Port-Related Tariffs and Concession Law in India

Posted On - 20 September, 2025 • By - Amiy Kumar

A Legal & Commercial Playbook for Sponsors, Authorities, and Lenders

Executive Summary

India’s port sector has undergone a structural shift over the last decade, from administered tariffs and heavy ex-ante oversight by the Tariff Authority for Major Ports (TAMP) to progressively market-linked tariffs and board-led regulation under the Major Port Authorities Act, 2021 (MPA Act). For PPP terminals at major ports, Tariff Guidelines, 2021 (and subsequent circulars) now anchor bidding, revenue discovery, and lifecycle adjustments, replacing earlier “cost-plus caps” with frameworks intended to improve bankability and align incentives. Non-major (state) ports continue to be governed by State Maritime Boards and state tariff orders. The Model Concession Agreement (MCA) for major ports (latest consolidated form 2021, with continuing refinements) standardizes risk allocation around change in law, force majeure, compensation, and termination payments, while allowing more market-responsive pricing consistent with the MPA Act’s policy direction.

For developers and financiers, the practical implications are clear:
(i) tariff risk must be diligenced at the port-class level (major vs state port),
(ii) PPP tariff rules applicable at bid stage often follow the project through life (subject to migration/transition circulars),
(iii) bankability hinges on precise drafting of change-in-law, indexation, volume risk, and termination formulas, and
(iv) state maritime board practices can differ materially by state, affecting throughput, dues, and shore handling charges.

Sector Map: Institutions, Statutes, and Categories

1. Major vs. non-major ports

Major ports (now “Major Port Authorities”) are governed centrally by the MPA Act, 2021; boards of major ports have enlarged autonomy in planning, land use, and crucially tariff-setting (within policy). The MPA Act also provides for regulations and board-approved scales of rates, replacing the older Major Port Trusts Act, 1963 architecture where TAMP had primary tariff-determination powers.

Non-major ports are regulated by States via State Maritime Boards (e.g., Gujarat Maritime Board), which issue port tariff schedules and circulars. Tariff design, indexation, and exemptions are state-specific; this decentralization materially affects project cash flows, especially where competition with major ports exists.

2. The tariff regulator’s evolution (TAMP → board-led regimes)

TAMP historically set/approved tariffs for major ports and BOT terminals under a suite of guidelines (2005, 2008, 2013, 2019) and working guidelines. In 2019, the Government moved to a more liberal regime for BOT operators; after the MPA Act, 2021, tariff powers for port-owned services largely shifted to boards, while PPP tariffs are governed by Tariff Guidelines, 2021 and bid-stage constructs. TAMP’s role is now largely residual/transitionary for legacy concessions governed by older guidelines.

Tariff-Setting: From Cost-Plus to Market-Linked

1. Legacy frameworks (pre-2021)

Until 2019, PPP terminals (BOT) at major ports were often under cost-plus or reference-tariff regimes, with granular cost audits and ceiling rates. The Tariff Guidelines, 2019 and accompanying working guidelines sought to simplify and operationalize tariff determination for existing BOT operators, but still kept a degree of administrative control.

2. Tariff Guidelines, 2021 for PPP at major ports

In December 2021, the Ministry notified Tariff Guidelines, 2021 for future PPP projects at major ports—aligning tariff philosophy with the MPA Act’s market-orientation. These guidelines:

  • Apply to PPPs “approved by the Government but still under bidding” (and guide bid documentation);
  • Enable market-linked tariffs discovered via bidding mechanisms, with boards setting the overall policy frame;
  • Reduce regulatory friction in tariff revisions, while retaining checks via concession covenants and performance standards.
  • Subsequent migration/transition circulars have addressed how and when legacy concessions can move to newer regimes, a key diligence item when underwriting brownfield refinancings or M&A of terminal SPVs.

3. Board-led tariff policy after MPA Act

The MPA Act empowers boards to frame their own scale of rates and statement of conditions, subject to central policy. Ports have published Tariff Policies and internal regulations post-MPA to codify approach, principles, and delegation (e.g., thresholds for discounts, promotional rebates, or volume-based incentives). For PPP terminals, the concession governs pricing/discount structure vis-à-vis the port’s notified scale (if applicable), with bid-discovered terms taking primacy where the guidelines so provide.

