THE GAZETTE OF INDIA : EXTRAORDINARY

IPARTIII—SFC.41

TARIFF AUTHORITY FOR MAJOR PORTS

NOTIFICATION

New Delhi, the 28th November, 2001

No. TAMP/91/2001-CHPT.—In exercise orihcpowers conferred by Section 49 ofthe Major Port Trusts Act, 1963

(38 of 1963), the Tariff Authority for Major Ports hereby approves thcproposaloftheChennai Port Trust for incorporation

of policy guidelines for Iand/watcrfront management of majorports issued by the (then) Ministry of Surface Transport in its

Scale of Rates as in the Order appended hereto.

SCHEDULE

Case No.TAMP/91/2001-CHPT

The Chennal Port Trust (CHPT)

Applicant

(Passed on this 5th day of November 2001)

The Chennai Port Trust (CHPT) has submitted a proposal for incorporation in

Its Scale of Rates of the policy guidelines for land / waterfront management of Major Ports

issued from time to time by the (then) Ministry of Surface Transport.

In its proposal, the CHPT has made the following polnts:-

(I).

The (then) Ministry of Surface Transport had first issued guidelines relating to

land and waterfront management of the Major Port Trust on 1 April 1995.

These guidelines were amended by the Ministry from time to time.

(li).

The guidelines issued on 1 April 1995 were amended by the Ministry as given

below:

(a).

MQST's letter No.PT-12011/55-87-PT dated 25.1.96

(b).

MOST's letter No.PT-12011/55-87-PT dated 11.3.98

(c).

MOST's letter No.PT-12011/55-87-PT dated 15.2.2000

(iil).

In order to avoid audit paras as well as loss of revenue to the port, the CHPT

has implemented these guidelines particularly in respect of escalation /

collection of premium, security deposit / guarantee, etc., as advised by the

Ministry of Shipping.

(iv).

The guidelines given by the Ministry are in the form of a set of instructions to

the ports and also provisions that should be necessarily incorporated in the

(lease / licence) agreement.

(v).

The conditionalities included in the guidelines issued by the Ministry have been

incorporated in all general long-term lease agreements arid which are being

widely accepted and adopted in the lease agreements entered into by the

CHPT with the various port users, (The port has now proposed to include

these conditionalities in the Scale of Rates),

(yi).

Conditionalities prescribed by the Ministry for long-term lease allotted on

premium-upfront basis were not adopted as no land has been allotted on

premium'Upfront basis.

(The port has now proposed to include these

conditionalities In the Scale of Rates).

(vii).

The following two clauses are available In the schedule in respect of licensing

of open space:

(a).

"In the event of new or increased tax, rate assessment or outgoing of

any description payable either by licensoror licensee being imposed in

future upon the safd premises by any other authority than the licensor

to pay the new imposition, or the amount by which the present

imposition, is increased as the case may be".

(b).

"The rules and regulations framed by the Licensor from time to time

shall be deemed to be part of the provisions of the licence".

Invoking these two clauses as and when new agreements were entered into,

all the Government guidelines Issued from time to time have been incorporated

and signed by both the parties to the various agreements. In case of existing

agreements as and when the guidelines issued, they are being Incorporated.

Since the proposal Is based on the guidelines issued by the Government and

they had already been adopted by the CHPT, further consultation with users haB not been

considered to be meaningful.

With reference to the proposal of the CHPT, and based on a collective

application of mind, the following position emerges:

(f).

This Authority has not yet formulated its own (common) guidelines relating to

lease / licence of Port Trust properties. Till formulation of such guidelines, it

has been decided to continue with the Instructions already given to the Ports

by the Government.

(li).

The conditionalities proposed by the CHPT for Inclusion in Its Scale of Rates

are based on the guidelines issued by the Government from time to time. In

fact, these guidelines are already in operation at the CHPT, as admitted by It.

Eventhough it could have continued with operation of such guidelines by

invoking the residual provision in its Scale of Rates, the Port now wants to

have an elegant arrangement of properly Incorporating the provisions in the

Scale of Rates.

(ill).

As has been mentioned above, the proposal is only for a formal incorporation

of the provisions already implemented based on Government guidelines. Such

an inclusion is also necessary to avoid any litigation on the legitimacy of the

Port to prescribe condltlonalltles governing lease / licences. This Authority is,

therefore, Inclined to approve formal incorporation of the proposed

conditionalities in the Scale of Rates. By way of abundant caution, it is clarified

that this decision shall not be seen to amount to approval or disapproval of the

guidelines issued by the Government.

