4/3/2019 Ports & Terminals in India - Lexology

Ports & Terminals in India

India March 27 2019

Use the Lexology Getting The Deal Through tool to compare the answers in this article with those from other
jurisdictions.
General
Key ports
Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is the
primary purpose of the ports?
Ports in India are divided into two categories: major ports and minor ports. The major ports are:
West Coast
Kandla;
Mumbai;
Jawaharlal Nehru;
Marmugao;
New Mangalore; and
Cochin.
East Coast
Tuticorin;
Chennai;

Ennore;
Visakhapatnam;
Paradip;
Kolkata; and
Haldia.
There are more than 200 minor and intermediary ports in India. These ports comprise:
bulk terminals;
liquid cargo terminals;

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 1/11
4/3/2019 Ports & Terminals in India - Lexology

container terminals;
general cargo;
ferry and cruise; and
others.
The primary purpose of these ports is the connectivity and transportation of goods and passengers to and from
the hinterland through the sea. These ports are used for loading and unloading of goods, transhipment of goods
and passengers, ferry services, etc. These ports act as a major route for trading as more than 90 per cent of India’s
trade happens through the sea.
Additionally, the ports also provide piloting, hauling, mooring, re-mooring, hooking, measuring of vessels and
any other service in respect of vessels calling Indian ports.
Reform
Describe any port reform that has been undertaken over the past few decades and the principal port
model or models in your jurisdiction.
During the post-1980s liberalisation regime in India, the Indian government liberalised investments in the Indian
public sector. The central government since then has been encouraging private sector participation in ports by
awarding public-private partnership (PPP) concessions. They have been mainly on a build-operate-transfer
(BOT) basis with revenue sharing formulas, and include the construction of:
berths for cargo handling;
container terminals;
cargo handling equipment;
warehousing;

construction of dry docks and ship repair facilities; and

development and construction of new ports.
State development policy
Is there an overall state policy for the development of ports in your jurisdiction?
The Ministry of Shipping has introduced the Maritime Agenda 2010-2020 as the overall state policy for the
development of ports in the country. The Maritime Agenda 2010-2020 aims to attract investment for creation and
upgrading of infrastructure in the ports, and also for augmentation of Indian tonnage in the shipping sector to
keep up with the accelerating growth that India’s economy and shipping industry is experiencing.
Green ports
What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?
In line with various maritime conventions, India has very stringent laws, rules and regulations for controlling air
and water pollution, and for the use and maintenance of hazardous material in its territorial waters.
The central government, as a step towards promoting green ports, has through its Maritime Agenda 2010-2020
suggested measures for moving towards green ports, a few of which are mentioned below:

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 2/11
4/3/2019 Ports & Terminals in India - Lexology

the use of cleaner fuels (eg, low-sulphur diesels, biodiesel and Fischer-Tropsch diesel) in all port
equipment;
well-enforced idling time restrictions of vehicles in the port area;
measures to produce less traffic and lower air emissions, such as:

terminal gate improvements;

simplifying trade procedures; and
logistic chain design;
reducing emissions during bunkering operations by:
controlling the temperature of bunkers during storage; and

using scavenging agents;

improving harbour craft efficiency by means of:
speed reduction;
using specially designed paints to reduce drag; and
vessel assignment planning; and
the building of infrastructure, such as:

separate corridors for cargo;

widening of roads and flyovers; and
improving intersections for better traffic.
In 2016, the Ministry of Shipping initiated the Project Green Ports for India’s major ports. The aim of the Project
is to make the major ports cleaner and greener. The Project includes 12 initiatives, which will be implemented
under a strict time-bound fashion in order to achieve the targets set out. Some of these initiatives involve:
preparation and monitoring plan of the initiatives;
acquiring equipment needed for monitoring environmental pollution;

acquiring dust suppression system;

setting up of sewage and waste water treatment and rubbish disposal plants; and
setting up projects for energy generation from renewable energy sources.
Legislative framework and regulation
Development framework
Is there a legislative framework for port development or operations in your jurisdiction?
Yes, with regard to the major ports the Major Port Trusts Act 1963 is the applicable legislation, whereas the
minor ports would be governed by the Indian Ports Act 1908, and rules framed by their respective State Maritime
Boards.

