Disputed liability worth a few thousand crores and high revenue share payable by terminal operators could spoil a Shipping Ministry plan to permit cargo terminals governed by a ‘faulty’ rate regime from 2005, to shift to a market-friendly pricing structure finalised in 2013 for new projects.

The public-private-partnership (PPP) operator will have to settle all disputes ahead of shifting to the 2013 rate regime, which will be done through a re-bid, according to guidelines set for the migration. Litigation pending before any court of law, including arbitration cases initiated by him against the port trust, the Tariff Authority for Major Ports (TAMP) and the Union of India, should be withdrawn “unconditionally” before bids are called.

The disputed amount arising out of operation of stay orders passed by courts of law should be kept in an escrow account, while the PPP operator withdraws the litigation. The application seeking withdrawal of litigation from the courts should also seek the manner of utilisation of the disputed amount, according to the guidelines.

The project proposed for migration should be free of all encumbrances and liabilities. All outstanding dues to the port trusts and all liabilities arising out of litigation or otherwise should be settled mutually by the PPP operator and the port trusts.

Terminals operating under the 2005 rate regime will never agree to this pre-condition set by the ministry simply because the disputed amount they are sitting on is “huge” – in one case, it is higher than the project cost itself.

Besides, surrendering the disputed money and dropping all litigation would make a mockery of the court cases they are fighting the port trusts concerned and the rate regulator on what they believe was “a mistake on the part of TAMP to punish them for being efficient by handling more than the projected volumes”.

So, telling the older PPP operators to surrender all the money and start afresh, is simply asking for the impossible. But, this could also help the government build a ‘case’, where they can go back and tell the court that while the aggrieved older terminals working under the 2005 rate regime were allowed an opportunity to shift to the 2013 regime, nobody opted for it.

Then, the ministry can tell the court that its earlier submission to the court on allowing migration was no longer valid because the terminal operators were not willing to migrate under the conditions set by it.

So, either the conditions for migration will have to be changed or they can tell the court ‘sorry, I can’t do anything about it and this is what it is’.

The second aspect is the reserve royalty to be set for re-bidding purpose. The Shipping Ministry says that the existing royalty or revenue share converted into royalty of the relevant project would be set as the reserve royalty.

This is based on the premise that migration to the de-regulated rate regime of 2013 would fetch higher revenue to port operators, which has to be shared with the port trusts. And, the best way to discover the royalty price afresh was to re-tender the project keeping the existing rate as the base price, so that the port trusts are not hauled up later by the government auditor or investigating agencies for causing revenue loss, besides the political ramifications it may entail.

But, it should also be borne in mind that the older port concessions were bid out at very high numbers with terminal operators quoting aggressive royalty/ revenue shares that were upwards of 40 per cent. Nobody can match those high rates today, let alone exceed them simply because the market cannot take it. Thus, re-bidding with a reserve royalty is bound to be a big-time failure; nobody will take it.

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