PSA walks away from Indian project

Two weeks ago Jawaharlu Nehru Port Trust (JNPT) gave the ABG and PSA consortium a deadline of 10 September to sign the agreement to build the new Rs 6,700 crore (US$1.2bn) container terminal. There was speculation that the operators were holding back because of a battle with India’s Tariff Authority for Major Ports (TAMP), the Major Ports being central government owned.

Mohan Bhambhani, the managing partner of Global Positioning Advisory explained that whereas most terminal operators can expect a proportionate return on their investment in efficiency, India’s TAMP guidelines say that only half of the revenue accruing from volumes in excess of their projected levels can be retained: the other half is used to reduce terminal tariffs.

Mr Bhambhani told Port Strategy that although TAMP is adhering strictly to the guidelines, “it is hurting the private terminal operators… Consequently, these operators are going slow on increasing volumes and investment in efficiencies”.

However, it also should be noted that the JNPT concession, awarded just a year ago, was based on the operator’s offer to share 50.82% of the annual revenue with its landlord, the highest revenue share bid so far in a public-private port project.

JNPT has also decided to encash the related bank guarantees for the cancelled terminal. Further damage suits could be brought by the government, which could be difficult for PSA as it has interests in other Indian ports and operates terminals in Chennai and Tuticorin.