In a dramatic policy change that could spur private investment in the country’s port sector, the Indian government has approved a proposal to allow port-terminal operators the freedom to fix their service rates.
“The government has decided to free all future projects from port regulator Tariff Authority for Major Ports. We will decide shortly what do with the current port projects,” Shipping Minister G.K. Vasan said, speaking at a maritime summit in Mumbai.
He said new guidelines on tariff fixation for prospective projects would be announced in a couple of months.
TAMP, which was established in 1997 following port privatization, currently approves tariffs applied at all cargo terminals in major state-owned ports, while non-major ports, which are governed by state governments, are free to fix their rates.
“There is no proposal to terminate the regulatory authority, but its role could be limited to administering tariff fixation methods adopted by private port-terminal operators and addressing competition issues,” a senior ministry official said.
The move comes in the wake of increasing concerns that public-private-partnership projects at state-owned ports are not attracting greater interest from private investors because of pricing regulation.
Chennai Port’s first tender to build and operate a third box terminal of 4 million 20-foot-equivalent units annual capacity, on a 30-year concession, drew a single final bidder with a mere 1.5 percent revenue share offer, forcing the port authority to re-tender the $800 million contract.
Besides the proposed tariff deregulation, the Indian government has separately issued new guidelines to streamline the security clearance process for prequalified bidders and delegate more project approval authority to the Shipping Ministry as part of measures to expedite port development projects under the PPP model.