The Hindu Business Line : DP World Chennai to pay Rs 91-cr compensation to Chennai port

DP World Chennai, the private container terminal operator at the Chennai port, has to pay Chennai Port Trust (ChPT) Rs 91.51 crore as compensation for not achieving the minimum container throughput of non-transhipment traffic — containers not transhipped in neighbouring ports of Colombo, Singapore, Port Klang, Dubai and Salalah.

The ChPT encashed a bank guarantee of Rs 46.08 crore from DP World Chennai. The private operator also paid, under protest, a demand draft of Rs 17.78 crore to ChPT, according to sources.

The Port Trust has raised a demand for the balance payment of Rs 27.65 crore from DP World Chennai for ‘non-achievement of non-transhipment’ traffic between December 2006 and November 2007.

DP World’s contention is that containers meant for neighbouring ports should also be considered as containers falling under the ‘non-transhipment’ traffic category. However, the Port Trust did not accept this argument citing the norms prescribed in the License Agreement between ChPT and the then Chennai Container Terminal Ltd (CCTL) in September 2006, said sources.

Agreement form

The agreement says that the licensee (CCTL) shall develop Chennai as a ‘hub port’ and ensure that within three years from the date of commencement of operations (November 30, 2001), main line vessels also call on the port.

It shall be a condition for the licensee that the non-transhipment traffic norms for CCTL would be 20 per cent of the total traffic in the third year, 25 per cent in the fourth year and 30 per cent from the fifth year onwards.

In the event of the shortfall in the non-transhipment traffic, the licensee shall pay the licensor compensation equivalent to the amount of royalty by the licensee on the shortfall in traffic.

“The CCTL did not achieve the norms, and the Port Trust had to be compensated,” said sources.

Hub port

The agreement further says that the intention of the licensor to develop Chennai as a hub port is not only to provide for direct sailing between neighbouring ports and Chennai.

The purpose of privatisation of the terminal is to develop Chennai as a ‘hub port’ and not to get compensation for the failure of the licensee to fulfil his commitments.

If the licensee cannot develop Chennai as a hub port, the licensor shall be at liberty to terminate the licence, says the agreement.

The private container terminal in Chennai is one of the oldest in the country.

Originally, P&O Ports (DP World later took over the company’s terminals) commenced operations on November 30, 2001.

At that time, the Chennai port was handling 3,50,000 TEUs per annum, and the private terminal now handles over 10 lakh TEUs a year.

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DP World Chennai to pay Rs 91-cr compensation to Chennai port