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 3/11
4/3/2019 Ports & Terminals in India - Lexology

The Mundra Port is one of the first ports to be developed under a PPP, which was a positive step forward and
exhibited the government’s intent to encourage private participation for development of ports. Thereafter, several
other ports have been privatised under the PPP model.
Regulatory authorities
Is there a regulatory authority for each port or for all ports in your jurisdiction?
Yes. There are regulatory authorities for the major ports and the minor ports. The major ports fall within the
jurisdiction of the central government. However the day-to-day functioning is governed by the Board of Trustees
of the respective major port.
Minor ports are regulated by the respective state governments and State Maritime Boards.
What are the key competences and powers of the port regulatory authority in your jurisdiction?
The key competencies and powers of the port regulatory authorities for major ports are governed by the Major
Port Trusts Act 1963, which are:
loading and unloading of goods;
transhipment of goods and passengers;
ferry services; and

performance of port terminal services such as:

stevedoring;
handling of passengers;
pilotage; and
towage, etc.
Harbourmasters
How is a harbourmaster for a port in your jurisdiction appointed?
The harbourmaster is appointed Staff of the Board under Chapter III (sections 23 to 28) of the Major Port Trusts
Act 1963 read along with the relevant by-laws and rules and regulations framed under the Major Port Trust Act
1963.
Competition
Are ports in your jurisdiction subject to specific national competition rules?
No, they are not subject to specific national competition rules.
Tariffs
Are there regulations in relation to the tariffs that are imposed on ports and terminals users in your
jurisdictions and how are tariffs collected?
The regulations related to major ports’ tariffs are governed by the scale of rates framed under the Major Port
Trust Act 1963.
Every port will have its own rules/guidelines for collection of tariffs. In case of the Mumbai Port, the Vessel
Agents and the Clearing House Agents maintain an account with the Mumbai Port Trust, wherein they make
regular payments as per the scale of rates, into these accounts for the services availed by them.

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 4/11
4/3/2019 Ports & Terminals in India - Lexology

As regards the minor ports, they frame their own regulations for the tariffs that are to be imposed on ports and
terminals.
Are there restrictions relating to the currency applied to the tariffs or to any fees that are payable by a
port operator to the government or port authority? Are any specific currency conditions imposed on port
operators more generally?
All payments at Indian ports and to the government or port authorities are to be made in Indian rupees. Foreign
currency may be converted through Indian merchant banks.
Public service obligations
Does the state have any public service obligations in relation to port access or services? Can it satisfy these
obligations through a contract with a private party?
Yes, the state does have public service obligations, and the same has been set out under various notifications
issued by the union government from time to time, and the provisions of the Major Port Trusts Act 1963. A few
of the important obligations are:
loading and unloading of goods;
transhipment of goods and passengers; and
ferry services, etc.

In areas where the state does not have the expertise, these obligations can be satisfied through a PPP.
Joint ventures
Can a state entity enter into a joint venture with a port operator for the development or operation of a
port in your jurisdiction? Is the state’s stake in the venture subject to any percentage threshold?
Yes, the most recent example is the central government giving its approval for the development of a new port at
Wadhwan. The port will be developed through a joint venture between the Maharashtra Maritime Board and the
Jawaharlal Nehru Port Trust.
The state would always have a percentage stake that would allow it to control the project.
Foreign participation
Are there restrictions on foreign participation in port projects?
Currently, 100 per cent equity participation by foreigners is permitted in port projects.
Public procurement and PPP
Legislation
Is the legislation governing procurement and PPP general or specific?
The legislation governing the procurement and PPP is specific and the same is governed by the Major Port Trusts
Act 1963, and the Indian Ports Act 1908.
Proposal consideration
May the government or relevant port authority consider proposals for port privatisation/PPP other than
as part of a formal tender?

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 5/11
4/3/2019 Ports & Terminals in India - Lexology

Yes, under the Captive Port Policy Guidelines the Ministry of Shipping has decided to allow port-based
industries to set up cargo-loading facilities for their own captive uses at union government-controlled ports
without going through the auction route. The Ministry of Shipping further clarified that under the policy, a port-
based industry is one that requires 100 per cent captive berths/back-up area for the purposes of:
importing raw materials;
exporting finished products;
transporting raw materials; and

transporting finished products.

Joint venture and concession criteria
What criteria are considered when awarding award port concessions and port joint venture agreements?
There are two criteria that a port considers when awarding concessions and joint venture agreements. They are
technical criteria - including financial eligibility, and operations and maintenance experience - and bidding
criteria.
The party who has applied for the port concession and port joint venture agreement has to first meet the technical
criteria requirements. Once the party meets those, the party with the most competent rates is awarded the
concessions and joint venture agreements.
Model agreement
Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate
from its terms?
Yes, there is a model PPP agreement that is also known as the ‘model concession agreement’, which is issued by
the Ministry of Shipping. As such, the parties to the agreement cannot deviate from its terms. However, the
public body can deviate from the terms of the PPP agreement to a very minor extent, subject to it taking
permission from the concerned authority.
Approval
What government approvals are required for the implementation of a port PPP agreement in your
jurisdiction? Must any specific law be passed in your jurisdiction for this?
As per the nature of the PPP, there are various approvals required for the implementation of a port PPP
agreement. The mandatory approvals that are required are from:
the Ministry of Environment;
the Ministry of Labour; and
local municipal bodies under the existing local laws regarding water, sanitation, etc.
As such, no specific law is required to be passed for the implementation of a port PPP agreement.
Projects
On what basis are port projects in your jurisdiction typically implemented?
The port projects in India are typically implemented using BOT or design-build-finance-operate-transfer
(DBFOT).
Term length