The language of the guidelines issued by the Government is not very clear;

and, at places, very cumbersome and self-contradictory. If this Authority

modifies the formulations, it will call for a wholesale revision. In line with the

approach of neither approving nor disapproving the guidelines, this Authority

decides to insert the conditionalities In the Scale of Rates of the CHPT

retaining the same language / formulation as prescribed by the Government.

._ THE GAZETTE OF INDu EXTRAORDINARY

[PARTIH—Sb 41

(iv).

une OT tne conamonaiities propQSecj re|ates to sub-letting. The CHPT has

proposed that any sub-letting without the prior approval of the sanctioning

authority of the lease will make the lease liable for termination. Conversely,

this means that sub-letting is permissible if the competent authonty in the

CHPT approves it.

Earlier, while framing the Scale Of R a t e s of the CHPT in March 2001, this

Authority did not approve the provision empowering the Chairman (CHPT) to

permit sub-letting of space allotted o n monthly licence, etc. Since sub-letting is

not permissible, this provision was deleted from the Scale of Rates. There is

no necessity to re-introduce such a provision in the Scale of Rates by

•accepting the proposal of the CHPT in this regard.

The provision proposed by the CHPT has no doubt been drawn from the

guidelines issued by the Government. The same guidelines also stipulate the

following:

"The leased property sh$n nof be transferred by the lessee to any

third party either by way of sub-lease, rent or any other means".

The CHPT has not proposed inclU5ion o f t h i s provision, perhaps considering it

redundant if the provision about 8Ub-letting proposed by it is included in the

agreement. Since the provision about prior permission of the competent

authonty for sub-letting has not been re-mtroduced, it will be appropriate to

include the provision given above.

(v).

The Govemment guidelines (January 1998) contain the following provision,

which the CHPT has not propose f o r inclusion In Its Scale of Rates:

"Wherever the lands haVe t0 be a//Offed for a commercial activity

which is open to both pubijc

and

p r i v a f 0 sector< tne

PSU^.S

may

also be required to particjpate

In tne^competitive^{bidding process.}

But wherever the activity /s restricted to the Govemment sector

only like Import of CruaB on and certain petroleum products, the

Port Trusts should consider tne

propoS^al

either by calling

competitive bidding bet^on

tne^Government^{oil companies only}

or should lease the land on the advice of the Ministry of Petroleum

and Natural Gas/OCC»m

Since a provision about allotment o f )ancj t 0 psus for commercial activities is

proposed to be included in the scale of Rates, it Is relevant to have the

provision mentioned above which stipulates the condition for allotment of land

which is available for commercial activities by both the public and private

sectors.

(vi).

Another guideline issued by th e Government (February 2000) stipulates that

the Port will provide common U 9 e r facilities like pipelines, etc., in the land

leased. This provision has no.t been proposed for inclusion in the Scale of

Rates by the CHPT and no r6 a s o n f o r 8 u c h exclusion has also been given.

This Authority Includes this condition, which is relevant to lands allotted on

payment of premium on an upfront basis.

(vii).

This Authority has not yet formulated its own guidelines for lease of Port

properties. This Authority has t0 initiate an exercise relating to formulation of

such guidelines.

The relev^nt | s s u es Involved will be discussed at the

proposed second national levQ| consultation with Ports and Port users to be

arranged soon. Thereafter, firiar13at|on of the guidelines will be considered.

(viii).

This Authority has already noted in some other cases (e.g., priority berthing

charges) that the Government continues to issue guidelines / instructions to

Ports on tariff matters even after the creation of the Authority in April 1997. In

the instant case also, several guidelines have been issued after April 1997;

and, unfortunately, the Government did not consider it fit to (at least) consult

this Authority before issuing such guidelines. We have already brought to the

notice of the Government about statutory provisions relating to ordering tariff

arrangements. It is expected that this kind of lapses will not recur in future.

in the result, and for the reasons given above, and based on a collective

application of mind, this Authority amends the Scale of Rates of the CHPT to incorporate the

clauses proposed by the CHPT based on the guidelines Issued by the Government subject to

the specific amendments discussed in paragraph (4) above. Amendment to the Scale of Rates

of the CHPT is annexed.

S. SATHYAM, Chairman

[ADVT/m/IV/143/20()l/Exty.]

Annex

The following conditions shall be added in Book II; Chapter-i B of the Scale of Rates of

the CHPT after the heading "Schedule in respect of the Licensing of-covered space other than

Warehouse" :-

I- Conditions to be Included for Long Term Lease (General):

(a).

