Privatisation of Ports

The Government of India has encouraged increased private sector participation by initiating several policy amendments. 

The government has identified several areas for private sector participation like leasing port assets, pilotage, dredging, setting up of captive power plant, captive facilities for port based industries, construction of ship repair and dry docking facilities, etc.

The government offers following incentives to private investors (in port development):

1 Tax holiday for 5 years, 30% rebate on earnings in next five years (in period of 12 years of project commission).

2 Infrastructural Development Finance Company (IDFC) has been established to provide concessional credit to private players.

3 Allow external commercial borrowings.

4 Tax concession (40%) on income from infrastructure financing.

5 Tax relief for investors investing in equity/debt of infrastructure companies.

6 Automatic approval for up to 74% Foreign Direct Investment (FDI) in infrastructure companies.

The maritime states have also taken several steps to encourage development of minor and intermediate ports, via increased private sector participation under BOOT/BOT/BOST/BOMT principles.

Other steps include development of captive facilities for refineries, power plants; etc.

The response from private enterprises has been very limited due to the following reasons:

1 Requirement for high investments

2 Project gestation period is long, due to delay in getting clearances, fulfilment of other complex formalities and requirements.

3 Majority of ports in India are under the control of government.

4 Low Rate of Return (ROR). 

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