4. Non-major ports (State Maritime Boards)

Tariffs at non-major ports are typically notified by state maritime boards. They set vessel-related charges (port dues, pilotage, berth hire) and cargo-related charges (wharfage, storage, shore handling where applicable). Case in point: Gujarat Maritime Board posts consolidated tariff schedules and revises charges via orders/circulars; developers must review the SOPC (Schedule of Port Charges) and any state-level exemptions (e.g., coastal shipping incentives).

PPP in Ports: The Concessioning Backbone

1. Model Concession Agreement (MCA)

The MCA (2008) established a common template for major-port PPPs; it has seen iterative revisions (notably 2018 and 2021) to improve bankability, enable post-COD exit for sponsors, calibrate land rentals, and align with evolving tariff policy. The MCA 2021 (with guiding notes) is the operative benchmark, and the Ministry has indicated ongoing refinements post-stakeholder consultations.

2. What changed on tariffs inside the concession?

Recent MCAs reflect the shift to market-linked rates: instead of ex-ante administered caps, bid variables (e.g., revenue share, royalty, or upfront premium) and competitive dynamics shape terminal pricing within the law’s boundaries. That means tariff flexibility (subject to service standards and competition at the port/region) is a concession-level right and risk, not a regulator-set ceiling as recognized in commentary around the 2021 MCA under the MPA framework.

3. Ancillary policy frameworks

The Ministry’s “Ports Wing” maintains a suite of port policies—berthing policies, shore handling guidelines, and working guidelines—that feed into transactional documents and day-to-day tariff application (e.g., commodity classifications, rake handling, berth priority). These instruments shape operational revenues as much as headline wharfage/berth hire.

Concession Law: The Clauses that Drive Bankability

Below are the “live” provisions where law meets cash flow. They are central to diligence, term sheets, and intercreditor negotiations.

1. Tariff regime and change mechanism

  • Whether tariff rights are market-linked (post-2021) or reference-tariff/cost-plus (older PPPs);
  • The change mechanism (board approvals, formulaic indexation, commodity reclassification, promotional discounts);
  • Guardrails on rebates and discrimination; alignment with port’s Scale of Rates (if applicable);
  • Treatment of coastal vs foreign-going differentials and cabotage incentives (where notified).

Why it matters: Directly determines revenue headroom and flexibility to respond to competing terminals or private non-major ports nearby. For legacy projects, assess migration to newer guidelines and the effect on lender security packages.

2. Revenue model: royalty, revenue share, or upfront payment

Indian port PPPs have used royalty/revenue share (payable to the Port Authority) or upfront premiums. Choice of model interacts with tariff freedom: under market-linked tariffs, royalty as % of gross revenue transmits market volatility to the Authority; an upfront can front-load fiscal receipts but increase developer’s financing load. MCA updates have periodically sought a balanced approach (including post-COD sponsor exit flexibility, aiding recycling of capital).

3. Indexation

  • Tariff indexation (to WPI/CPI or blended indices) is essential for preserving real revenues;
  • Land lease rentals often have separate indexation (e.g., % of market value or fixed escalation);
  • Capex/phasing may link to traffic triggers, which in turn influence tariff trajectories.
  • Check the port’s Tariff Policy and concession schedules for the index and reset frequency; model sensitivity to high-inflation scenarios.

4. Change in Law (CIL)

A carefully drafted CIL clause is the safest harbour against exogenous regulatory shocks (e.g., environmental norms increasing compliance costs, customs/port health regulations affecting dwell times, tax changes altering net cash). Key points:

  • Definition breadth: Central/state statutes, rules, guidelines, circulars by port boards, court/tribunal decisions;
  • Materiality thresholds for relief;
  • Relief mechanics: tariff adjustment vs. tenure extension vs. monetary compensation;
  • Excluded changes: predictable changes (e.g., periodic indexation) are often carved out.
  • Align CIL with Tariff Guidelines 2021 where applicable, so relief is implementable without a new regulatory round.

