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State-run lender Canara Bank has sought bids to replace financially struggling Gammon Group with a new developer to complete construction and run a stalled container terminal at the Mumbai Port in a first such case in the ports sector.
Indira Container Terminal Pvt Ltd (ICTPL), the special purpose company formed by Gammon India Ltd, Gammon Infrastructure Projects Ltd and Spain’s Dragados SPL, to build and run the facility owes ₹750 crore to a clutch of five banks led by Canara Bank. The lending consortium includes Central Bank of India, Punjab National Bank, United Bank of India and India Infrastructure Finance Co Ltd.
The lenders have decided to exercise its rights vested under a substitution agreement signed with ICTPL and the Mumbai Port Trust to identify a new developer/operator and secure their interests.
BusinessLine has reviewed a copy of the expression of interest issued by Canara Bank.
The project, which has achieved 65 per cent physical progress, is being monitored by the Prime Ministers’ Office (PMO) for an early resolution.
Gammon India and Gammon Infrastructure have been hauled to the National Company Law Tribunal (NCLT) by lenders in separate cases after they defaulted on repaying loans.
The Gammon Group-led consortium won the rights in 2007 to develop and operate the new container terminal for 30 years. The consortium agreed to share 35.064 per cent of its annual revenue with the Mumbai Port Trust to win the deal in a public auction.
ICTPL signed a concession agreement with the Mumbai Port Trust on December 3, 2007 to set up the project. The first phase of the new facility with a capacity to load 1.2 million standard containers a year and costing ₹1,015.66 crore was expected to start operations in December 2010.
ICTPL completed the construction of the berth, but was unable to start operations because Mumbai port, as part of its contractual obligations, could not complete the dredging work and hand-over the entire back-up area required to store containers.
Clearance delay
The developer also lost time awaiting security clearance from the government to buy cranes used for loading and unloading containers at the terminal.
The delay, apart from escalating the project cost, affected the viability of the project because the Jawaharlal Nehru Port Trust (JNPT), also state-owned and located a few kilometres away, bolstered its stature as a preferred gateway for export-import containers shipped by the sea route.
In August 2015, the Mumbai Port Trust allowed ICTPL to handle cars and steel coils at the berth as an interim arrangement to help put idling resources to optimal use.
The Port Trust, meanwhile, also started work on restructuring the container terminal to permit handling other cargo, through a re-tendering of the project, which is awaiting Cabinet approval. In July this year, the lenders notified the Mumbai Port Trust of its decision to exercise the substitution rights.
“If the lenders fail to find a suitable developer/operator during the substitution process, they will go for termination,” an executive with one of the lending banks said, adding that the project will be taken to the NCLT after exhausting all options.
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