PSA International has won a temporary reprieve from the Indian Supreme Court against a terminal contract termination notice issued by the Tuticorin port authority, also known as V.O. Chidambaranar (VOC), near Chennai, India.
PSA-Sical Terminals, which began operations in 1998, has been mired in a protracted legal battle over royalty obligations towards VOC.
The stay order, restraining VOC from proceeding with any action against PSA-Sical, would remain in force until the matter is finally decided by the country’s apex court.
“In the meantime, status quo, as on date, shall be maintained,” the Supreme Court said.
This is a huge source of relief for the Singapore-based terminal giant as the contract termination could have also become a long-term pain point for participating in other prospective projects in India.
Under the 2005 cost-plus tariff mechanism, investors were caught up in complications surrounding revenue earned from volume handled beyond committed minimum guarantees and container royalties paid to the landlord port. Such anomalies had led to drastic downward rate revisions, forcing the affected terminals to scale down their throughput volumes in tandem with committed levels.
Those guidelines were later modified in 2008, 2013, and 2015 for successive bidders, without any relief for existing players. Here, PSA Tuticorin, DP World’s NSICT at Nhava Sheva and APM Terminals’ GTI, also at Nhava Sheva, have borne the brunt of downward tariff revisions by the regulator Tariff Authority of Major Ports (TAMP). At the same time, their royalty payment obligations were set to increase sequentially.
The recast “Major Port Authorities Bill 2021”, enacted in November last year, was seen as an effort to transform government-owned major port trusts into a corporate style of functioning with greater autonomy to enable them to better compete with minor or non-government port entities and keep pace with evolving industry dynamics. However, although the landmark legislation gave build-operate-transfer (BOT) operators the freedom to charge market-driven rates similar to how that would work for prospective projects, the government hasn’t signed off on a policy framework to abolish the role thus far played by TAMP.
PSA-Sical is a joint venture between PSA International and Chennai-based Sical Logistics Ltd. Amid the long-running growth uncertainty, the terminal saw just 31,222 TEU during April-May, versus 109,929 TEU handled by its intra-port competitor DBGT.
However, PSA Chennai commands the majority of container volumes moving via Chennai Port. Similarly, the company has high growth expectations from its new terminal at Nhava Sheva, named BMCT.
Jenny Daniel
India correspondent
Contact email: j.daniel@container-news.com
