Bangalore: Two of the world’s top container port operators, PSA Corp. and DP World, are bracing for a fight for rights to develop and operate a new Rs1,300 crore container-handling facility at Ennore Port near Chennai, their determination belying their annoyance with the new tariff restrictions at the port.
Ennore Port Ltd had invited initial qualification bids in early March from companies keen on developing and operating the facility with an annual capacity of 1.5 million twenty-foot equivalent units (TEUs) for 30 years. TEU is the standard size of a container and is a common measure of capacity in the container business.
Both PSA and DP World confirmed they would bid for the project at Ennore Port, located on the country’s eastern coast in Tamil Nadu, though they have been caught off guard by the port’s decision to fix the tariff before inviting price bids from shortlisted operators. This decision followed fresh guidelines by the Union government on regulating tariffs at major ports.
Free to charge: A truck moves cargo at the Mumbai port. Ennore Port near Chennai is not under the purview of Tariff Authority for Major Ports, tariff regulator for the 11 major ports owned by the Union govt. (Photo: Ashesh Shah/ Mint)
In effect, any operator running the new container terminal will not have the freedom to fix tariffs.
“How can the port suddenly come up and say that only the container terminal operator will not have the freedom to set tariffs when other cargo terminal operators at Ennore have been given such freedom?” asked Ganesh Raj, DP World senior vice-president and managing director, Indian subcontinent.
The company is the fourth biggest port global operator and owned by the Dubai government.
Ennore Port is a corporate entity set up under the Companies Act, 1956, and is not subject to regulation by the Tariff Authority for Major Ports, tariff regulator for the 11 Centrally owned major ports in India. Thus, private operators at Ennore had the freedom to fix tariffs.
Tariffs at Ennore will be fixed upfront by the port itself and not by the regulator, because it is outside the scope of the regulator.
“In the case of the container terminal, the successful private operator will not have the freedom to set tariffs,” A. Rajagopalan, director (operations), Ennore Port, told Mint earlier. The tender floated by the port said the operator “will be entitled to charge a pre-determined user fee from its customers.”
Both PSA and DP World have had previous run-ins with the regulator. DP World, which runs a terminal at India’s biggest container port, Jawaharlal Nehru Port, had earlier hauled the regulator to court after it cut tariffs at its terminal in 2006.
PSA, the second biggest container port operator in the world, faced a similar situation at its facility in the eastern coast port of Tuticorin. In 2006, the regulator had cut tariffs at the terminal by more than half after PSA sought a 30% hike. The Madras high court has since set aside the regulator’s decision to cut tariffs at Tuticorin and has asked the Union shipping ministry and the regulator to take a second look at the revision exercise at the terminal.
On the positive side, the new restriction has not stopped DP World and PSA from pitching for the Ennore facility. “We are keen on the project and will put in a bid,” said Raj of DP World. A PSA executive, who did not want to be named because he is not authorized to speak to the media, said the company is “serious about the proposed facility in Ennore Port and will participate in the tendering process.”
The foreign investors will be facing competition from local players such as Gammon Infrastructure Projects Ltd, a unit of Mumbai-based construction firm Gammon India Ltd, for the Ennore project.