Companies bidding for private-public-partnership (PPP) projects in ports will now have a lot more to cheer with the Government showing more seriousness on their implementation with new guidelines.
A couple of weeks ago, the Government said that once security clearance is accorded by the Shipping Ministry to a company from relevant ministries and departments, it will be valid for three years. Earlier companies need to get the clearance for each and every project, even if it happens to be in the same port.
The new guideline is a significant step with regard to PPP projects as security clearance takes the maximum time in a project as multiple ministries and agencies are involved in it.
For instance, in the first bid for Chennai port’s Rs 3,600-crore mega container terminal project, it took almost a year for security clearance to be issued. In the subsequent bid for the same project, the clearance came after nearly five months.
To share company list
On a case-to-case basis, the Shipping Ministry will share a list of companies/bidders with various ministries, including Home, Defence and External Affairs, in addition to the Intelligence Bureau and Cabinet Secretariat. The security agencies will provide the inputs within 12 weeks and price bids will not be opened till security clearance is accorded.
The Ministry will also separately prepare and circulate a list of all Indian and Foreign companies who normally bid for ports projects to the security agencies concerned. On receipt of the details, the security agencies will provide their inputs on such a list to the shipping ministry with 12 weeks, the guideline says.
In case of a delay in receiving security inputs from the agencies concerned, an Inter-Ministerial Committee, chaired by Home Secretary will ascertain the cause of delay and take necessary action. The status will be reviewed by the Empowered Committee chaired by the Cabinet Secretary at regular intervals.
Bottlenecks
In PPP projects, there are a few major bottlenecks, the Chennai Port Trust official said.
Once the Request for Qualification is issued, there will be a number of clarifications sought by potential bidders. Clarifying these points can go on for a few days or even months, but cannot be avoided.
The second issue is that PPP projects need to go to the Pubic Private Partnership Advisory Committee or the Standing Finance Commission (the latter is within the Ministry) for clearance. However, for projects of less than Rs 500 crore, this will not be required now.
The maximum delay is in getting security clearance. This can go on for months. Once the security clearance is issued, the port should come out with a request for proposal within 45 days, the official said.
Enhanced power
The other major announcement was the enhanced delegation of financial powers announced in September to accelerate investment approval to PPP projects.
Besides, cost escalation due to delays in award of projects could also be avoided. Further, public interest will be served by the enhanced delegation of powers as the same would enable expeditious approval of port projects in the PPP mode.
The Ministry has been experiencing delays in the award of PPP projects due to the time taken in completing procedures for approval. If the port sector is delegated powers on the lines of the road sector, the time taken for according investment approval to PPP can be reduced. This would facilitate speedy development of port capacity in the years to come, the ministry said.
For projects costing over Rs 500 crore, an approval of the Cabinet Committee on Infrastructure (CCI) is required for port sector PPP projects. Earlier, the approval of CCI was required for projects costing over Rs 300 crore.
This means, projects costing less than Rs 500 crore can be cleared by the Shipping Ministry itself. In each port there are at two to three projects that come under this category. However, they have been pending for some time, but could take off soon with the new guidelines, said an industry source.
“This new guideline could reduce the time in awarding the project by a month or two,” said a senior official of the Chennai Port Trust, who did not want to be identified.
During the current financial year, a total of 25 port projects under PPP mode were targeted for completion at an estimated cost of Rs 13,898 crore. Of this, 18 projects were under Rs 500 crore.
Positive step
The delegation of powers is a positive move in reducing the timeline for award of PPP projects, said K. Ravichandra, Senior Vice-President, ICRA Ltd.
However, it is unlikely to materially alter the landscape of ports PPP projects as the delays occur at various stages such as tendering, upfront tariff fixation, security clearances, litigation by the losing bidders, environmental clearances, land acquisition, dredging and connectivity projects.
“As the challenges are multi-fold, it would be too early to conclude that we will see rigorous awards and that developers will be able to implement the projects in a speedy manner,” he said.