As India navigates the complexities of cargo terminal management, a shift towards the operation and maintenance (O&M) model is being increasingly observed among state-owned major ports. This strategic pivot is primarily motivated by the need to minimise risks and avoid litigation, which have historically plagued public-private partnership (PPP) arrangements.
Under the O&M model, contracts are awarded for a shorter duration—typically 5 to 10 years—compared to the lengthy 30-year concessions associated with PPP agreements. Recently, a significant O&M contract was awarded by the Visakhapatnam Port Authority to Green Energy Resources Ports Pvt Ltd for managing the East Quay 1A (EQ1A) berth. This decision followed the termination of a prior PPP agreement with SEW Infrastructure Ltd, allowing the port authority to reclaim control and invest in essential infrastructure, such as harbour mobile cranes, thereby enhancing operational efficiency. Notably, the EQ1 terminal, which has been operating under the O&M model for over two years, has emerged as the most revenue-generating terminal at Visakhapatnam Port. An impressive handling capacity of two million tonnes of cargo in FY24 has enabled the port authority to recoup its investment in previous PPP contracts, reflecting the potential profitability of the O&M approach.
The success of the EQ1 terminal has prompted the consideration of applying the O&M model to additional terminals by the Visakhapatnam Port Authority, marking a departure from previous reliance on PPP agreements. The merits of the O&M model have also been recognised by the Syama Prasad Mookerjee Port Authority, which recently awarded Adani Ports and Special Economic Zone Ltd (APSEZ) the rights to manage container handling at five berths on a similar basis. It has been discovered by port authorities that the O&M model not only mitigates financial risk but also facilitates more straightforward operational control. An official from a major port indicated that this approach significantly reduces the complications associated with prolonged arbitration and litigation often encountered in PPP contracts.
However, it is suggested that the O&M model may be best suited for small brownfield cargo facilities, as large-scale expansions requiring substantial capital investment still necessitate the PPP model. Thus, while the O&M approach is perceived as promising for privatising existing terminal operations, the overarching need for investment in new infrastructure continues to be a pressing concern.
