JNPT anchors its pole position with PSA’s entry

When PSA International opens a new container-handling facility at Central government-owned Jawaharlal Nehru Port Trust near Mumbai in mid-January, it will mark the the company’s entry into India’s Western coast.

But, more importantly, it will see three of the world’s top four container-port operators present at JNPT, India’s busiest container port which handles close to half of the country’s container cargo.

APM Terminals, the container port-operating unit of Danish shipping giant AP Moller-Maersk Group, and DP World, a firm majority owned by the Dubai government, currently run container-loading facilities at JNPT.

The one missing is Hutchison Port, the container-port operator owned by Hong Kong billionaire Li Ka-shing. Hutchison cannot invest in India’s ports because the government has barred it from bidding for projects, citing its links with mainland China.

In India, PSA, which is owned by the sovereign wealth fund of Singapore, runs facilities at Chennai Port Trust, VO Chidambaranar Port Trust and Kolkata Port Trust (all three owned by the Centre) and at Kakinada Port in Andhra Pradesh, all on the Eastern sea board.

JNPT currently has four container terminals — one run by the port trust itself, two by DP World and one by APM Terminals.

Rate regimes The opening of Bharat Mumbai Container Terminals Private Limited (BMCT), a wholly owned facility of PSA, will also see all the four private terminals operating under different rate regimes.

DP World’s Nhava Sheva International Container Terminal Pvt Ltd (NSICT) and APM Terminals’ Gateway Terminals India Pvt Ltd (GTIPL) operate under a rate regime finalised in 2005. Here, rates are set by the Tariff Authority for Major Ports (TAMP) after the cargo facility was constructed, usually by adding 16 per cent to the actual costs. Such tariffs are revised every three years.

Still, there are differences within this rate regime depending on the date of starting operations.

NSICT, India’s first private container terminal at a major port, started operations in 1998 when the royalty model was used to bid out projects. Accordingly, the terminal operator has to pay the royalty specified in the contract on each container handled at the terminal. The royalty per TEU (twenty-foot equivalent unit) rises every year.

Besides, in the case of NSICT, the royalty paid to JNPT is allowed as a pass-through in rates only to the extent quoted by the second-highest bidder in the public tender.

Whereas, GTIPL, which started operations in 2006, follows the revenue-share model. It is contractually mandated to share 35.503 per cent of its annual revenue with JNPT and the revenue share is not allowed as a cost in setting rates.

In 2008, the government adopted a new rate regime for projects bid from that date. NSIGT operates under the 2008 rate regime. It shares 28.09 per cent of its annual revenue with JNPT.

In 2013, the government introduced a new rate regime, which is basically the same as that of 2008, except that cargo handlers will be allowed to charge a maximum 15 per cent more (termed a performance-linked tariff) than the indexed reference or ceiling rate during each year of the 30-year contract if they comply with certain performance standards prescribed by the regulator.

PSA’s BMCT will operate under this rate regime and is contractually mandated to share 35.79 per cent of its annual revenue with JNPT. The revenue share is not allowed as an item of cost in setting rates for NSIGT and BMCT as well.

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