The ministry’s first public comments since the controversy surrounding the auctions held between 2009 and 2013 is revealed in a report submitted by the government auditor, the Comptroller and Auditor General, to Parliament on 18 December.
“A direct comparison of the revenue share percentage offered by the same bidder on re-bid with that offered and accepted in the first bid was not tenable as the project on re-bid was restructured based on revised estimates of project specifications, scope and cost," the ministry informed CAG.
“Also, the revenue share of 35.79% obtained on re-bid was in line with the current range of around 30-35% for public-private-partnership (PPP) projects in major ports (those owned by the union government) and also validated the apprehension that the aggressive revenue share offer of 50.828% (quoted by PSA in the first tender) was not sustainable," the ministry said.
The ministry, though, sidestepped the view that the higher project cost and the consequent lower revenue share offered in the second round was mainly due to PSA’s decision not to sign the agreement earlier, necessitating a re-tender.
PSA International, the world’s biggest container port operator by volumes, is fully owned by Temasek Holdings Pte Ltd, the sovereign wealth fund of Singapore.
In September 2011, a consortium of PSA and local firm ABG Ports Ltd was awarded the project after it quoted a record high revenue share then of 50.828% in a public tender. Ports contracts at union government-controlled ports are decided on the basis of revenue share- the bidder willing to share the most from its annual revenue with the government-owned port gets the contract.
In October 2012, JNPT withdrew the letter of award given to the consortium led by PSA after the group failed to sign a concession agreement – a document that sets out the terms and conditions of a port contract – even a year after it was awarded the project.
JN Port subsequently encashed the bid security of ₹ 67 crore submitted by PSA for the ₹ 6,700 crore project that was designed to load 4.8 million standard containers a year.
When the project was re-tendered in June 2013, PSA applied on its own and won the auction again after emerging the highest bidder by offering a revenue share of 35.79%, which was 15% lower compared with the 50.828% quoted in the earlier round.
In May 2014, PSA signed a concession agreement with JNPT, to build the new terminal now costing ₹ 7,915 crore at the port that handles more than half of India’s container cargo.
The scrapping of the first tender and the consequent delay raised the project cost by as much as ₹ 1,215 crore and pushed back the construction of the new facility by at least four years, resulting in loss of business and opportunity costs to JN Port.
The incident raised questions over PSA’s decision not to sign the concession agreement, leaving JN Port with no other option but to withdraw the letter of award, allowing the Singapore firm to participate in the second round of bidding despite calls to debar it for non-compliance with tender conditions in the first round of bidding.
JN Port Trust, according to CAG, allowed PSA to participate in the re-tender based on an advice from India’s Solicitor General who said that the firm “could not be debarred from fresh bidding as it had not backed out from the project execution on its own".
The shipping ministry, according to the CAG, said JNPT encashed the bank guarantee of ₹ 67 crore given by PSA as liquidated damages and issued a demand notice for ₹ 446.28 crore on PSA for the revenue lost due to delay in implementing the project and the matter was under arbitration. Mint reported the development on 17 August.
“By forfeiting a measly amount of ₹ 67 crore, PSA made a huge killing on the re-tendered project, compared to the loss caused to the country in monetary terms as well as opportunity costs," Mandar Narhari Parab wrote in a public interest litigation filed in the Mumbai High Court in 2014 that sought to prevent PSA from developing the facility.
“Awarding the contract to PSA would amount to setting a bad precedent whereby bidders would be encouraged to take a chance in respect of submitting bids and walk out with measly forfeiture of bank guarantee and put the exchequer to huge loss as has happened in the present case," Parab contended in his petition, which was thrown out by the Mumbai high court.