5. Force Majeure (FM) and relief

Modern MCAs provide a tiered FM construct: natural, political, and sometimes indirect events. Relief typically spans time extension, suspension of obligations, and limited cost pass-throughs. The drafting now emphasizes mitigation, notice timelines, and insurance. Ensure port closures, channel silting, and pandemic-type restrictions are properly allocated, with clear Minimum Guaranteed Cargo (MGC) carve-outs where applicable. (Stakeholder inputs in 2024–25 notably sought relief where MGC is impracticable due to macro shocks.)

6. Termination and compensation

Bankability hinges on termination economics:

  • Authority default → typically higher payout (debt + equity return multiple or certain % of adjusted book value);
  • Concessionaire default → lower payout (often debt-centric, with equity write-down);
  • Prolonged FM → middle ground payout.
  • Check the calculation base (adjusted depreciated value vs. NPV) and cure periods. Align lender step-in and substitution rights so debt recovery is protected. Recent MCA iterations and ministry press notes have aimed to improve investor confidence by clarifying these mechanics.

7. Performance standards and liquidated damages (LDs)

Concessions prescribe gross berth productivity, truck/rail turnaround, shore crane availability, etc., with LDs for deviations. Ensure the LD regime dovetails with tariff setting (e.g., promotional discounts cannot be clawed back as LDs) and that reliefs under FM/CIL suspend or adjust LD accrual.

8. Competition, exclusivity, and tariff parity

Given parallel capacity at non-major ports, locate any exclusivity or most-favoured treatment clauses—and test enforceability under competition law and public policy. As ports move to market-linked tariffs, exclusivity is rarer; instead, minimum performance and service obligations protect users.

“Tariff Law” in Practice: Five Scenarios

1. Legacy BOT terminal under 2013/2019 regime seeks refinancing:

  • Confirm applicable guidelines and whether migration to 2021 framework is permitted;
  • Model tariff headroom and revenue share under both regimes;
  • Reconcile lenders’ consent rights with any required board approvals.

2. New container terminal at a major port (post-2021 bid):

  • Tariff discovered via bid; review MCA 2021 for change mechanisms;
  • Draft robust CIL/FM; confirm MGC (if any) relief triggers;
  • Ensure indexation and land lease escalations are financeable.

3. Bulk terminal at a Gujarat non-major port:

  • Tariffs per GMB SOPC; check state incentives for coastal cargo;
  • Concession with State Maritime Board/port developer—align with state law;
  • Model competition from nearby major port with board-led tariffs.

4. Brownfield acquisition of a PPP terminal SPV:

  • DD the tariff base, pending revisions, and any disputes;
  • Confirm land/utility rentals and indexation;
  • Check termination compensation base and substitution clauses vis-à-vis lenders.

5. Through-cycle revenue stress (e.g., commodity downturn):

  • Explore contractual reliefs (CIL/FM if triggered), operational levers (rebates within authority), and renegotiation pathways recognized in ministry circulars;
  • Calibrate with port board’s Tariff Policy for temporary schemes (e.g., time-bound discounts).

6. Lenders’ Lens: What Credit Committees Ask:

  • Tariff certainty: Is the pricing regime formulaic (index-linked) or board-approval dependent?
  • Regulatory pathway: Are Tariff Guidelines, 2021 squarely applicable? Any migration risks?
  • Termination value: Does the compensation formula protect senior debt in Authority Default/Prolonged FM?
  • Volume/MGC: Are obligations realistic? Are FM/CIL carve-outs tight enough to prevent inequitable LDs?
  • State vs major port: If non-major, how predictable are state tariff revisions? Are there historical patterns of ad-hoc exemptions?

Public Law Overlay: Transparency, Non-Discrimination, and User Protection:

  • Port authorities are public bodies; tariff and concession decisions must withstand administrative law scrutiny. Key touchpoints:
  • Reasonableness and transparency in tariff orders and discount schemes;
  • Non-discriminatory access (especially where the port provides essential facilities);
  • Public consultation on major policy changes (many boards publish draft policies for comment).
  • Compliance with environmental, safety, and labour codes also influences throughput and costs, linking back to CIL clauses when regulatory burdens shift.

