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i-maritime News Letter

Law Ministry’s views sought on DP World container project at JNPT - 2013-03-20

The Shipping Ministry has sought the Law Ministry’s view on whether it can allow the Indian assets holding company – Hindustan Ports Pvt Ltd - of DP World to sign the concession agreement for developing a 330-metre berth at JN Port. The legal opinion has been sought because DP World had bid and won the rights to develop the 330-metre berth in the port through a special purpose vehicle. But subsequently it wanted its newly set up holding company to sign the concession agreement. This led to the question whether a different legal entity can be allowed to develop the project. “An approval would be required because Hindustan Port Private Ltd is a different legal entity than what had bid for the project. Moreover, the request for change has come even before the bidding process has reached the concession agreement signing, which is a key milestone required for completing the bidding process,” said a Ministry official who did not wish to be quoted .

The option before the developer is to first sign a concession agreement and then seek a change, added the source. In early December, DP World received a letter of award from JN Port for developing the 330-metre berth in which the firm proposed investment of $200 million. Subsequently, in late December 2012, DP World got the Finance Ministry nod to form HPPL, to act as an investing company and receive foreign investments for making down stream investments into other Indian companies. DP World operates five container terminals in India — Nhava Sheva, Mundra, Cochin, Nhava Sheva, Visakhapatnam.

Interestingly, if this award were to be cancelled for any reason and bids re-invited for the same project next fiscal, the project will attract the new port tariff norms.In other words, it will permit more flexibility for tariff setting, making the project more attractive for port developers. The Shipping Ministry has proposed a set of new tariff norms for major ports with effect from April 1, which will allow developers to fix port tariffs higher than what is suggested by the port tariff regulator - Tariff Authority of Major Ports (TAMP).

The new policy will be implemented for those projects whose financial bidding takes place next fiscal. The new norms basically permits project developers — DP World in this case — to fix tariffs higher than the tariff ceiling recommended by TAMP. However, companies have to share their revenue with Port Trusts, in proportion to the increase in realisations due to higher tariffs. But, the risk in case of a re-bid is that competition may become wider and DP World may even lose the project. In 2012, DP World was the sole bidder for the project, and it may attract attention from other firms under the new port tariff regime. In 2012, DP World registered a 6.2 per cent growth against the previous year in container volumes in Asia-Pacific and Indian subcontinent, higher than the 2.4 per cent growth registered globally.

Source : Hindu Business Line