Kolkata Port Trust becomes first state-run port trust to invoke force majeure

Kolkata Port Trust has declared force majeure at its Haldia Dock Complex, becoming the first state-owned major port trust to invoke the clause in the wake of the outbreak of the coronavirus that has roiled trade.

Most of the private ports and terminals operating in the country have invoked force majeure, a clause that absolves firms from meeting their contractual commitments for reasons beyond their control.

“Kolkata Port Trust (KOPT) has considered the COVID-19 pandemic as a natural calamity and invokes force majeure from 06:00 Hrs on 22 March to 06:00 Hrs on 15 April 2020,” A K Mahapatra, General Manager (Traffic) wrote in an April 5 trade circular, a copy of which has been reviewed by Business Line.

On March 24, the shipping ministry had asked all the 11 major port trusts “to consider COVID-19 pandemic as a valid ground for invoking force majeure clause on port activities and port operations also, in as much as obligations under various contracts (involving the major port trusts) are concerned”, to deal with the difficulties faced by stakeholders.

In doing so, the shipping ministry had cited a March 19 office memorandum issued by the finance ministry, clarifying that the COVID-19 pandemic “should be considered as a case of natural calamity that would entitle invocation of force majeure provisions”.

KOPT has also decided to waive demurrage charges / rent for all types of cargo and container from 06:00 Hrs on 22 March to 06:00 Hrs on 15 April 2020.

The contractors operating mobile harbour cranes at berth numbers 1, 5, 9 and 14, Haldia floating terminal and container terminal will not be penalized for achieving less productivity than the MLP as per the contract agreement.

Penal berth hire charges will not be levied from the vessel's agent for achieving less productivity at Berth No 10, than the agreed benchmark productivity rate as per the Berthing Policy.

The above period will be exempted from consideration of minimum guaranteed throughput (MGT) period for strategic plans and other similar schemes and way leave licensees as well as for plots allotted on long term basis against MGT commitment. However, the tonnage handled during this period will be considered against the fulfilment of MGT commitment, Mahapatra wrote in the trade circular.

The Federation of Association of Stevedores has been lobbying the ports trusts to invoke force majeure.

“It is impossible to work the vessels at contracted terms, as ports are not able to supply labour nor provide security to private labour or assist in transportation, accommodation, food or PPEs for the labour,” K V Krishna Kumar, President, Federation of Associations of Stevedores, wrote in a April 4 letter to the Shipping Minister Mansukh Mandaviya.

“Vessels meant for major ports are shifting to private ports as private ports have declared force majeure,” he said adding that declaration of force majeure by port trusts will safeguard the interests of importers and exporters and stevedores and handling agents, who are unable to perform as per earlier contracted terms”.

“If force majeure is not declared, it could lead to a huge drain of foreign exchange, huge expenses in international litigation etc, which our country can ill afford,” he added.

Port Trusts have delayed invoking force majeure because “they don’t do everything from stevedoring, loading and unloading to delivery”.

“Private port operators and terminals are invoking force majeure because they are making end-to-end contracts, but we are not into that kind of contracts with stevedores,” said the chairman of a port trust located on India’s eastern coast.