Bangalore: The shipping ministry is looking to reinstate Haldia Bulk Terminals Pvt. Ltd (HBT), almost two years after it quit a bulk-loading facility at Haldia dock complex of Kolkata Port midway through a 10-year contract, citing law and order issues.

The ministry has set up a three-member panel comprising chairmen of the Cochin, Paradip and VO Chidambaranar ports to work out an amicable settlement to the vexed issue that has hurt investment sentiment in the ports sector, a spokesman for the ministry said.

“The panel, set up earlier this month, was given two weeks to work out a fair deal to the benefit of both HBT and Kolkata Port Trust," the spokesman said.

On 31 October 2012, HBT, a joint venture of Mumbai-listed ABG Infralogistics Ltd and French shipping firm Louis Dreyfus Armateurs SA, abandoned the Haldia dock facility just two years into its 10-year contract, citing worsening the law and order situation at the port instigated by local stevedoring and shore-handling firms owned by lawmakers belonging to the Trinamool Congress Party (TMC) that rules West Bengal.

Louis Dreyfus had a 49% stake in the joint venture cargo-handling firm that started operations in 2010.

The frosty political equation between West Bengal and the Union government, and the invocation of an international arbitration clause by Louis Dreyfus under the bilateral investment promotion and protection agreement (BIPA) signed between India and France to settle the dispute played a big part in the ministry’s decision to try for a negotiated settlement.

This is the first BIPA arbitration in India’s shipping sector. In August, the shipping ministry named Singapore-based arbitration expert J. Christopher Thomas as its arbitrator.

HBT is already engaged in separate arbitration with Kolkata Port Trust over a contractual dispute under the Indian Arbitration Act.

The BIPA arbitration is to protect shareholder investment. If the BIPA arbitration award goes in favour of Louis Dreyfus, the Indian government will have to pay the claim made by the French firm. It cannot challenge and delay the settlement.

“The government is keen to avoid such a situation," said a person briefed on the matter. He declined to be named.

“If the fair deal is acceptable to both the sides, the arbitration proceedings will be dropped," the shipping ministry spokesman said.

HBT has set a precondition to return to Haldia and resume the contract.

“If they want us to go back, we need a letter from Kolkata Port Trust stating that it will give the employees of HBT the same level of protection as is given to employees of Kolkata Port Trust both inside and outside Haldia dock complex," a spokesman for HBT said.

“None of the employees of HBT are willing to go to Haldia without such a categorical assurance from Kolkata Port Trust. Without such a letter, we are not willing to sit across the table; we are not willing to enter into an amicable settlement. For us, this is not negotiable," the HBT spokesman said.

Kolkata Port Trust employees residing at the township in Haldia are given security by the Central Industrial Security Force (CISF).

“If CISF can protect them, why can’t they protect us?" asked the HBT spokesman.

The HBT contract was for providing integrated cargo-handling services at berths two and eight of Haldia dock, including unloading of cargo from ships, transfer of cargo from the berths to the storage area and stacking there and, finally loading the cargo on to trucks and rail. For this, HBT used three harbour mobile cranes, 13 payloaders and 25 dumpers at each of these berths to provide the required integrated cargo handling services.

For providing the services, Kolkata Port Trust paid 75 per tonne to HBT, of which 49 per tonne was for handling of cargo to and from ships by harbour mobile cranes and the balance 26 per tonne was for providing all the shore-handling services up to loading of trucks and rakes. This rate was decided through a public tender where HBT was the lowest bidder.

Kolkata Port collected 225 per tonne from users as per rates approved by the port tariff regulator, making a profit of 150 per tonne in the process. With HBT walking out of the contract, Kolkata port lost about 1,800 crore from the contract over a 10-year period.

“HBT was one of the most efficient mechanized berths operating in India. As against the contractually mandated discharge rate of 20,000 tonnes per day per berth, the productivity at HBT was up to 35,000 tonnes per day per berth. In comparison, conventional cargo handlers used to discharge only 6,000 tonnes per day per berth and, hence, exporters and importers had to pay huge penalties to the shipping line for delay in loading and unloading cargo," the HBT spokesman said.

Subsequent attempts by Kolkata port to re-tender the project failed because the lowest rate quoted was about 200 per tonne compared with the 75 of HBT.

One of the options being considered by the three-member panel is to break the HBT contract by allowing it to undertake only loading and unloading of cargo to and from ships and leaving the shore handling services to local firms.

“We have not asked for any deviations from the terms of the original contract," the HBT spokesman said.