Model Concession Agreement for PPP in Container Train Operation

Region
South Asia
Country
India
Publication Year
Jan,2006

 

Model Concession Agreement (MCA) for PPP in Container Train Operation - Concession agreement between Indian Railway Authority and container train operator (“Concessionaire”). The MCA was developed to encourage private sector investment in rolling stock. The Indian Railway Authority provides locomotives and undertakes to move the Concessionaire’s container trains on predetermined railway route(s) against a haulage charge. Long-term concession. Published by the Indian Ministry of Railways (Railway Board). For the key features of the MCA see also the overview of the framework provided by the Indian Secretariat for PPP and Infrastructure. 

 

Sector:

Transport – Railways

Name of Agreement:

Model Concession Agreement (MCA)

Type of Agreement:

Concession agreement providing for the operation of container trains by private entities.

Year of Agreement/ Draft:

2006

Principal Author(s)

N/A

Annotated by:

Susanne Foerster, Consultant, LEGPS, World Bank

Purpose and Context:

This model concession agreement was developed to open up the operation of container trains to private sector. It aims to increase railway’s share of container traffic and introduce competition in rail freight services in India.

Circumstances where this contract may be appropriate:

Suitable where state wants to retain its monopoly as infrastructure manager and operator of trains but at the same time promote private investment in the rail freight market.

Drafted for common law/ civil law jurisdiction:

Drafted for common law jurisdiction; could be adapted for use in civil law jurisdictions.

  • Main Features:

1. Concept of Concession (3.1 and 10.4.1): Concessionaire is granted non-exclusive right torequire Railway Authority to haul its Wagons (with or without containers) on one of four route categories specified in MCA subject to haulage charge. Railway authority retains full responsibility for operation and maintenance of railway network as well as planning, coordination and operation of trains on the network. Concessionaire acquires Wagons and undertakes business of transporting freight containers via rail. Concessionaire has right to charge freight customers without state interference.

2.Duration of MCA (3.6): Concession Period is 20 years and can be extended for another 10 years on the same terms and conditions.

3. Wagons (5)

  • Concessionaire to acquire a minimum number of wagons including Brake Vans - but not necessarily containers - for commencement of operations and for transportation of containers (5.1).
  • Railway Authority to maintain Concessionaire’s wagons in accordance with notified maintenance schedule; Concessionaire to provide and maintain wagon examination facilities for maintenance of Wagons inside Rail Terminals at its own expense (5.8.1) and to hand over Wagons to Railway Authority for maintenance (8.1 (xv)). Wagon maintenance charges are included in haulage charges (5 % of the current haulage charges) (5.8.2). Concessionaire may also undertake maintenance through other entity upon approval from Railway Authority (5.9).
  • Concessionaire may offer to Railway Authority or other Concessionaires use of any Idle Wagons. If Railway Authority accepts offer, use of Idle Wagons on mutually agreed terms and conditions. Railway Authority may levy Stabling Charge (7.6.1) for Idle Wagons on the Indian Railway network (5.4).

4. Rail Terminals (4): Concessionaire to ensure that all Rail Terminals where its trains/locomotives either originate or terminate conform to standards set out in MCA. Concessionaire responsible for all necessary approvals needed for trains and locomotives to enter into and utilize Rail Terminals. Concessionaire allowed to design, construct, operate and maintain New Rail Terminals at its own expense. Railway authority and Concessionaire to sign separate agreement for each New Rail Terminal.

5. Change in Rail Technology and Network (14): Railway authority may introduce modifications regarding technology, specifications or networks in order to modernize rail system. Concessionaire may be obliged to make the necessary modifications with regard to wagons, equipment and routing at its own costs.If double-stack container operation is mandated, Concessionaire is obliged to upgrade and/or acquire new Wagons and upgrade and/or suitably equip Rail Terminals at its own expense.  

6. Locomotives (6.1.1.): Railway authority provides locomotives to haul Concessionaire’s trains on non-discriminatory and non-exclusive basis.

7. Scheduling Process (6, 7): Railway authority to implement transparent and non-discriminatory system for dispatch of Concessionaire’s trains on a first come first served basis. Concessionaire informs Railway Authority on weekly basis of number of trains it requires to be moved (no limitation on number or frequency of trains requested if there are no operational and capacity restrictions), proposed routes and likely departure dates (7.3.1). At least four hours prior to planned departure of its train, Concessionaire submits so-called Indent for Locomotive to Railway Authority (6.2.1). Once the timing is acknowledged by Railway Administration delayed supply of locomotive beyond 12 hours leads to rebate of 2 % on haulage charges if delay was not due to contingencies (e.g. interruption of traffic due to accident).

8. Charges and Fees:

  • Entry Fee (Recital C and D): For becoming eligible to operate container trains, Concessionaire must pay a Registration Fee depending on chosen route category.
  • Haulage Charges (10, Annexure IV): Concessionaire to pay haulage charges for using Railway Authority’s tracks, locomotives and other services for movement and (if applicable) maintenance of container trains. Haulage charges to be non-discriminatory for all Concessionaires. Surcharges (e.g. busy season or busy route surcharge) can be levied. Haulage charges cannot be revised more than twice a year.
  • Locomotive Detention Charges and Movement Charges (6.3.2): Concessionaire is to pay detention charges and/or movement charges if train is not attached (detached and released) after arrival of the locomotive at departure (or arrival) terminal for a time period exceeding the free waiting time of two hours.

