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Jawaharlal Nehru Port has turned down the Dubai-based port operator DP World’s request to transfer a new container terminal project at the port - which it won in a public auction - to its Indian holding company Hindustan Ports Pvt Ltd.
This is likely to delay the construction of the project and also upset, albeit temporarily, DP World’s plans to restructure its Indian assets.
DP World was the sole bidder for the project, a 330-meter berth with an annual capacity to handle eight lakh 20-ft containers.
The terminal, estimated to cost around Rs 1,000 crore, was awarded to DP World in November 2012, after it agreed to share 28.09 per cent of the revenue with the Port Trust.
Meanwhile, as part of its India strategy, DP World decided that its newly constituted Indian holding company Hindustan Ports will execute the JN port project.
Consequently, Hindustan Port has obtained Foreign Investment Promotion Board’s permission to bring in Rs 440 crore as its equity in the project.
But when it was time to sign the concession agreement, the Jawaharlal Nehru Port Trust (JNPT) took the view that it cannot allow Hindustan Ports to undertake the project work as the model concession agreement for the port project doest not allow substituting a new entity with the original bidder.
Original bidder is DP World India Pvt Ltd which cannot be replaced by Hindustan Ports, even though both belong to the same parent.
DP World’s contention is that both DP World India Pvt Ltd and Hindustan Ports are both Indian subsidiaries of DP World, Dubai.
The FIPB itself has allowed Hindustan Ports to invest Rs 440 crore in the JN port project.
According to port officials, the matter has now been referred to the Shipping Ministry, which is yet to take a decision. “We are awaiting a decision by the (Shipping) Ministry,” said a JNPT official.
DP World, majority owned by the Dubai Government, is the biggest container port operator in India, handling more than 40 per cent of the country’s container volume through its five terminals at JNPT, Mundra (Gujarat) Chennai, Kochi and Vizag.
Of these, the first three are fully owned by DP World.
It holds 80 per cent stake in Vallarpadam container terminal in Kochi, and 26 per cent in the Vizag terminal. Each terminal is now owned by a separate special purpose vehicle.
The restructuring of DP Wold’s Indian operation is reportedly aimed at consolidating and ‘Indianising’ the local assets.
Its Indian investments so far have been routed through Mauritius. After the proposed restructuring, Hindustan Ports will be the promoting company for all the Indian terminals.
Port sector analysts feel that the issue (that JNPT has raised) is a technical one which can be sorted out. In the case of road projects, the revised model concession agreement of NHAI allows subsidiaries and associates of the bidding entity to chip in with equity. Same norms could be made applicable to port projects as well, they point out.
“It is unfortunate that such technical matters holding up important port projects. The JN Port badly needs capacity expansion. All stakeholders should come together to ensure that projects take off on time,” said S.S. Kulkanri, Secretray, Indian Private Ports and Terminals Association.
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