BackGovt to revive stalled container terminal at Mumbai port
The decision could help a consortium of state-owned lenders recover a part of the Rs900 crore, including interest in the past three years, lent to the terminal
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Bengaluru: The shipping ministry has agreed to re-tender and revive a stalled container terminal built by Gammon Infrastructure Projects Ltd at government-owned Mumbai port by converting it into a multipurpose facility to handle clean cargo.
The decision could help a consortium of state-owned lenders recover a part of the ₹ 900 crore, including interest in the past three years, lent to the terminal. The loan has gone bad.
Canara Bank, Punjab National Bank (PNB), State Bank of India (SBI), UCO Bank and India Infrastructure Finance Co. Ltd (IIFCL) had loaned ₹ 706 crore (now ₹ 900 crore with interest) to the project which has been delayed by five years due to reasons over which the project promoters had no control.
“The container terminal has failed. The shipping ministry has decided to re-tender the project by changing the structure and scope of the project. The fresh tender will follow the model used by state-owned Kamarajar Port Ltd for converting an idle iron ore terminal into a coal terminal at the port located at Ennore near Chennai," a spokesman for the shipping ministry said.
A spokesman for Mumbai port confirmed the development. This was the first container privatization project at Mumbai port, one of India’s oldest.
The alternative clean cargo to be handled at the terminal will be firmed up on the basis of a detailed feasibility study which is currently being carried out.
A joint venture between Gammon Infrastructure and Spanish port operator Dragados SPL SA had won the rights in 2007 to develop and operate the new container terminal for 30 years. The consortium agreed to share 35.064 % of its annual revenue with the government-controlled port to win the deal in a public auction.
Indira Container Terminal Pvt. Ltd, the special purpose company formed by Gammon and Dragados, had signed a concession agreement with the Mumbai port in December 2007 to execute the project.
Gammon Infrastructure has a 74% stake in Indira Container Terminal with Dragados holding the balance. The first phase of the new facility with a capacity to load 1.2 million standard containers a year and costing ₹ 1,228 crore was expected to start operations in December 2010.
Gammon Infrastructure has completed the construction of the berth, but is unable to start operations because Mumbai port, as part of its contractual obligations, is yet to complete the dredging work and hand over the entire back-up area required to store containers.
Gammon is also awaiting security clearance from the government for buying cranes used for loading and unloading containers at the terminal. Gammon Infrastructure had to scrap an earlier order given to Chinese port equipment maker Zhenhua Port Machinery Co. Ltd (ZPMC) after India’s security agencies denied clearance to the purchase on national security concerns.
The existing lenders have decided not to give more funds to the project promoters to buy equipment, putting the onus on funding crane purchases on Gammon Infrastructure.
The delay, apart from escalating the project cost to about ₹ 2,000 crore, has affected the viability of the project because Jawaharlal Nehru Port, India’s busiest container gateway, located a few km away, added capacity with more under construction.
Early this year, Mumbai port allowed Gammon to handle cars at the berth as an interim arrangement till it is able to start commercial operations of the container terminal to help put idling resources to optimal use.
But this move was questioned by firms facing rate issues at container terminals they operate in other government-owned ports. “The shipping ministry is coming around to the view that such troubled terminals should opt for re-bidding if they want improvements in their contract terms. But, by allowing Gammon to handle cars, the ministry has given the impression that it was selective and arbitrary in its approach towards restructuring of grounded and troubled assets," a port industry executive said.
Mumbai port will set 35.064% (the price bid put by Gammon to win the container terminal tender) as the reserve revenue share price for the re-tender. Price bids below the reserve price set by the government will not be accepted.
If the highest revenue share quoted in the new tender is more than 35.064%, Gammon will have a so-called right of first refusal to match the highest bid and take the contract on fresh terms. If it declines to exercise this right, the contract will be awarded to the highest bidder. In such an event, the highest bidder will have to pay an upfront amount to be given to Gammon as compensation/closure payment for the money it invested in setting up the container loading facility.
“This could be a fair exit option for Gammon Infrastructure which is under financial stress. Gammon would have wanted it that way. Besides, bankers will be taken care of. Lenders may have to forego some money. But, this is better than writing off the entire loan," a person briefed on the development said, asking not to be named.
Calls made to Gammon and Indira Container Terminal remained unanswered.
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