+
Major ports experiment with O&M model for cargo terminal privatisation
PORTS & SHIPPING

Major ports experiment with O&M model for cargo terminal privatisation

State-owned major ports in India have begun exploring the operation and maintenance (O&M) model as an alternative to the public-private partnership (PPP) framework for privatizing cargo terminals. This shift is seen as a way to reduce risks and litigation compared to traditional PPP agreements.

Under the PPP model, cargo handling contracts are awarded to private firms for a 30-year period based on a detailed concession agreement. In contrast, O&M contracts are typically awarded for 5-10 years.

Last week, the Visakhapatnam Port Authority awarded an O&M contract to local stevedoring company Green Energy Resources Ports Pvt Ltd. This contract allows the company to operate the port’s East Quay 1A (EQ1A) berth by installing harbor mobile cranes (HMC) for five years, with an option to extend for an additional year.

Previously, the port authority selected SEW Infrastructure Ltd to construct a fully mechanized coal handling terminal under the PPP model, but the 30-year concession was terminated after SEW exited the project midway. The port authority then invested its own funds to complete the berth and prepare it for operations.

The port authority will levy tariffs from terminal users, sharing approximately Rs 15-16 per ton with Green Energy Resources, the O&M operator.

Over two years ago, Visakhapatnam Port Authority engaged HIQ Services to manage the East Quay 1 (EQ1) terminal using the O&M model. Adani Ports and Special Economic Zone Ltd (APSEZ) previously operated the EQ1 terminal for seven years until the 30-year concession was terminated in 2021 due to APSEZ's failure to meet minimum guaranteed throughput obligations for three consecutive years.

After terminating the concession, the port authority compensated APSEZ Rs 155 crores, covering 90% of the debt due. Currently, Visakhapatnam Port Authority charges around Rs 260 per ton for cargo handling, from which it pays Rs 61 (including GST) to HIQ Services, allowing the authority to earn approximately Rs 200 per ton. This has helped generate about Rs 80 crores annually, with the facility handling around two million tonnes (mt) of cargo in FY24.

The revenue from the O&M model has enabled the port authority to recover the termination payment made to APSEZ. “The EQ1 terminal is now the most revenue-earning terminal at Visakhapatnam Port,” stated a source.

The source emphasized that the O&M model has proven to be more profitable for major ports than the PPP model. Following the success of the O&M model at EQ1 and EQ1A, the port authority plans to privatize West Quay berths 1, 2, and 3 using the same approach, which was initially intended to follow the PPP model.

Visakhapatnam Port has faced challenges with contract terminations, with at least three PPP projects halted for various reasons, leading to lengthy arbitration and litigation. As a result, the port authority is shifting exclusively to the O&M model for privatizing cargo terminals.

Similarly, Syama Prasad Mookerjee Port Authority (formerly Kolkata Port Trust) has also adopted the O&M model for berth privatization. Recently, APSEZ secured rights to handle containers from five berths at Netaji Subhas Dock of Syama Prasad Mookerjee Port Authority on an O&M basis for five years, quoting Rs 2,100 per twenty-foot equivalent unit (TEU).

Deendayal Port Authority in Kandla, Gujarat, is also considering the O&M model for one of its planned new berths.

An official from a major port emphasized that the O&M model significantly reduces risk and administrative burden for ports. He believes this model represents the future of port asset privatization, arguing against the necessity of private funding for the mechanization and operation of existing brownfield assets under the PPP framework.

“The O&M model is part of privatization; it will be a government facility operated by a private firm for 5-10 years,” he noted, emphasizing that this approach allows the port authority to maintain control over the terminal.

However, private port operators suggest that the O&M model is best suited for small brownfield cargo handling facilities and may not be applicable for developing new terminals that require significant funding.

