Bangalore: After a two-year legal battle for the right to bid for constructing a terminal at Jawaharlal Nehru port, or JN port, resulting in an estimated Rs 1,000 crore escalation in the project cost, Danish port operator APM Terminals Management BV on Tuesday withdrew from the auction.
APM communicated its decision in a letter to JN port’s management on the last day for submitting its bid but without giving a reason, said a top port official who is overseeing the auction process.
“It is very, very shocking. It’s a loss to the nation,” the port official said, requesting anonymity because of the sensitive nature of the issue. “The delay has led to a cost escalation of as much as Rs 1,000 crore for developing the terminal... Besides, the business loss to the port is enormous. This is a fit case for filing a damage suit against them.”
Tom Boyd, director of external communications at APM and based in the Netherlands, did not respond to calls or a voice message left on his mobile phone seeking comment.
Project cost for the new terminal, with a capacity to handle four million standard containers a year, was originally estimated at Rs 6,700 crore.
“JN port badly needs further capacity; the delay in the finalization of the tender is very unfortunate,” shipping secretary K. Mohandas said by phone from New Delhi.
He said executives from APM met him on Tuesday morning to explain the reasons for pulling out of the auction. “APM Terminals said there were some problems; they wanted certain issues to be clarified by the port management and suggested some changes in the bidding documents. I told them at this point, we cannot make any changes because the price bids of others are already in.”
In 2009, APM, the container port operating unit of Danish shipping and oil conglomerate AP Moller-Maersk Group A/S, filed documents seeking qualification for the auction to build JN port’s fourth terminal.
The port declined to accept the documents because according to a licence condition APM had signed with the port in 2006 for the container terminal it operates there, it was excluded from bidding for the next terminal, in line with the government policy prevailing at the time.
APM filed a petition in the Mumbai high court seeking to be allowed to bid for the terminal. The court rejected its petition and the firm approached the Supreme Court, which ruled in its favour on 11 May.
Following this, JN port asked APM to submit its price bid by 21 June. “But instead of submitting the price bid, APM Terminals submitted a letter to JN port stating that it was not bidding for the project,” a port spokesman said.
AP Moller-Maersk Group also runs Maersk Line, the world’s biggest container shipping firm.
JN port has three terminals designed to handle a total of 3.6 million standard containers a year. But the port, one of the 13 controlled by the Union government, handled 4.27 million containers in the year to 31 March, nearly 5% more than it did in the previous year.
JN port handles more than half of India’s container cargo shipped through the 13 ports. It cannot handle more unless it expands capacity.
L. Radhakrishnan, chairman of JN Port, did not answer calls to his mobile phone on Tuesday. In May, Radhakrishnan said after the Supreme Court verdict that JN port urgently needed to build capacity.
“That’s our priority,” he said. “Last year, the three container loading facilities at the port operated at 113% of their combined capacities. No port can operate at such capacity levels; the machinery will break down.”
JN port has received price bids for the fourth terminal from five groups. The bids were kept in a State Bank of India safe locker without opening, pending a bid submission from APM following the apex court’s verdict.
A consortium led by Mundra Port and Special Economic Zone Ltd, too, was denied clearance by the Union government to bid for the project.
The group has challenged the decision in the Mumbai high court. The court has not yet admitted its petition or granted a stay on the auction, but has said that JN port can award the project only after the petition has been cleared. The next hearing on the case is posted for 4 July.
Over the past few years, port container traffic in India, the world’s second fastest growing major economy, has been expanding at an average of 15% a year. At this rate, container traffic is estimated to reach 21 million standard containers by 2015, whereas India’s total capacity is just 9.1 million standard containers, according to the shipping ministry.
JN port is expected to handle 11 million containers by 2016 and 23 million containers by 2020.
APM’s decision to withdraw from the auction “could be a very strategic move,” said Shailesh Garg, director and general manager at the Indian unit of London-based Drewry Shipping Consultants, adding that because of capacity constraints at JN port, there has been a shift of container cargo to new ports located at Pipavav and Mundra in neighbouring Gujarat. Mumbai-listed Gujarat Pipavav Port Ltd, the operator of Pipavav port, is 43.01% owned by APM Terminals.
“As a result of the cargo shift to new ports, JN port lost market share,” Garg said by phone from Gurgaon, adding JN port lost an opportunity because of the delay in building the new terminal. “If not for the delay, the new terminal would have come up by now and JN port would have benefited from the growth in cargo volumes.”