The biggest single foreign direct investment (FDI) in an Indian port project by Singapore’s PSA International Pte Ltd faces a public interest litigation (PIL) scare which could potentially hurt the much-delayed capacity expansion project of union government-owned Jawaharlal Nehru (JN) port near Mumbai if the Mumbai high court admits the PIL and stays the project.
In May, PSA International signed a so-called concession agreement with JN port, to build a Rs.7,915 crore container loading facility at the port that handles more than half of the container cargo shipped through India’s ports. The project involves FDI of about Rs.3,100 crore.
A concession agreement sets out the terms and conditions of a port contract and puts the project in motion. PSA emerged the highest bidder for the project by quoting the highest revenue share bid of 35.79%.
Port contracts at Union government-controlled ports are decided on the basis of revenue share—the bidder willing to share the most from its annual revenue with the government-owned port gets the contract, typically for 30 years, according to the port privatization policy of the government.
A spokesman for JN port, India’s busiest container gateway, said that it has received a notice on the PIL filed by a Marathi journalist questioning the award of the contract to PSA. Details of the petition were not known.
PSA’s failure to sign an agreement on winning the same project in an earlier auction led the Union government owned port to re-tender the mega project, raising the project cost by about Rs.1,200 crore and delaying its implementation by at least three years.
The PIL contends that PSA should have been blacklisted and barred from participating in the re-tender for non-adherence to tender conditions, the JN port spokesman said.
Mint has not reviewed a copy of the PIL which, according to the JN port spokesman, will come up for hearing in the Mumbai high court on 12 June.
PSA could not be reached for comment immediately.
PSA International, the world’s biggest container port operator by volumes, is fully owned by Temasek Holdings Pte. Ltd, Singapore’s state-owned investment firm. PSA handled 61.81 million standard containers in calendar year 2013, according to its website. In October 2012, JN port withdrew the letter of award given to a consortium led by PSA after the group failed to sign a concession agreement a year after it was awarded the project in September 2011 in a public auction.
The consortium of PSA and local firm ABG Ports Ltd was awarded the project after it quoted a record high revenue share then of 50.828% in a public tender. The winning bidder has to sign the concession agreement within 30 days of accepting the letter of award for the project, according to tender conditions.
JN port subsequently encashed the bid security of Rs.67 crore submitted by PSA for the Rs.6,700 crore project that was designed to load 4.8 million standard containers a year.
“The PIL is an unnecessary irritant to the project,” the JN port spokesman said.
“Vested interests don’t want JN port to come up with the new terminal. Every month of delay in building the terminal is adding volumes to our neighbouring rivals”. The new project, the fifth at JN port, is key to its capacity expansion plans as it will double the container loading capacity of the port.
“Mere filing of the PIL is not going to hurt JN port. The project will be delayed only if the court grants a stay,” said a Mumbai-based port consultant who declined to be named because of company policy on speaking to the media.
The new terminal will be designed to load 4.8 million standard containers a year, making it India’s biggest single container terminal by capacity and size having a quay length of 2 km with a water depth of 16.5 metres, capable of handling large container ships.
In the year to March, JN port loaded 4.16 million standard containers, operating at more than its designed capacity of 3.6 million standard containers a year.
JN port currently has three container loading terminals while a fourth one is under construction by Dubai’s DP World Ltd.
The port, one of the 13 owned by the union government, is expected to handle 11 million standard containers by 2016 and 23 million standard containers by 2020, according to a 10-year plan for ports unveiled by the shipping ministry in 2011.
