Photo: Mint
Photo: Mint

Re-bidding allowed for private cargo terminals

Struggling with rate and other issues that have hurt performance, these ports will be allowed to restructure

Bengaluru: Private cargo-handling facilities at Union government-owned ports, struggling with rate and other operational issues that have hurt their performance, will be allowed to restructure and better their project terms by offering their terminals for re-bidding to discover revenue share price afresh.

At least three such private facilities have or are being put to re-tendering. Private cargo terminals at Union government-owned ports are selected on the basis of revenue share—the entity willing to share the most from its annual revenue will win the project.

Chettinad International Coal Terminal Pvt. Ltd and JSW Infrastructure Ltd have applied on a tender issued by Kamarajar Port Ltd, the entity that runs the port at Ennore near Chennai in Tamil Nadu, to examine whether its plan to convert an idle, privately funded iron ore terminal into a coal-handling facility can fetch better revenue share for the port than the one agreed to by the original developer.

The re-tendering was approved by the shipping ministry based on a proposal cleared by the board of Kamarajar Port on a request from the iron ore terminal operator.

Kandla Port Trust, India’s biggest state-owned cargo handler by volumes, will re-tender two multi-purpose cargo berths set up with private funds in 2013. The board of trustees of Kandla Port Trust had agreed to re-tender the private berths after the firms running these facilities asked for a restructuring of their projects to overcome some rate hurdles hampering operations.

RAS Infraport Pvt. Ltd and JRE Infra Pvt. Ltd separately run the two dry-bulk cargo berths at Kandla Port on a 30-year contract.

“Any improvement/betterment in project terms will be subject to re-tendering to discover the new revenue share price in a changed scenario," a spokesman for the ministry said. The financial and commercial benefit accruing to an existing operator through a change in project terms should be shared with the government-owned port, the ministry said.

The iron ore terminal at Kamarajar Port built by Sical Iron Ore Terminals Ltd, a joint venture of Sical Logistics Ltd, MMTC Ltd and L&T Infrastructure Development Projects Ltd, has been idle ever since it came up in 2011, due to a bar on iron ore exports.

The joint venture had built the new terminal, which can load 12 million tonnes (mt) of iron ore a year, at an investment of over 500 crore.

Once Sical is allowed to handle coal instead of iron ore, the contract terms would be on par with an 8 mt capacity coal terminal run by Chettinad International Coal Terminal at Kamarajar Port since January 2011, according to the proposal cleared by Kamarajar Port to alter the cargo profile of the terminal. Sical has agreed to match the revenue share of 52.524% quoted by Chettinad International Coal Terminal.

Sical had offered a revenue share of 51.6% to win the iron ore deal.

“This (52.524%) was the highest revenue share received by the port through a competitive bidding process for that type of cargo (coal)," a spokesman for Kamarajar Port said.

“The revenue share price of 52.524% was discovered ten years ago. Since then, many things have changed. We want to discover the current revenue share price for a 12 mt capacity coal-loading terminal. The best and most transparent way to discover the revenue share price is through a tender or auction," the spokesman said.

Kamarajar Port has decided to set 52.524% as the reserve revenue share price for the re-tender.

This is being done to protect the current revenue share earned by the government-owned port. Price bids below the reserve price set by the government will not be accepted.

If the highest revenue share quoted in the tender is more than 52.524%, Sical 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 Sical as compensation or closure payment for the money it invested in setting up the iron ore terminal.

The closure payment will have to be paid by the new entity to the existing operator as he would be getting the benefit of assets developed by somebody else.

These modalities will apply to all private cargo terminals put to re-tender as part of a restructuring exercise, the ministry spokesman added.