ICRA: SAROD-Ports to attract more private funding into Indian Ports

ICRA Ratings has noted that the launch of SAROD-Ports (Society for Affordable Redressal of Disputes – Ports) by the Union Ministry of Shipping is an alternative step to resolve disputes in the Indian Ports Sector in lesser time and in a cost-effective manner, thus will attract more private investments. SAROD-Port is a dispute resolution mechanism in the maritime sector, comprising major ports, non-major ports and PPP players operating at major ports. SAROD- Ports will consist of members from Indian Port Association (IPA) and Indian Private Ports and Terminal Association (IPPTA). The empanelled arbitrators will comprise of the retired chairman or deputy chairman of major port trusts or retired or serving members of the judiciary, civil servants, public sector undertakings who have experience in the port sector and arbitration process. According to the ICRA Ratings, the port sector's ability to attract investments will also be contingent on the resolution of policy issues which led to disputes in the first place. While the government has announced several policy measures over the last few years, they are in various stages of implementation. In the last two decades, there has been an increasing shift towards PPP projects and landlord port models by the major ports, where terminals for specific cargo segments are developed and operated by private players on BOT basis. The disputes in many cases have dragged on for several years, as the parties may first go for arbitration and then fight the cases in higher courts. This results in high arbitration and litigation costs for both the ports as well as the private players and the newest initiative is factually a step to address such disputes through an alternative route to ensure faster resolution and in a cost-effective manner. K. Ravichandran, senior vice president and group -head, ICRA Ratings, said that the credit profile of several port sector entities has been impacted by large contingent liabilities arising from disputes and hence the launch of SAROD-Ports should be credit positive for the sector.