Government’s bid to create a level-playing field between major and non-major ports through the Major Port Authorities Bill puts the supremacy of the privately-run ports at risk, a brokerage report has said. “The recent Cabinet approval to the Major Port Authorities Bill is a big step towards providing a more level-playing field to state-run major ports,” says a report by Kotak Institutional Equities.
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“With the major ports already upping the ante in 2015-16, the prospects of sustained outperformance of non-major ports appears at risk,” the report adds. The dozen state-run major ports have been closing in on privately-run non-major ports, which had earned an upper hand over the past few years, due to easy regulations.
The report says the proposed amendments to port regulations will be applicable both to existing public private partnership contracts at the state-owned major ports and the upcoming projects as well. The Bill seeks to further reduce the “relevance” of the Tariff Authority of Major Ports (Tamp) by freeing up the pricing mechanism for the operators, it said.
Both existing and incremental PPP operators at major ports will be able to fix tariffs for port services, says the report and adds that there will be a port-specific board that will determine tariffs for other terminals at major ports.
The boards of major ports will be empowered to decide on funding requirements for capex and working capital requirements and can lease land for port-use for 40 years and for other use for 20 years on its own, the report notes, listing advantages of the new system.
Comparing this with the Tamp system, the brokerage noted that the earlier system disincentivised efficiency gains by capping tariffs based on a 16 per cent return on capital employed, locked in for three years with revision linked to wholesale price inflation.
“The deregulation of tariffs at major ports seen in conjunction with the empowerment of ports to expand capacities (port, storage, evacuation) will improve their business prospects,” the report said.
Among the non-major ports, operators having expansion plans like Adani Ports are better placed than the ones which have frozen on expansions like Gujarat Pipavav, it said, adding container freight station operators with large exposure to major ports like Gateway Distriparks will also benefit in the long term.
The government last week approved a Bill that seeks to bring in greater efficiency and professionalism in the governance of ports through full autonomy in decision-making. It will replace the Major Port Trusts Act of 1963.