The lease shall not be automatically renewable.

(b).

The lease rent shall bear an escalation at a rate of 5% (compoundable) per

annum.

(c).

The Port Trust shall have an option to refixthe base of lease every five years.

(d).

The lessee shall pay a premium equivalent to one year's lease rentals to the

Port.

(e).

The lessee shall deposit an amount equivalent to one year's lease rentals as

refundable Security Deposit with the Port which shall be maintained till the end

of lease period or shall provide an irrevocable bank guarantee for an amount

equivalent to three year's lease rentals which shall remain valid for the lease

period.

(f).

The lessee shall create the facilities for which land/waterfront is leased within

the time as may be specified by the Board of Trustees. In case lessee fails, to

do so, the lease shall be liable for termination.

(g).

The lessee shall obtain all statutory clearances as may be required by law

including environmental clearance.

(h).

The leased property can be resumed at any time before the expiry of the lease

period If required by the Government In the national Interest by the Port for its

own use with six months notice on payment of compensations in accordance

with the formulations as may be approved by the Government If the lease is

cancelled for not complying with the conditions of the lease, no compensation

shall be payable by the Port.

(i).

No compensation shall be payable by the Port in the event of refusal to renew

the lease.

(j).

Whenever the land/waterfront is being given for the Port related

activity(ies)/industry(ies) in accordance with the land use plan, a minimum

guaranteed performance Indicating the minimum guaranteed traffic, berth hire

quantum shall be provided in the agreement. The time frame for achieving the

minimum guaranteed performance shall be three years from the date of

commissioning of the facility. In case lessee fails to achieve the minimum

guaranteed performance, he shall be liable to pay the wharfage/berth hire

charges, etc. for the minimum guaranteed traffic/berth hire.

;

THE GAZETTE OF INDIA EXTRAORDINARY

[PAKTIII—SEC. 41

In case, the lessee Improves upon the minimum guaranteed performance, he

shall bo liable to pay the charges as per actuals.

(k).

If there are some genuine reasons like change in the Government policy

regarding import/export of a particular commodity as a result of which the

required throughput could not be achieved in a year, suitable relaxation may

be made with the approval of the Government.

(I).

The lease shall be liable for termination if the lessee fails to pay the

wharfage/berth hire charges, etc., for the minimum guaranteed performance

for three consecutive years without any genuine reason.

(m).

Allotment of land within 500 Metres:

Allotment of land within 500 metres of waterfront shall be considered only for

the activities as may be declared permissible by the Ministry of Environment

and Forests, Government of India or any competent authority.

(n).

The lease premises may not be resumed In the normal course from the lessee

except for the violation of the terms and conditions of the lease agreement.

(o).

The land to Government Department/Organisations may be allotted on

scheduled rate only and the land to local bodies/development authorities for

public purposes like construction of roads, bus terminal-cum-depots, schools

(not run on commercial basis.) may be allotted by charging 25%- of the

scheduled rate only.

(p).

The land/waterfront may be leased to a Public Sector Undertaking for

commercial purpose at the prevailing market rates after examination on case-

to-case basis.

(q).

Wherever the lands have to be allotted for a commercial activity which is open

to both public and private sector, the PSU's may also be required to

participate In the competitive bidding process. But wherever the activity is

restricted to the Government sector only like the Import of Crude oil and

certain petroleum products, the Port Trust should consider the proposal either

by calling competitive bidding between the Government oil companies only or

should lease the land on the advice of the Ministry of Petroleum and Natural

Gas/OCC.

(r).

The leased property shall not be transferred by the lessee to any third party

either by way of sub-lease, rent or any other means.

//. Conditions to b» Included for Long Term Lease allotted on premium up-front;

(a).

The Port Trust will charge land premium up-front based on tender. In the case

of captive facilities, the premium shall not be below the commercial value of

the land either obtained through tender In the vicinity or notified by the Port.

(b).

The lease rental will be nominal value of Re.1 per square metre/year, with

30% escalation in the licence fee after every 5 years.

(c).

The lease agreement will not incorporate any clause for renewal of the lease.

(d).

The Port will obtain statutory clearance before giving effect to the lease

agreements.

(e).

The Port will not insist on minimum throughput guarantees.

(f).

The common user facilities such as pipelines, etc., will be provided by the Port

Trust.

Printed bv the Manager, Govt of India Pross, Kiny; Roiid, Mavupuri, New Delhi-110064

and Puhlmhod by the Contiollor of Publications, Delhi-110054