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India set to allow re-negotiation of port contracts



Last week, India’s cabinet committee on economic affairs (CCEA) agreed to empower the ministry of road transport and highways to amend a so-called model concession agreement (MCA) and mode of delivery for highway projects.

This could act as a precedent for vesting the shipping ministry also with powers to amend the MCA—a document that sets out the terms and conditions and the rights and obligations of the parties—for port projects.

Several port projects put to tender are stalled or delayed due to procedural complexities and policy issues relating to environment and forest clearances. While it is important to expedite the implementation of new port projects, it has also become vital to break the logjam over operational projects that are in distress due to pricing ambiguities.

In this context, it is noteworthy to see the shipping ministry considering a plan to establish a mechanism to re-negotiate terms of the public-private-partnership (PPP) projects. In tandem, it has started work on amending a law to redefine the role of the port tariff regulator and to deregulate tariff setting at the 12 ports owned by the Indian government.

Also on the radar of the shipping ministry is a proposal to resolve legacy tariff issues faced by the existing terminals.

In 2013, the ministry partially deregulated rates at the 12 ports by framing a new set of guidelines that linked tariff to market forces. The new guidelines, though, are applicable to projects bid out since August 2013.

The old private cargo handlers at the 12 ports have been demanding a similar freedom on setting rates to bring all operators under a single tariff regime.

A development that could influence and hasten the ministry’s plans is an arbitration award involving a container terminal run by Singapore’s PSA International Pte Ltd at V.O. Chidambaranar port in Tuticorin, Tamil Nadu.

The arbitration award backed a demand made by PSA-Sical Terminals Ltd—the entity that runs the container terminal at Chidambaranar port from 1998 for 30 years—to be allowed to move to a revenue share format from the existing royalty model by adopting the revenue share percentage of 55.19% quoted by ABG Container Handling Pvt. Ltd in September 2012 for a new container terminal, the second, at Chidambaranar port.

PSA had argued before the arbitration tribunal that due to the earlier rate cuts ordered by the port tariff regulator, the commercial viability of the project has been affected and, therefore, it is entitled to have the contract terms amended. This view was upheld by the arbitration tribunal.

Chidambaranar port was against amending the contract by allowing PSA to switch to a revenue share format. Chidambaranar port has filed an appeal in the Madras high court challenging the award of the arbitration tribunal. A court decision could very well determine an industry solution to a broader policy-related tariff issue facing cargo terminals.

The tariff approved in 1999 for the PSA facility in Chidambaranar port included the contractually-mandated royalty paid by PSA to the port as an item of cost.

But, in July 2003, the shipping ministry issued a policy direction, ruling that royalty or revenue share paid by private terminal operators to the government-owned ports would not be allowed as a cost item while setting tariffs.

The ministry issued this policy after it came to the conclusion that private firms were seen quoting high royalty or high share of their annual revenue with the government-owned ports during auction to win port contracts and then recovered the same from the port users.

After private firms who started operations prior to July 2003 complained that the new rule made their terminals commercially unviable, the shipping ministry issued an amendment allowing the royalty/annual revenue share paid by them to the government-owned port as a cost item for fixing tariffs.

This, however, came with a rider. To avoid likely loss to the terminal operator, the ministry said the extent of pass-through of royalty/revenue share into tariffs would be limited to the quotation of the second-highest bidder in the auction. And this arrangement will cease when the affected terminals start making profits.

PSA-Sical and other affected terminals, however, want full royalty paid to the port as a pass-through in tariffs.

In the Chidambaranar terminal arbitration case, PSA argued that the ministry’s about-turn on royalty amounted to a change in law and hence it was entitled to have the contract amended.

Many other terminals are waiting for the outcome of the court case to seek a change in contract terms.

Empowering the shipping ministry to amend the MCA for port projects would infuse a much-needed flexibility for contracts to respond to market dynamics. It will also enable the ministry alter the MCA on a case-to-case basis to suit the needs of individual projects.
-The Shipping Tribune

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WAIVER CESSATION: Igbokwe urges NIMASA to evolve stronger collaboration with Ships owners



…Stresses the need for timely disbursement of N44.6billion CVFF***

Highly revered Nigerian Maritime Lawyer, and Senior Advocate of Nigeria (SAN), Mike Igbokwe has urged the Nigeria Maritime Administration and safety Agency (NIMASA) to partner with ship owners and relevant association in the industry to evolving a more vibrant merchant shipping and cabotage trade regime.

Igbokwe gave the counsel during his paper presentation at the just concluded two-day stakeholders’ meeting on Cabotage waiver restrictions, organized by NIMASA.

“NIMASA and shipowners should develop merchant shipping including cabotage trade. A good start is to partner with the relevant associations in this field, such as the Nigeria Indigenous Shipowners Association (NISA), Shipowners Association of Nigeria (SOAN), Oil Trade Group & Maritime Trade Group of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

“A cursory look at their vision, mission and objectives, show that they are willing to improve the maritime sector, not just for their members but for stakeholders in the maritime economy and the country”.

Adding that it is of utmost importance for NIMASA to have a through briefing and regular consultation with ships owners, in other to have insight on the challenges facing the ship owners.

