Bangalore: The shipping ministry plans to allow port-based industries to set up cargo handling facilities for their own use at the 12 major state-owned ports, without going through the tendering route.
“We are in the process of issuing guidelines for setting up captive facilities that will be common to all,” said a ministry official, who did not want to be named ahead of a formal announcement of the policy, which is expected soon.
Cutting delays: A ship berthed at the Paradip Port in Orissa
The facilities would include berths, jetties, oil jetties, platforms and single buoy moorings for evacuating crude oil.
The move follows requests from several local business houses such as Essar Group, JSW group and oil firms to set up captive cargo handling facilities at the main ports for import of raw materials and export of finished products.
“The policy will help us set up the facility without delays normally associated with the tendering process,” said an executive at Essar Shipping, Ports and Logistics Ltd who did not want to be named. “Besides, since the berth will be dedicated for our exclusive use, our ships can call any time without waiting at the anchorage for getting berth clearance.”
Essar Steel Ltd has applied for a captive facility at the state-owned Paradip Port in Orissa to import coal and other raw materials, and export pellets and finished steel, said a port official, who did not want to be named. The company is setting up an integrated 6 million tonnes per annum steel plant just 3km from the port. The first phase of the project is expected to be completed by the first quarter of 2010, a company official said.
With several ports—such as Tuticorin in Tamil Nadu, Kochi in Kerala, Kandla in Gujarat and the Jawaharlal Nehru Port in Maharashtra—planning to set up port-based special economic zones, demand for captive facilities from industries coming up in the area is expected to rise.
The need for such a policy also arose after South Korean steel maker Pohang Iron and Steel Co. Ltd decided to set up a captive port at Jatadhari, 7km south of Paradip Port, to handle coal and iron ore required for its proposed $12 billion (Rs50,400 crore) plant near Paradip in the Jagatsinghpur district of Orissa. The firm had initially considered setting up a captive facility at Paradip Port, but opted for Jatadhari in the absence of a proper policy and because of the stiff terms set by the port authorities.
As per the proposed policy, port-based firms that are permitted to set up captive facilities would have to invest funds to develop and operate these for a maximum of 30 years.
They would also have to handle minimum guaranteed cargo in a year, and pay royalty on a per-tonne basis to the port. The minimum guaranteed cargo and royalty rates will be fixed before the pact is finalized. The royalty rate will rise every year based on an escalation factor decided by the port and the entity setting up the facility. The port will also collect marine-related charges such as port dues and pilotage.
In the normal course, the captive facilities will only cater to the entity setting them up, but any idle capacity, under special circumstances, can be used to handle third-party cargo after taking permission from the port authorities.
The operator of the captive facility would not have to pay berth hire charges if it has constructed the berth, but it would have to pay 50% of the rate if third-party cargo is handled.
The port will have the right to impose penalties and terminate the agreement if the operator defaults on any of the terms and conditions, including failure to comply with the minimum guaranteed cargo clause for two consecutive years, the same ministry official said.