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 6/11
4/3/2019 Ports & Terminals in India - Lexology

Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?
There is no minimum term for a PPP prescribed in India. However, section 34 of the Major Port Trusts Act 1963
restricts the length of a lease for any immoveable property a Board of Trustees may agree to 30 years. Therefore,
a port can enter into a PPP contract for a maximum term of 30 years.
On what basis can the term be extended?
The term can be extended on fresh negotiations with the port authorities. The further the term can be extended
only by the concessioning authority (ie, the port).
Fee structure
What fee structures are used in your jurisdiction? Are they subject to indexation?
The fee structures or tariff applicable to PPP agreements in India are the scale of rates, which has been framed by
TAMP. However, in certain cases the fee structure or tariff with relation to land may also be governed by the Port
Policy Guidelines. The fee structures are not always subject to indexation. In cases where the fee structures are
not subject to indexation they are subject to predetermined yearly percentage escalation.
Exclusivity
Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?
No, the government does not provide guarantees in relation to port PPPs or grant the port operator exclusivity.
However, based on negotiations, the government may grant exclusivity only up to a period of three years at the
said port.
Other incentives
Does the government or the port authority provide any other incentives to investors in ports?
Yes, financial assistance is available for certain identified sectors such as shipbuilding. The government has also
announced exemptions from Custom and Central Excise duties on inputs used in shipbuilding. Tax holidays for
10 consecutive assessment years for infrastructure development including ports and inland waterways are also
available. Foreign direct investment of 100 per cent through an automatic route is permitted for projects in the
maritime sector.
Port development and construction
Approval
What government approvals are required for a port operator to commence construction at the relevant
port? How long does it typically take to obtain approvals?
The port operator would mainly require the following mandatory approvals from the government to commence
construction at the relevant port:
environmental approval;
health approval;
labour approval; and

dock site safety approval.

Any other approval as required under local existing laws is on a case-by-case basis. The time period for
obtaining the approvals from the government typically takes six months to three years.

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 7/11
4/3/2019 Ports & Terminals in India - Lexology

Port construction
Does the government or relevant port authority typically undertake any part of the port construction?
No, the government or relevant port authority does not typically undertake any part of the port construction.
Does the port operator have to adhere to any specific construction standards, and may it engage any
contractor it wishes?
Yes, the port operator has to adhere to specific construction standards as set out by the International Standards
Organization (ISO) and the International Electrotechnical Commission (IEC), more commonly known as the
ISO/IEC standards, and any other standard as set out by the port authorities in the PPP agreement.
The port operator may engage a subcontractor to carry out the works only after it obtaining the necessary
permission of the port authorities and the port operator entering into an agreement with the subcontractor as per
the format as set out by the port authorities.
What remedies are available for delays and defects in the construction of the port?
The PPP agreement mostly provides for liquidated damages to the aggrieved party under the PPP agreement.
However, this does not waive of the rights of the parties from other remedies that may be available to it under the
existing laws.
Port operations
Approval
What government approvals are required in your jurisdiction for a port operator to commence operations
following construction? How long does it typically take to obtain approvals?
As mentioned above, the mandatory approvals from the Ministry of Environment, Ministry of Labour, Ministry
of Health, local municipal corporations, etc, are required for a port operator to commence operations following
construction. The time taken for the approvals vary on a case-by-case basis.
Typical services
What services does a port operator and what services does the port authority typically provide in your
jurisdiction? Do the port authorities typically charge the port operator for any services?
The port operator and the port authority primarily provide services such as connectivity and transportation of
goods and passengers to and from the hinterland. They also provide services such as:
loading and unloading of goods;
transhipment of goods and passengers;
ferry services;
cargo handling;
container terminals;
cargo handling equipment;
warehousing; and
construction of dry docks and ship repair facilities.

The port authority typically charges the port operator concession licence fees, rent or revenue sharing.

