. In case actual traffic handled is less than (i) 90% of the MGT offered in the bid or (ii) 70% of optimum capacity (in cases no bid was received at the time

of allotment) continuously for three financial years, the port shall be entitled to terminate the Concession without any compensation being admissible to captive user. It is clarified that the cargo handled by the Port as per provision of clause 12 above shall be counted towards MGT only for the purpose of ascertaining entitlement of port to terminate the concession. 7. A model concession Agreement for captive facilities shall be prepared by the Ministry keeping in mind the existing MCA for PPP projects. 8. Sanctioning authority: The proposals for allotment of captive use facilities at Major Ports will be examined on a case to case basis and will be submitted by the ports after approval by Board of Trustees to the Ministry. The Sanctioning Authority for the proposals shall be as per approval limits prescribed in the OM No.1(3)/PF.II/2001 dated 01/04/2010 of Department of Expenditure, Ministry of Finance and subsequent changes in the approval limits, if any, issued by Department of Expenditure. The Financial limits prescribed in the O.M. No. 1(3)/PFII/2001 dated 1.4.2010 of Department of Expenditure are as under:(Rs. in crores) Type of Proposal Financial Limits (Rs. Crores) All Public Private <25.0 Ministry in normal Secretary course of Appraisal Forum Approval Forum

Partnership Projects

Ministry/Department Finance Ministry-in-Charge

of Central Ministries Between 25.0 and Standing or Central CPSEs, < 100.0 statutory Committee

Between 100 and Expenditure

Ministry-in-Charge &

authorities or other < 300 entities under their

Finance Committee Ministry (Finance) chaired by Adm.

administrative control. >300

Secretary PPPAC Cabinet Committee of Infrastructure.