Union government-owned Kamarajar Port Ltd, the entity that runs the port at Ennore near Chennai, has signed a so-called concession agreement with Sical Iron Ore Terminals Ltd for converting its idle iron ore terminal into a coal terminal at the port.
This is the first instance of a public-private-partnership (PPP) terminal being allowed to alter the cargo profile after it was awarded for another cargo type and will set the tone for similar stressed terminals at Union government-owned ports. The permission to change the cargo profile necessitated a re-bid because the shipping ministry said that such restructuring of stressed terminals would have to go through a re-tender to discover the revenue share afresh.
A concession agreement sets out the terms and conditions of a port contract. Port contracts at Union government-owned ports are decided on the basis of revenue share – the entity willing to share the most from its annual revenue will get the deal typically lasting 30 years.
The concession agreement to convert the iron ore terminal into a coal handling facility was signed after the Madras High Court last month dismissed a petition filed by Chettinad International Coal Terminal Pvt. Ltd challenging the evaluation criteria adopted by Kamarajar Port to disqualify it from participating in the auction.
“The court agreed with our evaluation criteria and dismissed the petition filed by Chettinad International Coal Terminal,” M.A. Bhaskarachar, chairman and managing director of Kamarajar Port Ltd, said.
If the highest revenue share quoted in the tender is more than 52.524%, Sical had a so-called right of first refusal to match the highest bid and take the contract on fresh terms.
But, Sical Iron Ore Terminals was the only entity to submit a price quotation on the tender wherein Kamarajar has set a reserve revenue share price bid of 52.524%. It agreed to match the reserve price set by Kamarajar.
To be allowed to handle coal instead of iron ore, the contract terms were re-written to make it on par with an 8 million tonne (mt) capacity coal terminal run by Chettinad International Coal Terminal Pvt. Ltd at Kamarajar Port since January 2011. Chettinad had quoted 52.524% revenue share to win the 30-year deal.
Source:Livemint.com