Mumbai: The Gujarat Maritime Board (GMB), the maritime regulator of Gujarat, will take a decision soon on whether to let the Dubai government-owned port operator DP World manage a container terminal at Mundra Port or revoke the contract awarded in 2003.
The right to operate and maintain the 1.25 million, 20-foot equivalent unit (TEU) a year container terminal was awarded to the Adani Group.
A TEU is the standard size of a container. The Adani Group sold the right to P&O Ports for $195 million (about Rs768 crore at current value) in 2003.
In February 2006, P&O Ports was acquired by DP World through a global deal, which also resulted in the transfer of management and ownership control of the Mundra International Container Terminal Pvt. Ltd (MICT) to DP World.
GMB says the transfer was a breach of an undertaking given by P&O Ports when it had acquired the terminal from the Adani Group.
GMB says P&O had given an undertaking to hold a minimum shareholding of 51% in MICT for seven years from the date of acquisition.
The maritime board also contends that the company had agreed to seek prior its approval to sell its stake below 51%.
GMB has issued a show-cause notice to DP World asking why the contract should not be cancelled.
In its reply, MICT said the undertaking was given by P&O Ports, which continues to hold 100% shareholding of MICT and therefore there was no violation of the agreement.
“The GMB is now asking why its approval was not taken by P&O Ports while selling the stakes to DP World,” said Ameet Desai, chief finance officer of Mundra Port and SEZ Ltd.
“DP World argues that a prior consent was not required at all. That’s the bone of contention now,” Desai said.
DP World has also dragged the Adani Group to court for not handing over the second container terminal at the port. As per the deal signed between the Adani Group and P&O Ports (now DP World), the Adani group was mandated to hand over the second terminal for $70 million after the first terminal handled 700,000 TEUs a year or eight years of operating the first terminal (which is 17 February 2009), whichever was earlier.
MICT handled 521,000 TEUs in the 12 months to 31 March. As per the deal, MICT has to share 10% of its gross revenues with the Adanis.
The Adani Group has started operating a second container at the port with a capacity to handle 1.25 million TEUs from August.
DP World filed an application before the Ahmedabad civil court seeking to prevent the Adanis from operating a new container terminal on its own. The court rejected the application on 13 September.
DP World has challenged the order before the Gujarat high court, besides referring the matter for arbitration.
“As per the original agreement signed in 2003, MICT has neither reached 7 lakh TEUs nor has it completed eight years of operations for staking claim to run the second terminal, which is ready for operations,” said Gautam Adani, chairman, Adani Group.
“Still, they don’t want us to operate the second terminal until either of this is achieved. Do they want the assets to remain idle till these milestones are achieved.”
The Adani Group said it had invested close to Rs633 crore to build the second terminal. “We will incur a loss if we were to hand over the second terminal for a consideration that was less than what we had spent to build the asset,” said Desai.
Desai also said that the operations at the container terminal will be disrupted for a few months if GMB terminates the agreement with DP World.
“If such a contingency arises, we will put in place a team that will run the terminal till a new operator is identified,” Desai added.
Meanwhile, Mundra Port and SEZ plans to raise Rs1,600-1,700 crore by selling 10% of its stake in the company to the public at a price band of Rs400 to 440 a share.
The issue will open on 1 November and close on 7 November. Mundra Port and SEZ will thus become the first port in India to be listed on the stock exchanges.