Cabinet nod for mega Vadhavan Port stalled as PMO floats HAM model for development

“At the suggestion of the PMO, we are looking at the HAM model for developing Vadhavan Port,” a senior government official said, asking not to be named. The PMO’s suggestion has spooked those tracking and involved in the project as it came when the Ministry of Ports, Shipping and Waterways piloted the final investment proposal to the Union Cabinet after securing nod from the Public Investment Board led by T V Somanathan, Finance and Expenditure Secretary, Finance Ministry, as well as the key environmental and coastal regulation zone clearances from the Ministry of Environment, Forest and Climate Change, all in February.

The 298 million tonnes (mt) capacity a year port will be constructed by Vadhvan Port Project Ltd, a joint venture between state-owned Jawaharlal Nehru Port Authority (74 percent stake) and Maharashtra Maritime Board (26 percent equity), in two phases under the landlord model, per the government policy.

In the landlord port model widely followed globally, the publicly governed port authority acts as a regulatory body and as landlord constructing the basic infrastructure such as breakwater, reclamation and dredging, while cargo handling operations are outsourced to private firms on a public-privatepartnership (PPP) mode. The landlord port, in return, gets a share of the revenue from the private operators.

The “last minute suggestion” from the PMO has stalled Cabinet clearance for the project which was expected before the dates for the ensuing Lok Sabha polls were announced by the Election Commission. The Cabinet approval now will have to wait till a clarity emerges on the model to be adopted for constructing the new port and after a new government assumes office in June.
If the HAM model is approved, it will be the first for a port project, necessitating a large-scale restructuring of the Vadhavan project parameters.

Port industry sources are skeptical of adopting the HAM model for port contracts, citing challenges associated with cargo handling activities and collection of vessel related and cargo related charges from the users of the facility. In the landlord port model, the port authority will invest in common basic infrastructure while attracting private funds for cargo terminals.

“If the HAM model is adopted for Vadhavan Port, it is not clear who will bid out the individual cargo terminals and whether the private entity picked under the HAM model will be responsible for the entire port and the cargo operations,” the port consultant added.