The Hindu Business Line : Two-terminal-per-operator cap — Opening the competition box at major ports

IN A move to foster competition, the Shipping Ministry has fine-tuned proposals to restrict one private operator to develop and operate a maximum of two container terminals at one major port. In contrast to the initial plan to impose the `two-terminal-per-operator' cap just to a particular major port, the Ministry is now seeking to extend this proposal to an adjacent major port as well, such as Chennai and Ennore ports, Jawaharlal Nehru Port and Mumbai Port or Kandla and Haldia Ports.

To illustrate, consider the Chennai Port where P&O Ports has been operating a container terminal since November 2001. As per the new policy, P&O Ports will not be allowed to bid if the Chennai Port Trust decides to construct a second container terminal with private investments. P&O Ports will also be excluded from participating in a tender if the nearby satellite port of Ennore wants to develop and run a container terminal with private funds.

"In case there is only a single terminal/facility at a particular major port, it would have one operator. However, whenever a second terminal is to be set up at the same major port or a first terminal in an adjacent major port, e.g., JN Port and Mumbai ports, Chennai and Ennore ports, the existing terminal operator would be excluded from participating in the tendering process to ensure competition.

"If there are a minimum of two private operators in any major port, no restriction would be placed on the existing operators to bid for the subsequent terminals, subject to the condition that a single private operator will not be allowed to operate more than two terminals at the same major port including terminals at an adjacent major port," the Ministry has said in a draft note prepared for the consideration of the Cabinet Committee on Economic Affairs as part of the Rs 58,000- crore National Maritime Development Programme.

"The idea is to ensure quality service at lowest cost and bring in both inter-port as well as intra-port competition so that users have a choice not only among ports but even amongst operators within the same major port," it said. The Ministry has also re-defined the minimum quay length required for container terminals to optimise utilisation of the facility. The modified proposal says that a quay length of 1000 metres (against the initial plan of 800 metres) in a straight line will be considered wherever possible for one container terminal.

"The existing private terminal operators, while eligible for a second container terminal, would have no rightful claim for any additional quay length if the present quay length in their existing terminals are less than 1000 metres," the draft note said.

The Ministry has started implementing the `two-terminal-per-operator' cap by applying this clause to the tendering process for developing a third container terminal and the second with private investments at the JN Port where P&O Ports has not been allowed to participate. The JNPT now has a container terminal run by the Port Trust/Government and a second one operated by P&O Ports at Nhava Sheva.

A consortium comprising the Danish firm Maersk and the state-owned railway PSU Concor has bagged the deal for developing a new (third) container terminal at the port. When the Maersk-Concor combine starts operations, the JNPT will have three container terminals, one run by the Government and two by different private operators.

The JNPT has started preliminary work on developing a fourth container terminal (the third with private funds) at the port. When it floats a tender for the new box terminal, both the existing private operators — P&O Ports and the Maersk-Concor consortium — can bid for it. If, say, P&O Ports wins the right to develop and operate the fourth container terminal, taking the tally of terminals it runs at the JNPT to two, then it will be banned from participating for a fifth container terminal (the fourth with private investment) at the port. Whereas the Maersk-Concor team will be eligible to bid for the fifth terminal.

Industry sources reckon that extending the `two-terminal-per-operator' cap to an adjacent major port is bound to create problems for the Government depending on which (say, Chennai or Ennore) will float the tender first for a new container terminal in these ports. While Ennore Port Limited, the first corporate major port, is ready to float a tender to build the first box facility, Chennai has just secured the freedom to develop a new facility.

While awarding the container terminal project to P&O Ports, the Chennai Port Trust had given an undertaking that it will not set up a parallel, competing facility for three years after CCTL starts operations. This deadline ended on November 30, 2004. "We have presented our case to the Shipping Ministry for another container facility at the port," the Chennai Port Trust Chairman, Mr K. Suresh told Business Line. The Port Trust plans to hand over one of its existing berths to a private operator for handling containers. "We have asked the Indian Ports Association to conduct a feasibility study for the new facility including identifying the berth to be converted into a container terminal. The study is expected to be ready in four-six months," Mr Suresh stated.

If the Ennore Port floats a tender first for building a new terminal, P&O Ports will be excluded from participation, in line with the policy. But what will happen when Chennai follows up by floating a tender for a new terminal?

On the other hand, if Chennai comes up with a tender first, P&O Ports will not be allowed to participate as it already operates a terminal at the port. Then, what will happen when Ennore invites interest for a new facility?

Confronted with this piquant situation, a Ministry official said that P&O Ports may be allowed to participate in the tenders for both the new terminals and depending upon whether it is successful in the bidding process, the Government will take a call on excluding the operator in one of the new projects.

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