Bangalore: Union government-controlled Jawaharlal Nehru port near Mumbai is preparing the ground to sue PSA International Pte Ltd for damages after the Singapore-based global port operator defaulted last year on its obligation to build a Rs.6,700 crore container loading facility at India’s busiest container port, said at least two persons familiar with the plan.
PSA, the world’s biggest container port operator, had won the project in a public auction. It may also be barred from bidding for the project when it is re-tendered sometime in March. PSA is fully owned by Temasek Holdings Pte Ltd, the sovereign wealth fund of Singapore.
“In his opinion given to JN port, Kevic Setalvad, the additional solicitor general of India, has said that it is possible to seek damages from PSA and also de-bar the firm for a certain period from participating in tenders issued by the union government-owned port,” said a JN port official, one of the two mentioned above, requesting anonymity because he is not authorized to speak to the media. Setalvad has cited cases involving firms in the highways sector to support his opinion, the JN port official said.
“The matter will be placed before the board of trustees of the port at the next meeting for a decision,” he added. N.N. Kumar, deputy chairman of JN port, said, “We are examining all legal and administrative options on further actions to be taken against PSA.”
On 17 September, the board of trustees of JN port decided to terminate the contract awarded to PSA for building the facility because of the firm’s failure to sign a so-called concession agreement for the project. The port, which handles more than half the cargo containers shipped through India’s ports, subsequently encashed the bid security of Rs.67 crore submitted by PSA for the project that was designed to load 4.8 million standard containers a year.
The decision was taken after PSA refused to sign a concession agreement for the project almost a year after it was awarded the project on 26 September, 2011, on winning the public auction.
A concession agreement sets out the terms and conditions of the contract and puts the project in motion. 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. On 16 October, JN port informed PSA in a communication that it was withdrawing the letter of award given to the firm for building the terminal.
“Following the announcement that the PSA-led consortium had won the right to develop the fourth container terminal project in September 2011, PSA worked expeditiously to prepare for the signing of the concession,” said a PSA spokesperson. “However, there were unexpected developments and differences that arose on key issues along the way that were beyond our control. Notwithstanding, PSA’s best efforts to engage and discuss with all the relevant stakeholders, these differences were not satisfactorily resolved,” the person said.
“We regret the decision by the Jawaharlal Nehru Port Trust Board to withdraw the letter of award earlier issued to the PSA-led consortium for the development of the JNPT 4 container terminal project. PSA has always upheld the belief that there is great market potential in India and we will continue to develop our existing portfolio of port projects in India and look for other opportunities to invest in the country,” the PSA spokesperson said. PSA currently runs container terminals at V.O. Chidambaranar Port in Tuticorin and Chennai port, both controlled by the union government and located in Tamil Nadu.
JN port has now decided to break the project into two separate terminals having a berth length of 1 km each, capable of loading 2.4 million standard containers per terminal when it floats a fresh auction in March, a spokesman for the port said.