Bangalore: The shipping ministry has decided to allow port-based industries to set up cargo-loading facilities for their own captive uses at Union government-controlled ports without going through the auction route.
These customers or port users have thus far been dependent on terminals set up by third-party port specialists to ship their cargo.
The new policy will cast a shadow on the viability of private common-user terminals set up through the auction route because customers will now be able to build their own captive terminals, experts said.
Port-based industries that are permitted to set up captive facilities will have to invest funds to construct, maintain, manage and repair such facilities for a maximum period of 30 years, according to the captive user policy posted by the shipping ministry on its website on Thursday. Deepening and maintaining the water depth at the terminal will be the responsibility of the captive user.
The entity setting up a captive facility will have to handle minimum guaranteed cargo—70% of the optimum capacity of the project—every year, pay lease rent on land and also share revenue with the government-owned port on the basis of rates set by the Tariff Authority for Major Ports, the tariff regulator.
“The objective is to make operations of Union government-controlled ports more competitive by empowering them to attract large and dedicated cargo,” the policy said.
Port-based logistic parks, consortia of two or more port-based industries of specific cargo or any intermediatory organizations handling cargo on behalf of various end-users are, however, not eligible to set up captive facilities.
“The concept of captive user policy appears to be logical as it seeks to address logistic bottlenecks of end-user industries but it needs to be applied judiciously,” said an analyst at one of the big four audit and consulting firms based in Mumbai on condition of anonymity.
The interests of the recently awarded or recently operational privately funded cargo terminals “need to be protected since these terminals were planned with an eye on cargo traffic which now threatens to get diverted to the captive facilities,” this analyst said.
“In case of Union government-controlled ports where there are such upcoming or recently operational cargo terminals, the captive berths should be allowed only after the privately developed terminals have achieved the projected traffic,” he added.
India, Asia’s third biggest economy, plans to spend as much as Rs 3 trillion on ports in the 10 years ending 2020 to expand capacity for loading 3.2 billion tonnes of cargo from the existing 1.16 billion tonnes, according to the maritime agenda for the decade announced by the shipping ministry on 13 January.
The policy on captive user facilities would undermine the viability of the common-user private terminals and could be misused, according to the Indian Private Ports and Terminals Association (IPPTA), a private port industry lobby group.
“It is apprehended that offering a captive berth to a single user, which may be adjacent to an already running private terminal, will seriously jeopardize the feasibility of that terminal,” said S.S. Kulkarni, secretary general, IPPTA. “Any such captive berth, hence, should not be considered where private terminals are operating.”
The interests of small importers and exporters lie in common user facilities and not in captive facilities that will be exclusively for a preferred few, according to IPPTA.
“It is very likely that the ‘captive’ parties will not have the necessary knowhow to operate terminals. Chances are that such parties will get the terminal awarded and then subcontract it out and earn for themselves royalty or revenue share, thus misusing the policy,” Kulkarni added.
Captive terminals should only be awarded to users “who can consistently guarantee high cargo volume and efficiencies comparable to global best practices, else there is a danger of these terminals being bagged by entities who may not leverage the waterfront adequately, ” said the analyst cited above.