ABG-PSA dithers on JNPT container terminal, ministry on calling for a rebid

With the consortium that won a contract to build a new container terminal at Jawaharlal Nehru port near Mumbai dithering on signing the concession agreement for the Rs 8,000-crore project, the government is seeking a final response from the winner before deciding on rebidding out the project.

Singapore’s PSA International Pte Ltd, along with ABG Ports Pvt Ltd, was awarded the project on 26 September 2011 after the consortium quoted the highest revenue share of 50.8 per cent in a public tender. The letter of award was given to the winner, but the concession agreement, the document that sets out the terms and conditions of the contract, was not signed as ABG sought to withdraw from the consortium.

The shipping ministry is now seeking a final response from ABG-PSA on whether they still want to go ahead with the project. A letter from the ministry, informing the companies of the legal view, is expected to be dispatched soon, people aware of the development said. In July, the law ministry had said ABG could not withdraw from the consortium.

The JN Port Trust (JNPT) is pinning its hope on PSA’s intent of leading the the project. “PSA has the capability of funding the entire project on its own and it (the terminal project) is an important part of its growth strategy in India. It is also an issue of reputation for them,” a senior shipping ministry official said, requesting anonymity.

The same cannot be said of ABG, which has not been successful in running the container terminal at Kandla Port in Gujarat, industry players and officials told Business Standard. ABG was expected to invest Rs 1,000 crore in the project. At a later stage, it had got PSA on board as its consortium partner. But the Kandla terminal has often been accused of non-performance in the last three years.

ABG was earlier disqualified from bidding for the 330-metre container terminal at JN port under the monopoly restrictive policies, which do not allow one company to bid for two consecutive projects. ABG then took up litigation against JNPT’s decision.

The ABG-PSA consortium’s bid of giving 51 per cent revenue share for the JN terminal had raised many eyebrows. The second highest bid was from Vedanta, which offered only 35 per cent share. Former shipping secretary K Mohandas said such a high revenue could become an uncomfortable arrangement between two parties. “It takes away the scope to reduce tariff and affects the overall trade,” he said.

The concession agreement was not signed mainly because of two issues: PSA refused to share the Rs 50-crore stamp duty for the agreement and then ABG said it wanted to pull out of the project.

“The economy is not good and the cost of this project has only escalated. Competition from neighbouring ports aside, the high revenue share offered to win the bid might be looking like a bad idea in retrospect,” the shipping ministry official said. He said it could be one reason why the project had not taken off yet.

Added Mohandas: “The container terminal has tremendous potential and being in a strategic location like Mumbai, it has a compulsion to grow in spite of economic climate.”