State-owned major ports in India have begun exploring the operation and maintenance (O&M) model as an alternative to the public-private partnership (PPP) framework for privatizing cargo terminals. This shift is seen as a way to reduce risks and litigation compared to traditional PPP agreements. Under the PPP model, cargo handling contracts are awarded to private firms for a 30-year period based on a detailed concession agreement. In contrast, O&M contracts are typically awarded for 5-10 years. Last week, the Visakhapatnam Port Authority awarded an O&M contract to local stevedoring company Green Energy Resources Ports Pvt Ltd. This contract allows the company to operate the port’s East Quay 1A (EQ1A) berth by installing harbor mobile cranes (HMC) for five years, with an option to extend for an additional year. Previously, the port authority selected SEW Infrastructure Ltd to construct a fully mechanized coal handling terminal under the PPP model, but the 30-year concession was terminated after SEW exited the project midway. The port authority then invested its own funds to complete the berth and prepare it for operations. The port authority will levy tariffs from terminal users, sharing approximately Rs 15-16 per ton with Green Energy Resources, the O&M operator. Over two years ago, Visakhapatnam Port Authority engaged HIQ Services to manage the East Quay 1 (EQ1) terminal using the O&M model. Adani Ports and Special Economic Zone Ltd (APSEZ) previously operated the EQ1 terminal for seven years until the 30-year concession was terminated in 2021 due to APSEZ's failure to meet minimum guaranteed throughput obligations for three consecutive years. After terminating the concession, the port authority compensated APSEZ Rs 155 crores, covering 90% of the debt due. Currently, Visakhapatnam Port Authority charges around Rs 260 per ton for cargo handling, from which it pays Rs 61 (including GST) to HIQ Services, allowing the authority to earn approximately Rs 200 per ton. This has helped generate about Rs 80 crores annually, with the facility handling around two million tonnes (mt) of cargo in FY24. The revenue from the O&M model has enabled the port authority to recover the termination payment made to APSEZ. “The EQ1 terminal is now the most revenue-earning terminal at Visakhapatnam Port,” stated a source. The source emphasized that the O&M model has proven to be more profitable for major ports than the PPP model. Following the success of the O&M model at EQ1 and EQ1A, the port authority plans to privatize West Quay berths 1, 2, and 3 using the same approach, which was initially intended to follow the PPP model. Visakhapatnam Port has faced challenges with contract terminations, with at least three PPP projects halted for various reasons, leading to lengthy arbitration and litigation. As a result, the port authority is shifting exclusively to the O&M model for privatizing cargo terminals. Similarly, Syama Prasad Mookerjee Port Authority (formerly Kolkata Port Trust) has also adopted the O&M model for berth privatization. Recently, APSEZ secured rights to handle containers from five berths at Netaji Subhas Dock of Syama Prasad Mookerjee Port Authority on an O&M basis for five years, quoting Rs 2,100 per twenty-foot equivalent unit (TEU). Deendayal Port Authority in Kandla, Gujarat, is also considering the O&M model for one of its planned new berths. An official from a major port emphasized that the O&M model significantly reduces risk and administrative burden for ports. He believes this model represents the future of port asset privatization, arguing against the necessity of private funding for the mechanization and operation of existing brownfield assets under the PPP framework. “The O&M model is part of privatization; it will be a government facility operated by a private firm for 5-10 years,” he noted, emphasizing that this approach allows the port authority to maintain control over the terminal. However, private port operators suggest that the O&M model is best suited for small brownfield cargo handling facilities and may not be applicable for developing new terminals that require significant funding.

Next Story
Real Estate

Shriram Properties Launches ‘Codename: The One’ in Bengaluru

Shriram Properties (SPL), a leading real estate developer focused on the mid-market and mid-premium segments, has announced the launch of its latest residential project under the banner “Codename: The One” in Bengaluru’s Electronic City corridor. This feature-rich gated community will offer 340 spacious 2- and 3-BHK residences, with a total saleable area of approximately 5 lakh square feet and an estimated revenue potential of over Rs 3.5 billion. The project is expected to be developed over a span of more than three years.  Strategically located near the Bommasandra Metro stat..

Next Story
Resources

India Warehousing Show 2025 Closes with Strong Global Presence

The 14th edition of the India Warehousing Show (IWS) 2025 concluded successfully at Yashobhoomi (IICC), Dwarka, drawing participation from over 300 exhibitors across 15 countries and welcoming 15,000+ visitors. Recognised as India’s leading platform for warehousing and logistics excellence, IWS 2025 offered a comprehensive display of cutting-edge automation, sustainable warehousing solutions, and next-gen supply chain technologies. The show was inaugurated by Shri Pankaj Kumar, Joint Secretary – Logistics, DPIIT, Ministry of Commerce and Industry, Government of India. In his opening a..

Next Story
Equipment

MHIET Launches 450kW Gas Cogeneration System with H₂ Co-Firing

Mitsubishi Heavy Industries Engine & Turbocharger (MHIET), part of the Mitsubishi Heavy Industries Group, has launched a new 450kW gas cogeneration system, the SGP M450, jointly developed with Toho Gas Co.,. The system supports hydrogen co-firing at up to 15 vol per cent, with no loss in performance or reliability.  The system is currently available in the Japanese market, and has been developed from the existing GS6R2 city gas engine platform. Key modifications were made to the fuel gas and engine control systems to enable hydrogen co-firing.   Verified through de..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?