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Business News/ Companies / PSA-ABG team set to get India’s biggest container terminal deal
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PSA-ABG team set to get India’s biggest container terminal deal

PSA-ABG team set to get India’s biggest container terminal deal

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Bangalore: A consortium led by PSA International Pte Ltd, the world’s second biggest container port operator, has emerged the highest bidder to build India’s largest container terminal yet, by capacity and cost, at the Jawaharlal Nehru port, or JN port.

PSA, along with local partner ABG Ports Pvt. Ltd, offered a revenue share of 50.82% to the government-owned port, said Rakesh Srivastava, joint secretary looking after ports in the shipping ministry.

This is the highest revenue share quoted by a private operator since India introduced the container port privatization programme in 1997 (see table). Under this policy, the bidder willing to share the highest quantum from its annual revenue with the government-owned port gets the contract.

Also See | Dropping anchor (Graphic)

The bids were opened on Tuesday.

JN port’s fourth terminal will have a capacity to handle four million standard containers a year, a berth length of 2km, and can accommodate seven ships at a time, compared with two-three vessels at other terminals in India. The original cost of Rs6,700 crore for the terminal is projected to have escalated by about Rs1,000 crore because of a two-year delay over litigation, as Mint reported on 22 June.

The other bidding groups were DP World Pvt. Ltd; Mundra Port and Special Economic Zone Ltd (MPSEZ)-Adani Enterprises Ltd-Isolux Corsan Concessions SA; GVK Developmental Projects Pvt. Ltd- Samsung C&T Corp.; and Sterlite Industries (India) Ltd-Leighton Contractors (India) Pvt. Ltd.

PSA is fully owned by Temasek Holdings Pte Ltd, the investment arm of the Singapore government.

JN port chairman L. Radhakrishnan was not immediately available for comment. PSA and ABG declined comment.

The bid outcome marks PSA’s entry into India’s western coast.

More importantly, three of the world’s top four container port operators will be running terminals at JN port, India’s busiest container port handling more than half of the country’s container cargo passing through ports.

APM Terminals Management BV, the world’s third biggest container port operator, and DP World, the world’s fourth biggest, operate two separate terminals at JN port. A third facility is run by the port itself.

These three terminals are designed to handle a total of 3.6 million standard containers a year. But putting a strain on its capacity, JN port, one of the 13 controlled by the Union government, handled 4.27 million standard containers in the year to 31 March, up from 4.09 million containers in the year before.

The port cannot handle more containers unless it expands capacity.

PSA runs a 1.5 million standard containers capacity a year terminal at Chennai port, India’s second biggest, and a 450,000 containers a year terminal at Tuticorin port, both owned by the Union government and located in Tamil Nadu on India’s eastern coast. PSA also runs smaller facilities in Kolkata and Kandla ports in partnership with ABG.

Finalization of the tender for JN port’s fourth terminal has been delayed by about two years. APM Terminals, the container port operating unit of Danish shipping and oil conglomerate AP Moller-Maersk Group, fought a case in the Supreme Court after it was excluded from bidding due to a government policy. In May, the apex court allowed APM Terminals to bid, but the firm backed out of the auction process last week citing viability concerns.

In another legal challenge, MPSEZ, owned by billionaire Gautam Adani, moved the Mumbai high court in February after it was denied security clearance for the project by the Union government. The court has not stayed the auction process, and the next hearing on the petition is listed for 4 July.

But with the validity of the bids submitted by the five groups expiring on 30 June, the management of JN port moved an urgent application before the Mumbai high court on 22 June seeking its permission to open the price bids. The court agreed to the request and directed the port to open the price bids, including the one submitted by MPSEZ, but said the award of the contract will be subject to the outcome of the petition, said S.K. Kaul, chief manager, legal, at JN port.

As MPSEZ is not the highest bidder for the project, JN port will now approach the court for its permission to award the contract. “Since MPSEZ is not the highest bidder, the petition becomes infructuous," the shipping ministry’s Srivastava said, adding that JN port will file an affidavit in the high court seeking its permission to award the contract.

Rajeeva Sinha, a director at MPSEZ, said the company will proceed with its petition.

“While I would refrain from commenting on the bid numbers, I am glad that the bids were finally opened and JN port will move ahead with development of the desperately needed new terminal," said Neeta Ramnath, senior vice-president, transportation advisory at Feedback Infrastructure Services Pvt. Ltd, a consultancy firm. “The next step is to address the evacuation issues, which would definitely start constraining growth and the competitiveness of JN port."

Over the past few years, port container traffic in India, the world’s second fastest growing major economy, has been expanding at an average of 15% a year. At this rate, the country’s total container traffic will more than treble to 38.91 million standard containers by 2020, up from the existing capacity of 11.81 million standard containers, according to a 10-year plan the shipping ministry unveiled in January. Of this, JN port is expected to handle 11 million standard containers by 2016 and 23 million by 2020, it said.

Deals India, published jointly by Mint, Dow Jones Newswires and The Wall Street Journal, is a one-stop destination for investment professionals following deal flow, deals news, private equity and venture capital activity in India.

Graphic by Sandeep Bhatnagar/Mint

p.manoj@livemint.com

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Published: 29 Jun 2011, 01:00 AM IST
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