Shipping ministry releases new model concession agreement

The new model concession agreement allows private players to exit port projects after six years and gives them power to issue bonds to refinance debt


The new model concession agreement aims to bring more private investment in the port sector. Photo: Mint
The new model concession agreement aims to bring more private investment in the port sector. Photo: Mint

New Delhi: Ministry of shipping Thursday released its proposed new model concession agreement (MCA) which allows private players to exit port projects after six years and gives them power to issue bonds to refinance debt.

The new MCA, with 11 prominent changes, will replace the existing MCA that took effect in January 2008. It also aims to bring more private investment in the port sector.

Under the new MCA, the concessionaire shall hold 51% equity until 3 years after commercial operation date (COD) and 26% thereafter for another 3 years. Hence, the private party would be free to exit after 6 years from COD.

In a press statement, the shipping ministry said the objective of this new MCA is to include more equitable allocation of project risks, provision to handle unforeseen circumstances and removing ambiguity in existing provisions.

A shipping ministry official requesting anonymity said, “In India, with 12 major ports, the move is likely to bring in more private investments even from overseas players. Besides, we have made amendments to facilitate availability of low cost long term funds to concessionaire so as to improve the financial viability of the projects and this is based on the model triartite agreement approved by Department of Economic Affairs.” Besides, the new model also allow concessionaires to issue bonds on completion of one year operations for refinancing debt as it will help in optimization of the finance cost of the project.

The new model agreement also proposes that concession may be reviewed by a review board under applicable laws at the end of 15 years from COD to arrive at required mitigation measures. The triggers and nature and quantum of mitigation measures will be as per guidelines issued by the government.

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