The Union Ministry of Shipping recently unveiled the ‘SAROD-Ports’ (Society for Affordable Redressal of Disputes – Ports) through a virtual ceremony held in New Delhi. This initiative aims at providing effective and efficient dispute settlement in the maritime sector.
Understanding SAROD-Ports
As per the Societies Registration Act, 1860, the SAROD-Ports have been formed, resembling the SAROD-Roads that was set up by the National Highways Authority of India (NHAI) for the Highway Sector. Key members of this organization include representatives from Indian Ports Association (IPA) and Indian Private Ports and Terminals Association (IPTTA).
Role of SAROD-Ports
The main function of SAROD-Ports is to render advisory services and assist in resolving disputes via arbitration in the maritime sector. These disputes could emerge from Major Port Trusts, Non-major Ports, private ports, jetties, terminals, and harbours. Moreover, disagreements between granting authority & Licensee/Concessionaire/Contractor, or between Licensee/Concessionaire and their contractors during contract execution also falls under its purview.
Benefits of SAROD-Ports
Set to become a beacon of hope, trust, and justice in the Indian Port sector, SAROD-Ports promises to save considerable legal expenses and time. Its other benefits include enforcing concession agreements as per their true intent. A concession agreement is an accord which permits a corporation to conduct a specific commerce within a government’s purview or on another company’s property abiding by specific conditions. SAROD-Ports’ efficient and robust dispute resolution mechanism will encourage ease of doing business in the maritime sector, instill confidence among private players, and thereby prompt all major Ports to transition towards the ‘Landlord Model’.
Understanding the Model Concession Agreement
At the heart of public-private partnership (PPP) projects in India is the Model Concession Agreement (MCA). This sets the regulatory framework for executing PPP projects in the country. MCAs are prevalent in national highways, state highways, urban rail transit systems, and ports. In January 2018, the MCA was amended to make Port Projects more appealing to investors. Notable features included the constitution of SAROD-Ports as a dispute resolution mechanism, allowing developers to divest their equity up to 100% post two years from the Commercial Operation Date (COD), reducing the land rent from 200% to 120% for additional land provided to the Concessionaire, and launching a complaint portal for port users.
The Landlord Port Model
In the Landlord Port Model, the publicly governed port authority serves as a regulatory body as well as a landlord with private companies operating the port, mainly involving cargo-handling activities. The port authority retains ownership of the port, leasing the infrastructure to private companies who maintain their own superstructure, install their equipment, and handle cargo. In return, the landlord port receives a part of the revenue from the private entity.
Landlord Port Model – Current Scenario and Significance
At present, most major port trusts in India are involved in terminal operations, resulting in a hybrid model of port governance. The dual role of port authorities in terminal operations can lead to conflicts of interest. It’s crucial for the landlord port authority to remain neutral for fostering fair competition among port service providers, especially terminal operators. In this model, the landlord port authority is tasked with performing all public sector services and operations, such as awarding bids for cargo terminals and dredging.
