Chabahar: India Ports Global may ease norms for picking operator

The spectre of being impacted by the US sanctions on Iran could force Indian firms from bidding on a tender to manage, operate and maintain (MOM) the container and multi-purpose terminals at Chabahar port. This will make it tougher for New Delhi to develop the Iranian port for strategic reasons.

Earlier, interest in the MOM contract was shadowed by viability concerns. Now, with the decision of the US to scrap the nuclear accord and reinstate sanctions on Iran, India Ports Global Pvt Ltd is re-writing the commercial and financial terms of the MOM contract to attract bids, a person briefed on the development said.

Payment terms

While the earlier tender terms stipulated bank guarantee and upfront payment by the successful bidder in dollar terms, the new terms will prescribe these payments in Indian rupees because of difficulties in getting dollars.

“The deal will be between India Ports Global and the successful bidder and the commercial and the financial terms will be in rupees. Still, the deal will be risky for us because of the fear of attracting US sanctions for operating in Iran. This could act as a dampener yet again,” said an executive with one of the three firms that had applied on the earlier tender.

No smooth sailing

A Shipping Ministry official said that the Government was waiting to see how the reinstatement of sanctions on Iran will pan out. “Definitely challenges will increase. All said and done, Iran is a risky country and Chabahar port project is not commercially viable,” an official said.

India Ports Global, a 60:40 joint venture between Jawaharlal Nehru Port Trust and Deendayal Port Trust (previously Kandla Port Trust), was set up by the government to make strategic investments in ports overseas.

India Ports Global and Aria Banader Iranian Port signed a deal in May 2016 to equip and operate the container and multi-purpose terminals at Shahid Beheshti – Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.

New norms

Accordingly, India Ports Global had invited bids to select a strategic private MOM partner.

The earlier contract had set a fixed management fee and a variable management fee with the bidder quoting the lowest variable management fee from IGPL winning the deal. These terms are also being eased, the person mentioned earlier said.

The new terms will have to signed off by the Union Cabinet, he said.

The successful MOM partner had to incorporate a special purpose vehicle (SPV) in Iran with a local private partner. This SPV will take a 10 per cent stake in a separate SPV floated by IGPL in Iran to run Chabahar port. This clause is expected to be removed.

India Ports Global had earlier set a March 31, 2018 deadline to finalise the MOM partner.

Equipment

India Ports Global, meanwhile, has picked an Iranian firm to run the port for about 18 months from mid-June till an MOM partner is finalised for a 10-year period, Managing Director Arun Kumar Gupta told BusinessLine .

“By that time, we should finalise everything; not only the Indian MOM partner but all the equipment, etc should be in place to enable full-fledged operations. Those equipment are not off the shelf, they have got their own lead time ranging from 12 to 18 months. The existing equipment are not ideal, we can discharge cargo with them, but efficiency will not be there,” Gupta added.

India Ports Global has ordered four rail mounted quay cranes (RMQCs) for a combined $29.8 million from Chinese crane maker Shanghai Zhenhua Heavy Industries Co Ltd (ZPMC) and 14 rubber tyred gantry cranes (RTGCs) for about $18 million from Finnish crane maker Cargotec OYJ for erecting at Chabahar port.

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