The Hindu Business Line : Govt incorporates adequate provisions in tender conditions — To protect JNPT's revenue share in Maersk-Concor deal

THE Government has incorporated adequate provisions in the tender conditions to protect the revenue share of 35.503 per cent to be given by Maersk-Concor team to the Jawaharlal Nehru Port Trust (JNPT) for operating a new container terminal at the port.

Revenue share implies the percentage of the annual operating gross revenues, which the private operator has to share with the port trust/Government as mentioned in the price bid.

The private operator quotes a revenue share percentage in the price bid on the basis of the annual gross revenues earned by applying a certain tariff on the traffic volumes handled at his terminal.

Critics allege that if Maersk decides to give rebates/reductions on the tariff approved by the Tariff Authority for Major Ports (TAMP), the Government's revenue share would concomitantly come down. This is because the reductions and rebates granted by the private operator to his customers would reduce his bottom line. And, when the revenue share is calculated on the reduced bottom line, the Government's earnings in the form of revenue share given by the private operator will also get reduced naturally than what was mentioned in the price bid even though the percentage will remain the same.

However, the Shipping Ministry officials said that these allegations/fears were unfounded and baseless. "The tender conditions clearly say that while calculating the gross revenues for revenue share purposes, only the tariff approved by TAMP will be taken into account. The gross revenues is not calculated on the basis of rebates/reductions given by Maersk on the TAMP-approved tariff", a senior Ministry official stated.

"The private operator can give any amount of rebates/reductions to the customers. He can even provide services free-of-cost to them. We are not bothered. But, he has to pay the revenue share annually to the port trust on the basis of the tariff approved by TAMP on the volumes handled during the year. In this manner, the port trust/Government is protected from any vagaries of business", the official said.

This condition will be incorporated in the bidding documents for developing and operating container terminals at Cochin and Kandla ports as well as the fourth container terminal being planned at JNPT, he revealed.

To cite an example, if Maersk earns Rs 100 in a year from providing services at its terminal on the basis of a certain tariff approved by TAMP, of which Rs 35.50 will have to be given to JNPT as revenue share while the balance Rs 64.50 will be retained by the private operator for meeting all his operational costs, debt servicing, capital investment requirements and dividends to shareholders.

In case, Maersk gives rebates/reductions to customers on the TAMP-approved tariff and earns lower gross revenues, that is not taken into account for the purpose of arriving at the revenue share to be given to the JNPT/Government, the official stated.

Only the tariff published/printed (termed the rack rates) by the private terminal operator with the approval of the tariff regulator will be taken into account for arriving at the annual gross revenues earned from operating the terminal.