The Hindu Business Line : New revenue share format for Kochi terminal

THE calculation of annual operating gross revenues for arriving at the revenue share to be paid by Dubai Ports International (the highest bidder) to Cochin Port Trust for running an international container transhipment terminal (ICTT) will be based on concessional rates levied by the private operator and not on the tariff approved by the Tariff Authority for Major Ports (TAMP).

This is a departure from the method followed by the government in the recently concluded bidding process for developing a new container terminal at Jawaharlal Nehru port with private investments. 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.

In the case of the JN port terminal, the government had stipulated that while calculating the annual operating gross revenues for revenue share purposes, only the tariff approved by TAMP will be taken into account. The gross revenues are not calculated on the basis of rebates/reductions given by the Maersk-Concor consortium (the highest bidder with a revenue share of 35.503 per cent) on TAMP-approved tariff.

"But in the case of the Kochi terminal, the concessional rates will be taken into account for calculating the gross revenues for revenue share purposes. TAMP-approved tariff will not apply in this case if the operator decides to offer concessions to the users," a Shipping Ministry official said.

In other words, Dubai Ports International (DPI) will have to pay 33.30 per cent revenue share to Cochin port trust out of the actual revenues earned annually from operating the terminal. If DPI gives rebates/reductions, then the reduced tariff will apply for calculating the gross revenues. Otherwise, the tariff approved by the regulator will be the determining factor.

The private operator at Kochi has been allowed to calculate the gross revenues on the basis of the rebates/reductions granted by it to the users for two reasons. One, this will help the operator compete with Colombo Port and wean away some of the transhipment traffic.

And two, the concessional rates will help Dubai Ports handle more volumes to boost earnings.

However, the private operator will have to consult the Cochin port trust before introducing the concessional rates. "This will have to be done in a transparent manner on a common user basis which is applicable to all," the official said.

According to the official, the container terminal projects at JN port and Cochin cannot be put on the same footing. "The JN port project was a seller's market where the volumes are readily available combined with stiff competition between private operators. So the JN Port Trust could dictate terms while inviting bids from private operators.

Whereas Cochin is a greenfield project which required several relaxations for turning it into a reality, including the change in the calculation of gross revenues," the official said.

This clause has been incorporated by the Cochin port trust in the draft concession agreement with the approval of the Ministry in a bid to sweeten the deal and attract more private investors for developing the Rs 2,000-crore project.

"Because of this concession granted by the Government, the Cochin port trust was able to get a price bid of 33.30 per cent revenue share from DPI. Otherwise, it would have got less," the official said, adding that the price bid submitted by DPI was a "very good offer."

Less than 33.3 pc would cause `loss'

NEW DELHI: The Shipping Ministry reckons that anything less than the 33.30 per cent revenue share would have rendered the terminal project a loss to the Cochin Port Trust. If privatisation had not taken place, the government would have earned the same quantum of surplus estimated at about Rs 23 crore annually as it is getting today from operating the Rajiv Gandhi container terminal.

But in order to retain the surplus of Rs 23 crore, the port trust would have to invest Rs 25 crore within one year on replacing and revamping the existing equipment.

On the basis of the revenue share of 33.30 per cent quoted by Dubai Ports International, the government would get Rs 14.98 crore annually as revenue share alone from the container project at the current level of traffic of 1,65,00 TEUs. Besides, it will get Rs 9.6 crore as lease rentals annually which will increase the rate of 5 per cent every year.

The port trust will also get an upfront fee of Rs 40 crore from the private operator for the value of the equipment handed over to it. "All put together, the government will earn a revenue of Rs 29 crore-Rs 30 crore annually from DPI apart from saving the investment which it would otherwise have spent on replacing the asset. It is the best bargain for the government," a Ministry official disclosed.

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