Being the 16th largest maritime country in the world with a coastline of about 7,517 kms, the ports and shipping industry in India plays a very vital role in the country's growth and remains the backbone of other trade and commerce industries in the country. Port and shipping infrastructure of India presently include 12 major ports which are under the direct supervision of the central government.1 These ports are governed under the Major Port Authorities Act, 2021 (hereinafter referred to as MPAA, 2021), notified with effect from 03.11.2021 replacing the Major Ports Act, 1963.2 Apart from MPAA, 2021, Ministry for Ports, Shipping & Waterways recently announced Tariff Guidelines, 20213 and Model Concession Agreement 2021 for the PPP projects in India. The present article attempts to analyse these new adaptions introduced by the government and their effect on shipping industries in the Country.
MAJOR PORT AUTHORITIES ACT, 2021 ("MPAA").
One of the major policy changes introduced by the government at the very statute level was the enactment of the MPAA, 2021. It repealed the earlier Major Ports Act, 1963. MPAA, 2021 seeks to revamp the institutional framework for the Major Ports in a manner to give them more autonomy and decision-making power in governing the port. It is therefore the MPAA, 2021 abolished the erstwhile Tariff Authority for Major Ports as well as the Board of Trustees of Major Port established under the earlier Act of 1963.
MPAA, 2021 establishes a Board for Major Port Authority (hereinafter referred to as 'Board') for each port which acts as a successor of the Board of Trustees of Major Port. banks and raise capital via issuing bonds, debentures, and stock certificates.4 Also, the matters in relation to the issuance of guidelines for the stressed project would also be set up by the Board which was earlier the task of TAMP.
MPAA, 2021 also does away with the Role of the TAMP and provides for the constitution of the Adjudicatory Body to perform the "functions envisaged to be carried out by the erstwhile Tariff Authority for Major Ports."5 The Adjudicatory Body is also in-charge of resolving disputes pertaining to the board, the PPP Projects in context with the Concession Agreements, tenders, Lease etc. The power of the adjudicatory body also extends to entertaining complaints regarding the services offered by the Maior Ports.6
TARIFF GUIDELINES, 2021 AND MODEL CONCESSION AGREEMENT 2021
One of the major changes introduced by the government through MPAA, 2021 is abolishing the erstwhile Tariff Authority for Major Ports ('TAMP) which was established by the earlier Act of 1963 inter alia for fixing the tariffs levied by the major port trusts. However, under the MMPA, 2021, all the powers and functions of the TAMP as provided under the erstwhile Major Port Authorities Act 1963 stands transferred to the Adjudicatory Board except that of tariff setting.7 Therefore, in order to fill this void, the government issued the Tariff Guidelines, 2021 for the future PPP Concessionaires (hereinafter referred to as 'the Guidelines'). The Guidelines remarkably allow the concessionaires themselves to set tariffs as per market conditions.8
To prevent the PPP Concessionaires from exploiting the customers, the 2021 Guidelines lays down certain measures that need to be complied by the PPP Concessionaire i.e., the scales of Rate framed by the PPP Concessionaire shall –
- Not be with retrospective effect,
- Not be in derogation with the rules made by or directives of the Central Government,
- Not be inconsistent with the provisions of the Competition Act, 2002 and
Currently, the handling of cargoes by the PPP concessionaires at Major Ports amounts to 50% of the total traffic. The major issue faced by these concessionaires in the earlier regime was the non-uniformity in storage charges as well as other tariffs which led to the absence of a level playing field for all the terminal operators. The 2021 Guidelines will enable the level playing field at Major Ports allowing competitive pricing hence benefiting both the users as well as a terminal operator.
Furthermore, to execute the aforesaid new policies, the Ministry of Port, Shipping and Waterways also introduced the Model Concession Agreement, 2021 (hereinafter referred to as 'the Model Agreement'). Article 8 of the Agreement envisages that the "Concessionaire shall fix the Tariff based on market conditions and on such other conditions, if any, as may be notified and made applicable by a competent authority, under the provisions of the MPA Act."
The Model Agreement also introduced amended multi-tier dispute resolution clauses wherein the parties first have to settle the dispute amicably failing which, the matter has to be referred to Conciliation & Settlement Committee established by the Concessioning Authority. In case the dispute still remains unresolved by the aforesaid Committee, then only the Concessionaire can invoke the Arbitration that too as per the rules of Society for Affordable Redressal of Disputes - Ports commonly termed as SAROD - Ports.
The act is a welcome step to operationalizing the government locations that have been kept idle or have been inactive due to years of underinvestment or bureaucratic dominance. Further, in terms of decentralizing the decision-making power and operational flexibility, the act gives more freedom to the Major Ports to compete with the Private players to operate at their optimum capacity and generate profit. Moreover, as per the government report there are 58 projects involving a cost of Rs. 49950 crores have been identified as part of the National Infrastructure Pipeline (NIP) for infrastructure augmentation and development at major ports upto FY 2025.9 Considering such huge participation of the private player in the development of Major Ports, the new regime of multi-tier dispute resolution clause introduced by the Ministry of Shipping through the Model Agreement is a strategic step taken to ensure resolution of disputes in a timely and cost-efficient manner.
2. Ministry of Ports. Shipping and Waterways, Notification dated 29.10.2021, available at, http://www.tariffauthority.gov.in/writereaddata/UploadFile/Letter%20(1) 1948.pdf.
3. Model Concession Agreement, 2021, available at, https://shipmin.gov.in/sites/default/files/Model%20Concession%20Agreement%2C%202021%20 with%20Guiding%20Note_compressed.pdf.
4. Section 33(1) and Section 33(2), Major Port Authorities Act, 2021.
5. Ibid at Section 58(1)(a).
6. Ibid at Section 58.
7. Ibid at Section 58(1).
8. Para 2, Tariff Guidelines, 2021 for the future PPP Concessionaires.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.