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JSW Infrastructure Ltd is set to win the rights to run its first container terminal project at a Central Government-owned port. It has quoted the highest per-container royalty to operate a facility at New Mangalore Port Trust (NMPT).
The Sajjan Jindal-led JSW Infrastructure quoted a royalty of ₹951 per twenty-foot equivalent unit (TEU) for a 500,000 TEU capacity terminal to be run from Berth No 14 at NMPT on a 30-year contract, multiple government sources told BusinessLine . The company confirmed it had emerged the highest bidder for the project.
JSW’s winning bid was almost double the rate quoted by Adani Ports and Special Economic Zone Ltd (APSEZ), India’s biggest private port operator. It is expected to be cleared by the board of trustees of NMPT at its next meeting, which will clear the decks for the issue of a letter of intent (LoI) to the firm.
The mechanisation of Berth No 14 on a public-private-partnership (PPP) mode at NMPT for handling containers and other clean cargo with an investment of more than ₹300 crore will be the first to utilise the revised model concession agreement (MCA) for PPP projects at major ports approved by the Cabinet in January 2018.
Revised norms
Under the revised MCA, the concessionaire (private operator) is contractually mandated to pay royalty on a “per metric tonne of cargo/per TEU handled” basis to the government-owned port trust, which would be indexed to the variations in the wholesale price index (WPI) annually. It replaced the earlier procedure of charging royalty equivalent to the percentage of gross revenue quoted by the winning bidder calculated on the basis of upfront normative tariff ceiling prescribed by the Tariff Authority for Major Ports (TAMP).
It addressed the long pending grievance of PPP operators that revenue share is payable on ceiling tariff and price discounts are ignored.
The upfront tariff for the project was set by TAMP based on the rate regime finalised by the Shipping Ministry in 2013 for PPP projects, which entitles the private operator to a rate hike every year to account for rising prices because the base reference rates are indexed to the WPI to the extent of 60 per cent.
The 2013 rate regime also guarantees a raise of as much as 15 per cent on the WPI-indexed reference rate (set upfront at the beginning of the contract by TAMP) during each year of the 30-year contract if the terminal operator complies with certain performance standards.
JSW Infrastructure currently runs ports/terminals at Jaigarh and Dharamtar in Maharashtra, and Mormugao in Goa that are used mostly for handling the steel-maker’s in-house cargo.
It is also building new facilities at Paradip Port Trust to handle iron ore and coal as well as a new port at Nandgaon in Maharashtra to help reach the capacity target of 200 mt besides raising the third-party cargo base.
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