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Amit Mitra

Mumbai , Nov. 26

THE campaign between the different parties in the race for the Rs 900-crore third container terminal project at Jawaharlal Nehru Port is gaining stridency, as the December 1 deadline for submission of the final financial bids draws closer.

The campaign has acquired a new twist with some bidders, shippers and steamer agents training their guns against the shipping lines-led consortia in the fray on the issue of the transfer price mechanism that, they feel, would enable the shipping lines to quote higher revenue share to bag the project and yet cough out lesser revenue to the port.

Analysts following the bidding process feel that most of the shipping-lines led consortia were arriving at their financial bids based on the transfer price mechanism, which essentially involves quoting high revenue share percentage by lowering the terminal handling charges and offsetting this loss by a marginal increase in freight. Thus, the analysts say, even though the port may get high revenue sharing bids from the shipping lines that are in the race, it may actually end up getting lesser revenue as compared to its income from the existing two terminals.

In fact, it is this very factor that gives an edge to the shipping lines-led consortia over other bidders, as the latter have no control on freight rates and would have to essentially depend on the revenue share.

The shipping lines, on the other hand, will have the flexibility to water down the terminal handling charges and loading this loss on to the freight rate, which is in their hands. "This does not provide a level-playing field for the non-shipping lines bidders," says Mr. Srinivasan, president of the Western India Shippers Association (WISA).

The major shipping lines that are in the race include Maersk, which has tied up with Concor, CMA-CGM of France in association with Seaking and PSA with Wadia and Sons of the Bombay Dyeing Group.

When contacted a senior representative of Maersk India said: "In theory it may sound good, but in real life it is different. For a project of this size, there are so many factors that have to be taken into account."

How exactly does this transfer price mechanism work for the shipping lines? Explained an analyst: "At present, the handling rate at the JNPT-run terminal is about Rs 3,000 per TEU (twenty-foot equivalent unit) and that of P&O operated NSICT about 16 per cent higher. What the shipping lines are planning is to lower the handing charges so that they can offer higher revenue sharing percentage to the port. For example, a 40 per cent share of a tariff of, let's say, Rs 2,000 will be Rs 800, while a 30 per cent share of the existing tariff of Rs 3,000 will be Rs 900. So while the port will naturally have to opt for the higher bid of 40 per cent, it will actually get a lesser revenue. And the Tariff Authority for Major Ports (TAMP) or the port will have no reason to disallow a cut in tariff reduction, as it would benefit the shippers."

Now, how will the shipping lines make up for the loss that would result from the cut in handling charges? "Simple. As they own the ships, they will have the freight flexibility, Mr Srinivasan said.

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