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Port infrastructure is central to promoting seaborne trade activity of developing countries like India. Traditionally, port infrastructure projects in India were owned and managed by government undertaking, but there is now broad consensus that private-sector participation should be encouraged. Overall traffic growth in seaborne trade for the last ten years has increased private sector participation (national as well as international players) in India's port sector. The government has studied various strategies adopted by ports worldwide to address similar issues facing ports in India. "The government envisages commercialization/ privatization/modernization of major existing ports. These are expected to result in technological upgrades and overall improvement of performance levels of the ports" [MEA]. Indian ports handled about 522 million tonnes of cargo in 2004-05 with a 12.1% annual growth rate. All major ports have taken steps to develop terminals and handling and storage facilities under PPP (public-private participation) schemes like BOT (build-operatetransfer), BOOT (build-own-operate-transfer), BOOST (build-own-operate-share- transfer), etc. Several state governments have also formulated favorable policies to develop minor greenfield ports under these schemes. A number of private companies have already set up port facilities in the country. "Two ports have been set up through private participation. A number of foreign companies like Peninsular and Oriental (P&O) Ports of Australia, PSA-Sical Terminals Limited, International Sea Ports Limited (ISPL) and the Shell-Essar consortium have invested/are in the process of investing in the port sector within India" [MEA].
Exhibits 1 and 2 provide some figures relevant to private-sector participation in various port projects.
The aim of this article is to develop a financial bidding strategy by assembling a financial model in the Indian context, and to evaluate its effectiveness by performing sensitivity analysis for various factors to reach an optimal revenue-sharing figure for the final bid.
BIDDING PROCESS
The government of India has taken initiatives for the development and commercialization of Indian ports through private participation that will help upgrade technical facilities and enhance productivity. Simultaneously, various regulatory structures and policies have also been formulated to monitor performance. The first guidelines for private sector participation in major ports were announced by the government in October 1996, and further provision for the formation of joint ventures by major ports with foreign ports, minor ports, and any other private parties was...