9. Insurance (8.1 (ix)): Insurance to be taken out by Concessionaire for the Rail Terminals and the Concessionaire’s Wagons throughout term of agreement.

10. Assignment/Transfer and Change of Control (12): Transfer and/or Assignment of the Concession to any third party or Change of Control of the Concessionaire is possible after one year from the commencement of commercial operations of the Concessionaire’s trains subject to approval by railway administration and under conditions specified in MCA.

11. Liability (13): MCA contains detailed provisions on liability of Railway Authority covering loss damage or destruction of Containers and Wagons during transit. Liability for loss, damage and destruction to any Container or any goods to be governed by Railway Act. Strict liability for damaged and lost Wagons while in custody of Railway Authority (repair or compensation up to the Depreciated Replacement Value) unless otherwise prescribed in Railways Act.

12. Force Majeure (15): Provision distinguishes between three different types of Force Majeure events, i.e. non-political, indirect political (e.g. act of war, embargo, riot, industry-wide or state-wide strikes, civil commotions), and political (e.g. Change in Law, expropriation or compulsory acquisition of any Project Assets or rights of the Concessionaire). Exemption from obligations that cannot be performed due to Force Majeure (15.9.) and extension of Agreement Period (15.6). For termination see below.

13. Termination and Consequences of Termination (15, 17):

  • Termination Events:

    1. Railway Authority may terminate agreement if Concessionaire
    • Fails to operate container trains in accordance with the requirements of MCA within three years from the award of the ‘in principle’ approval to run container trains on the Rail Network (4.1.2, Recital E).
    • Does not pay outstanding dues within 30 days from arrival of train at destination (10.3.4).
    • Is in default as specified in MCA and fails to cure default within 60 days (17.1.1).

2.  Concessionaire may terminate agreement if Railway Authority is in default and fails to cure default within 90 days (17.2.1).

3.  Termination right of both parties in the case of prolonged force majeure event (more than 180 days within period of 365 days) (15.7).

  • Consequences of Termination (15.10, 17.3):
    • Termination payments depend on cause for termination of MCA:
    • Termination on account of an indirect political event: amount equal to Registration Fee and, if Concessionaire offers Wagons for sale to Railway Authority, Depreciated Replacement Value of Wagons. 
    • Termination on account of a political event or default by Railway Authority: 150 % of Registration Fee and, if Concessionaire offers Wagons to Railway Authority for sale, 120 % of the Depreciated Replacement Value of Wagons.

c.      All other cases: No termination payment.

14. Indemnity (16): MCA provides for Concessionaire and Railway Authority to indemnify other party against any claims brought by third parties for breach of obligations and infringement of rights except where such claim has arisen due to any negligent act or omission or breach of MCA and any breach of a statutory duty on the part of the Concessionaire, its subsidiaries, affiliate contractors, servants or agents.

15. Right of substitution (17.1.3 and Annexure I): MCA provides for step-in rights for Lender. Contains model Substitution Agreement between Lender, Concessionaire and Railway Authority. Lender is granted step-in rights in the case of financial default/any other default by Concessionaire. Substitution to be completed within 180 days (possible extension by another 90 days). If no company acceptable to Railway Authority is selected within this period of time Railway Authority may terminate MCA. If Concessionaire’s default is cured within this period of time Lender may ask Railway Authority to restore all rights of Concessionaire instead of exercising Right of Substitution.

16. Dispute Resolution (18): If disputes between parties cannot be resolved amicably, they shall be decided by arbitration. Board of arbitration consists of three arbitrators. Arbitration to be held in accordance with Rules of Arbitration of International Centre for Alternate Dispute Resolution, New Delhi, or other rules agreed by parties. Seat of arbitration: New Delhi, India. Awards made by arbitration are final and binding.

17. Governing Law and Jurisdiction (9.1): Laws of India are applicable; Court of Delhi has jurisdiction over matters arising out of or relating to Concession.

Possible additional provisions that it might be appropriate to include:

 

Provisions that may not be advisable to replicate/ may need further thought:

Some provisions remain vague (e.g. ownership of Rail Terminals, possibility to transfer Wagons for Depreciated Replacement Value to Railway Authority after end of Concession Period). Local arbitration.

 

Provisions of wider general use:

 

Experience Since Coming Into Force (including any amendments)/ if draft form, whether it has been applied:

Haulage charges have been increased frequently.

Tracking Number:

India_Model Concession Agreement for PPP in Container Train Operation_EN.pdf

 

 

 


The inclusion of any legal materials on the website of the PPP in Infrastructure Resource Center for Contracts Laws and Regulation (PPPIRC) does not mean that they are in any way approved, endorsed or recommended by The World Bank, the PPPIRC or its donors. The document this page refers to is a sample agreement FOR REFERENCE PURPOSES ONLY and SHOULD NOT BE used as a "model". The annotations have been prepared by the PPPIRC for general guidance purposes. Legal advice should be sought to determine whether a particular legal document is appropriate for any given project, and how the specific terms of the document should be adapted to fit the circumstances of that project.


Last Updated : Wed,2017-01-25