Economy

PSA wants ‘viable resolution’ to Tuticorin port woes

P Manoj Mumbai | Updated on February 19, 2018 Published on February 19, 2018

Tan Chong Meng, Group CEO, PSA International   -  SHASHI ASHIWAL

Group CEO endorses calls for major ports to move to market-driven pricing

India needs to create a favourable environment for port-operating firms to re-invest, the global CEO of Singapore’s PSA International has said, while urging the government to work out a “viable resolution” for the troubles facing its facility at VOC Port Trust in Thoothukudi, Tamil Nadu.

PSA-Sical Terminals, the entity that runs the container terminal at VOC Port Trust from 1999, is 62.5 per cent owned by PSA International, a unit of Temasek Holdings, the sovereign wealth fund of Singapore. The terminal has been involved in legal cases over tariff issues for many years.

The issue is now in the Supreme Court.

“Something has to be done for a viable resolution to be reached,” Tan Chong Meng, Group CEO, PSA International, told BusinessLine.

The 30-year contract, PSA’s first investment in India and its second globally after deciding to venture overseas with a terminal in China in 1996-97, also faces the risk of running into default if it does not replace cargo-handling cranes between the 17th and 20th year of operations, a timeline that has already begun.

“I wish I had a crystal ball to say this is what will happen,” Meng said when asked whether PSA had any clue on the consequences.

Investments

The global giant has been in India for close to two decades, investing more than $2 billion in facilities at VOC Port Trust, Chennai Port Trust, Kolkata Port Trust, Kakinada Port and more recently in JNPT.

“That is a big investment in a single country, especially one which, over time, saw slightly slower growth, and then recently, more of a stronger pick-up. So I was putting money with a lot of faith in the future of India. The initial stages of this partnership with India, to be frank, have not been financially that rewarding. Well, PSA earns its keep in India; but to push forward and invest more, we hope we would be able to see JNPT as one of our more successful projects.”

PSA, according to Meng, is in India not just for the short to medium term. “We have seen the evolution of the mid to long term. Things can still be improved, could we say, normalised, or put on a level playing field, especially now with the presence of a large number of private ports and operators,” he said, referring to the demand of port operators to allow terminals running under different rate regimes to come under the latest rate structure announced in 2013.

“Indeed, all terminals should be moved to the 2013 rate regime. It is not just about profitability. Actually, profitability and the health of companies are important for re-investment.”

Given the ageing lifecycle of many of India’s major ports, it becomes necessary to re-invest.

“If the economic environment isn’t changing, you’ve got a bit of a problem and operators are always reluctant to leave an environment — you operate here for 20 years, you know everybody and you would love to continue, but loving to continue doesn’t mean environment is favourable,” Meng said, while endorsing calls for India’s major ports to move to a market-driven pricing.

Open-tariff regime

“Today, in the port area, India is already at least evenly served, or more likely, over-served by more operators and more ships than it has been in the past. So gradually, it would not be a disadvantage to India to move towards a more open-tariff regime like many other locations.”

PSA believes the Major Port Authorities Bill to convert port trusts into authorities is part of “signals” that India will continue to progress.

“But you must execute right. It is better it happens so that we continue to manage those issues in whatever way is appropriate. Sometimes, we believe if we can avoid certain types of actions, like legal, it is so much better for the health of the business.”

Published on February 19, 2018
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