Bangalore: Jawaharlal Nehru Port Trust (JNPT), which operates India’s busiest container port, will scrap an auction for a contract to develop a new Rs600 crore container terminal after poor response from bidders and court cases delayed the process initiated last year.

Trade gateway: A file photo of the Jawaharlal Nehru Port, which is India’s busiest container port. Ashesh Shah / Mint

“We have received a letter from the Union shipping ministry indicating that the tender should be scrapped," a port executive said. “We will communicate the scrapping of the tender to the shortlisted bidders in the next few days."

The executive said JNPT would consider a fresh tender. He did not want to be named because he is not authorized to speak to the media.

A shipping ministry official confirmed the development. He did not want to be identified because an official announcement was due.

The shortlisted firms are DP World Ltd, the world’s fourth biggest container port operator owned by the Dubai government, and a consortium comprising Essar Group companies, Vadinar Oil Terminal Ltd and Essar Ports and Terminals Ltd.

The auction for the new terminal contract was dogged by court cases. Mundra Port and SEZ Ltd and ABG Infralogistics Ltd had separately challenged JNPT’s decision to exclude them from the auction.

The government-owned port wants to develop, through private investments, a small container terminal with a berth length of 330m—half the normal length of 650-700m—with a capacity to handle 600,000 standard containers a year.

The port, located near Mumbai on India’s west coast, handles around 50% of the country’s container cargo of around 7.85 million standard containers.

In the year to March, the JN Port handled 3.95 million standard containers, operating at more than its capacity of 3.6 million standard containers.

JNPT runs one of its three container handling facilities. The other two are run by DP World and a joint venture between APM Terminals Management BV and Container Corp. of India Ltd.

The proposed new terminal would be located adjacent to the facility run by DP World.

This is the second container terminal project auction to be scrapped by the Union government in the past few days.

In late September, the shipping ministry had scrapped the auction for a contract to develop and operate a second container terminal at Tuticorin port in Tamil Nadu after a group excluded from the bidding process challenged the decision in the Madras high court.

Container handling capacity at India’s ports has to be scaled up to 21 million standard containers by 2014, up from 9.1 million in 2008, to meet demand, according to the shipping ministry.

Expansion of manufacturing activities and more demand from foreign nations to containerize commodities are the main drivers for the growth of the Indian container market.

“But Indian port infrastructure is lagging behind," consulting firm Frost and Sullivan said in a recent study, warning that with Indian trade growing at 11-12% a year, congestion at main ports can reduce port performance and hinder containerization growth unless sufficient port capacity is created.