Bangalore: The Union government-controlled Kandla Port in Gujarat terminated its contract with ABG Kandla Container Terminal Ltd on 5 November after the firm failed to fulfil a key contractual obligation on achieving minimum guaranteed volumes at the terminal for the past three years, a port spokesman said.
In turn, Mumbai-listed ABG Infralogistics Ltd, which owns a 51% stake in ABG Kandla Container Terminal, said on Friday it was walking out of the Kandla port project as the port had defaulted in fulfilling its obligations under a pact signed in June 2006.
Singapore’s PSA International Pte. Ltd, the world’s biggest container port operator, holds the balance stake in ABG Kandla Container Terminal.
PSA is fully owned by Temasek Holdings Pte Ltd, the sovereign wealth fund of Singapore.
“The licence agreement signed with the firm provides for terminating the contract if it fail to achieve the minimum guaranteed throughput continuously for the last three years beginning 2008,” the Kandla port spokesman said. “Accordingly, we have issued a termination notice to ABG Kandla Container Terminal Ltd on 5 November.”
ABG Kandla Container Terminal loaded 167,000 standard containers in the year to March. The port spokesman could not specify the minimum guaranteed throughput agreed with ABG Kandla.
ABG Infralogistics has invested some Rs.230 crore in setting up the 600,000 standard container capacity a year terminal at Kandla port.
“We have served a notice on Kandla port on Friday to terminate the licence agreement due to default of the port,” a spokesman for ABG Infralogistics said.
“We have been operating the terminal with low draft (depth), no night navigation, no rail connectivity, no power connection and no back-up yard. But having invested the money, we had no choice but to continue operations. Now we have reached a stage where the chances of bringing mainline vessels looks practically impossible,” the ABG spokesman said.
Kandla port was obliged to provide a depth of 12.5 m at the berth to ABG by 2009, according to the licence agreement.
“The port has failed to provide this depth. It defaulted on the dredging obligation,” the ABG spokesman said.
The terminal currently has a draft of 10.5 m, he said.
The port has contested the claim.
The Kandla port spokesman said the port provided a draft of 12.5 m with tidal benefit to ABG.
“It is not humanly possible to provide a depth of 12.5 m at Kandla Port without tidal benefit. Achieving a depth of 12.5 m without tidal benefit will require an investment of Rs.5,000 crore. It’s not that simple,” he said.
ABG recently moved the Gujarat high court on this but lost the case, the port spokesman said.
The two sides now look headed for a prolonged litigation.
Kandla port will seek compensation from ABG for not paying the difference between the actual containers handled and the minimum volumes mentioned in the pact, the port spokesman said.
ABG said it will seek compensation from the port for the losses suffered by the terminal operating firm due to the default of Kandla port in fulfilling its obligations under the contract.
ABG Kandla Container Terminal had agreed to share 48.9% of its revenue with Kandla port to win the 30-year pact.
Port contracts are decided on revenue sharing basis—the bidder willing to share the most from his annual revenue with the port gets the contract, typically stretching 30 years, according to the port privatization policy.