Revenue Implications of the New Indian Ports Act

Impact of the Indian Ports Act, 2025 on Civil Infrastructure and Port Revenue

The recent passage of the Indian Ports Act, 2025 carries significant implications for the civil infrastructure landscape, especially for stakeholders involved in port operations and revenue management.

By omitting "port dues" from its scope, the new legislation disrupts established revenue streams for state governments. This change is particularly critical for non-major ports that depend heavily on these dues, which are traditionally calculated through Gross Registered Tonnage (GRT).

As a result, this shift is set to redefine financial forecasts and operational budgets across coastal states.

Historical Framework and Legislative Changes

The 1908 Act established a clear framework, enabling states to collect revenue through statutory port dues. This framework provided:

• A reliable funding source for coastal state governments
• Clarity in revenue collection mechanisms

In contrast, the new act replaces "port dues" with only "fees and other charges", which include:

• Service tariffs for cargo handling
• Charges for berth hire

This signals a profound alteration in port financing dynamics, as statutory revenues are sidelined.

With statutory revenues diminishing, the interface between state maritime boards and private entities faces increased risks due to reduced regulatory oversight.

Fiscal Impact on State Governments

The legislative shift puts greater pressure on state governments to adjust their financial strategies. States will now rely primarily on the State Goods and Services Tax (SGST) derived from other services offered at ports.

Key fiscal concerns include:

• A potential drop in revenue
• Adverse effects on capital expenditure for infrastructure development
• Possible delays in project delivery for port upgrades and maintenance

Implications for EPC Contracts and Stakeholders

Significant attention is necessary regarding the planning and execution of Engineering, Procurement, and Construction (EPC) contracts, which may not have accounted for such fiscal limitations.

Stakeholders should prepare for:

1. Disputes and claims arising from revenue shortfalls
2. Impact on operational cash flows
3. Adjustments in contract terms necessitated by budgetary constraints

Regulatory and Compliance Challenges

The reduction in revenue avenues may lead states to intensify reliance on remaining regulatory channels, causing:

• Prolonged approval processes for port construction projects
• Increased compliance risks stemming from rushed adjustments to project specifications or service agreements

Vigilance is critical to prevent potential compromises in safety and quality during project execution.

Summary of Key Effects

• Omission of port dues disrupts traditional revenue streams
• Transition from statutory revenue to service-based fees
• Increased fiscal pressure on state governments and possible revenue shortfalls
• Potential for disputes in EPC contracts over new financial realities
• Heightened regulatory and compliance risks impacting project timelines and quality

This reshaping of port revenue frameworks necessitates careful stakeholder planning to navigate the evolving financial and operational landscape.