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 8/11
4/3/2019 Ports & Terminals in India - Lexology

Access to hinterland
Does the government or relevant port authority typically give any commitments in relation to access to the
hinterland? To what extent does it require the operator to finance development of access routes or
interconnections?
Yes, the government or relevant port authority typically gives the port operator access to the hinterland. Based on
negotiations and predetermined criteria the operator is required to finance the development of access routes or
interconnections.
Suspension
How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a
port authority require the operator to suspend them?
This is subject to the terms as laid down in the model concession agreement, which may include the port operator
to submit to the port authority periodical reports regarding cargo traffic, tariffs collected in respect of facilities,
and services availed by the parties.
One of the reasons the port authority may require the port operator to suspend the services would be declaration
of an emergency by the government.
Port access and control
In what circumstances may the port authorities in your jurisdiction access the port area or take over port
operations?
It depends on a case-by-case basis as per the terms mentioned in the model concession agreement. However,
typically the port authority may take over the port operations when the port operator fails to discharge their
duties and obligations as mentioned in the PPP agreement.
Failure to operate and maintain
What remedies are available to the port authority or government against a port operator that fails to
operate and maintain the port as agreed?
The remedies available to the port authority or government against a port operator who fails to operate and
maintain the port as agreed, are based on the terms as set out in the model concession agreement. However, the
same would not waive of their rights from other remedies that may be available to them under the existing laws
Transferrable assets
What assets must port operators transfer to the relevant port authority on termination of a concession?
Must port authorities pay any compensation for transferred assets?
The model concession agreement provides for the assets to be transferred after the termination of concession.
Typically, the model concession agreement consists of an annexure of all the assets that will be transferred to the
port authority on termination of a concession agreement. Typically, the compensation payable by the port
authority to the port operator, due to the port operators’ default would be the lowest of:
the book value;
90 per cent of debt due; or
the actual project cost.

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_medium… 9/11
4/3/2019 Ports & Terminals in India - Lexology

However, in certain cases no compensation shall be payable to the port operator if he fails to maintain an
insurance cover.
Further, if the concession agreement is terminated by virtue of the expiry of the concession period, the port
operator in that case would not be entitled to compensation and would have to hand over or transfer peaceful
possession of the project site, port’s assets, project facilities and services free of costs and encumbrances.
Miscellaneous
Special purpose vehicles
Is a port operator that is to construct or operate a port in your jurisdiction permitted (or required) to do
so via a special purpose vehicle (SPV)? Must it be incorporated in your jurisdiction?
Yes, the port operator would be required to do so via an SPV, and it would have to be incorporated in India.
Transferring ownership interests
Are ownership interests in the port operator freely transferable?
The ownership interests are transferable, subject to the written permission from the port authorities and after
fulfilling certain criteria’s as set out by the port authorities.
Granting security
Can the port operator grant security over its rights under the PPP agreement to its project financing
banks? Does a port authority in your jurisdiction typically agree to enter into direct agreements with the
project financing banks and, if so, what are the key terms?
The port operator can grant security over its rights under a PPP agreement to its project financing banks after
obtaining a no-objection certificate (NOC) from the port authorities and safeguarding the interests of the port.
The current laws regulating foreign exchange transactions permit creation of security in favour of foreign lenders
depending on the financial model.
The port authority in India does not enter into direct agreements with the project financing banks.
Agreement variation and termination
In what circumstances may agreements to construct or operate a port facility be varied or terminated?
The circumstances in which the agreements to construct or operate a port can vary would depend as per the terms
of the PPP agreement or the joint venture agreement. The PPP agreement or the joint venture agreement could be
terminated on account of failure to comply with various terms and conditions, such as:
failure to comply with conditions precedent as set out in the agreements;
occurrence of force majeure events; or
failure of the port operator or concessionaire to furnish a performance guarantee, etc.

Contractual breach
What remedies are available to a government or port authority for contractual breach by a port operator?
The remedies available are as enumerated under the model concession agreement and the existing laws.
Governing law
Must all port PPP agreements be governed by the laws of your jurisdiction?

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_mediu… 10/11
4/3/2019 Ports & Terminals in India - Lexology

Yes, all PPP agreements are to be governed as per Indian laws.

Disputes
How are disputes between the government or port authority and the port operator customarily settled?
When disputes arise between the parties, they are customarily settled through mutual dialogue and amicable
resolution, failing which arbitration would commence.
If the dispute arises during the construction phase of the project, a representation is made before the engineer in
charge. If the party is not satisfied by the decision of the engineer in charge, the party can proceed for arbitration
of the dispute.

Kochhar & Co - Gautam Bhatikar

https://www.lexology.com/library/detail.aspx?g=b4a9d80d-5925-4587-ba59-3436e5f6112e&utm_source=lexology+daily+newsfeed&utm_mediu… 11/11