Non-Major Ports: Variance by State (Why It Matters):

State maritime ecosystems differ widely in industrial hinterland, rail/road connectivity, and tariff philosophy. Gujarat, for example, publishes consolidated tariffs/SOPC, and updates them periodically; other maritime states manage via port-specific notifications. For multi-state developers, tariff benchmarking against major-port board rates is critical to set viable wharfage/berth hire while staying competitive. Recent national analysis (NITI, 2025) underscores the growing capacity and role of non-major ports in coastal logistics, an important competitive constraint on major-port pricing.

Current Developments & Direction of Travel

  • Operationalizing 2021 Tariff Guidelines: The Ministry and ports have issued circulars/working notes for migration and applicability (2024–25). Concession drafters should always check the latest circulars before finalizing bid docs.
  • Ongoing MCA refinements: Statements by the Ministry in 2025 indicate further updates to MCAs after stakeholder inputs—watch for sharper language on MGC, performance standards, and risk-sharing.
  • Market-linked pricing consolidation: Industry commentary highlights that the 2021 MCA under the MPA Act enables operator-set rates within the policy frame, moving away from administered caps—consistent with international trends in landlord port models.

Comparative Snapshot: How India Aligns Globally

Landlord model convergence: India’s shift to board-led tariffs and market discovery for PPP terminals mirrors global practice in Europe and parts of East Asia, where authority sets policy while operators price to market under user-protection principles.

Contractual safety nets: India’s MCAs have matured around CIL, FM, and termination—themes common to global project finance. The distinctive feature remains India’s dual system (major vs state ports), demanding state-specific tariff diligence alongside national frameworks.

Practical Checklist (for Term Sheets & Bid Teams)

Tariff & Revenue:

  • Identify applicable regime (Tariff Guidelines 2019 legacy vs 2021 future PPP). Confirm any migration window and conditions.
  • Lock indexation (WPI/CPI) and revision intervals; get board approvals embedded in bid docs where possible.
  • Calibrate royalty/revenue share vs upfront payment to the pricing freedom granted.

Risk Allocation:

  • Draft Change in Law with measurable triggers and pre-agreed remedies (tariff reset, tenure extension, monetary relief).
  • Ensure Force Majeure covers channel closures, extreme weather, pandemics; align MGC/LD reliefs.
  • Hardwire termination formulas; synchronize with lender step-in rights and substitution.

State Ports:

Pull the latest SOPC/tariff orders; check any coastal incentives or exemptions; verify renewal/appeal mechanisms.

Policy Interfaces:

Review the port’s Tariff Policy and berthing/shore handling guidelines—they can be as influential as the tariff headline.

Conclusion: A Clearer, More Bankable Tariff & Concession Regime, with Diligence

India’s port sector has pivoted from prescriptive tariff control to a policy-steered, market-responsive model under the MPA Act, 2021. For major ports, Tariff Guidelines, 2021 are the anchor for new PPPs (with ongoing migration relief for legacy deals). State maritime boards continue to set the tone at non-major ports through tariff schedules and incentives. The MCA (2021 and refinements) has re-balanced risk to catalyze private capital while preserving public-interest safeguards.

For sponsors and lenders, the discipline is familiar: know your tariff base, lock your indexation, draft your CIL/FM/termination with surgical clarity, and never assume interchangeability between major-port PPP and state-port concessions. With that diligence, India’s evolving framework is not only navigable, it is increasingly bankable.

Key References:

  • Major Port Authorities Act, 2021 (full text). Empowers port boards, modernizes governance, and aligns tariff powers with market-linked approach.
  • Tariff Guidelines, 2019 and Working Guidelines, 2019 for BOT operators (legacy regime).
  • Tariff Guidelines, 2021 for future PPP concessionaires; ministry notices on migration/applicability (2024–25).
  • Ports Wing: Policy & Guidelines repository (berthing, shore handling, tariff policy 2018+/post-MPA updates).
  • MCA 2021 with Guiding Note (Ministry of Ports, Shipping & Waterways). Updates over 2008/2018 versions; ministry press releases on revisions (e.g., sponsor exit).
  • Industry/press explainer on 2021 MCA allowing market-linked rates under the MPA framework.
  • State maritime boards (example: Gujarat): current tariff schedules/SOPC.
  • NITI (2025):report on the growing role and capacity of non-major ports.

Contributed By: Athira T S