“It is of utmost importance for NIMASA to have a thorough briefing and regular consultations with shipowners, to receive insight on the challenges they face, and how the Agency can assist in solving them and encouraging them to invest and participate in the maritime sector, for its development. 

“NIMASA should see them as partners in progress because, if they do not invest in buying ships and registering them in Nigeria, there would be no Nigerian-owned ships in its Register and NIMASA would be unable to discharge its main objective.

The Maritime lawyer also urged NIMASA  to disburse the Cabotage Vessel Financing Fund (CVFF)that currently stands at about N44.6 billion.

“Lest it be forgotten, what is on the lips of almost every shipowner, is the need to disburse the Cabotage Vessel Financing Fund (the CVFF’), which was established by the Coastal and Inland Shipping Act, 2003. It was established to promote the development of indigenous ship acquisition capacity, by providing financial assistance to Nigerian citizens and shipping companies wholly owned by Nigerian operating in the domestic coastal shipping, to purchase and maintain vessels and build shipping capacity. 

“Research shows that this fund has grown to about N44.6billion; and that due to its non-disbursement, financial institutions have repossessed some vessels, resulting in a 43% reduction of the number of operational indigenous shipping companies in Nigeria, in the past few years. 

“Without beating around the bush, to promote indigenous maritime development, prompt action must be taken by NIMASA to commence the disbursement of this Fund to qualified shipowners pursuant to the extant Cabotage Vessel Financing Fund (“CVFF”) Regulations.

Mike Igbokwe (SAN)

“Indeed, as part of its statutory functions, NIMASA is to enforce and administer the provisions of the Cabotage Act 2003 and develop and implement policies and programmes which will facilitate the growth of local capacity in ownership, manning and construction of ships and other maritime infrastructure. Disbursing the CVFF is one of the ways NIMASA can fulfill this mandate.

“To assist in this task, there must be collaboration between NIMASA, financial institutions, the Minister of Transportation, as contained in the CVFF Regulations that are yet to be implemented”, the legal guru highlighted further. 

He urged the agency to create the right environment for its stakeholders to build on and engender the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders.

“Lastly, which is the main reason why we are all here, cessation of ministerial waivers on some cabotage requirements, which I believe is worth applause in favour of NIMASA. 

“This is because it appears that the readiness to obtain/grant waivers had made some of the vessels and their owners engaged in cabotage trade, to become complacent and indifferent in quickly ensuring that they updated their capacities, so as not to require the waivers. 

“The cessation of waivers is a way of forcing the relevant stakeholders of the maritime sector, to find workable solutions within, for maritime development and fill the gaps in the local capacities in 100% Nigerian crewing, ship ownership, and ship building, that had necessitated the existence of the waivers since about 15 years ago, when the Cabotage Act came into being. 

“However, NIMASA must ensure that the right environment is provided for its stakeholders to build and possess the needed capacities to fill the gaps; and ensure that steps are being taken to solve the challenges being faced by stakeholders. Or better still, that they are solved within the next 5 years of its intention to stop granting waivers”, he further explained. 

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Breaking News: The Funeral Rites of Matriarch C. Ogbeifun is Live



The Burial Ceremony of Engr. Greg Ogbeifun’s mother is live. Watch on the website: and on Youtube: Maritimefirst Newspaper.

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Wind Farm Vessel Collision Leaves 15 Injured



…As Valles Steamship Orders 112,000 dwt Tanker from South Korea***

A wind farm supply vessel and a cargo ship collided in the Baltic Sea on Tuesday leaving 15 injured.

The Cyprus-flagged 80-meter general cargo ship Raba collided with Denmark-flagged 31-meter wind farm supply vessel World Bora near Rügen Island, about three nautical miles off the coast of Hamburg. 

Many of those injured were service engineers on the wind farm vessel, and 10 were seriously hurt. 

They were headed to Iberdrola’s 350MW Wikinger wind farm. Nine of the people on board the World Bora were employees of Siemens Gamesa, two were employees of Iberdrola and four were crew.

The cause of the incident is not yet known, and no pollution has been reported.

After the collision, the two ships were able to proceed to Rügen under their own power, and the injured were then taken to hospital. 

Lifeboat crews from the German Maritime Search and Rescue Service tended to them prior to their transport to hospital via ambulance and helicopter.

“Iberdrola wishes to thank the rescue services for their diligence and professionalism,” the company said in a statement.

In the meantime, the Hong Kong-based shipowner Valles Steamship has ordered a new 112,000 dwt crude oil tanker from South Korea’s Sumitomo Heavy Industries Marine & Engineering.

Sumitomo is to deliver the Aframax to Valles Steamship by the end of 2020, according to data provided by Asiasis.

The newbuild Aframax will join seven other Aframaxes in Valles Steamship’s fleet. Other ships operated by the company include Panamax bulkers and medium and long range product tankers.

The company’s most-recently delivered unit is the 114,426 dwt Aframax tanker Seagalaxy. The naming and delivery of the tanker took place in February 2019, at Namura Shipbuilding’s yard in Japan.

Maritime Executive with additional report from World Maritime News

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