Starport-Louis Dreyfus JV terminal allowed to handle 10 more cargo items at Vizag Port.

A bulk cargo handling terminal at Visakhapatnam Port Trust (VPT) run by an Indo-French joint venture has been allowed to handle 10 more cargo items, from the four it was originally built to serve, triggering demands for similar treatment from those equally hit by adverse market conditions.

The Tariff Authority for Major Ports or TAMP has notified the rates for handling the 10 extra cargo items at the West Quay Multiport Pvt Ltd (WQMPL) run by ALBA Asia Pvt Ltd, a joint venture between Starport Logistics Ltd and French shipping firm Louis Dreyfus Armateurs S.A.S, on an application filed by VPT.

The rates for handling the extra cargo were cleared by TAMP with the condition that it will automatically cease to apply after the project facility reaches 75 per cent of optimal capacity of 20.87 lakh tonne for two consecutive years. It will be reviewed by VPT on completion of five years from the scheduled project completion date.

VPT said its decision conforms to the concession agreement and was aimed at “improving the capacity utilisation of the WQ-6 terminal purely in the interest of business and to avoid the investment made for the development of the facility from becoming infructuous and the amount lent by banks from becoming non-performing asset (NPA)”.

The board of trustees of VPT allowed the terminal operator to handle additional 10 cargoes on a “non-exclusive basis” and there was “no bias” against other terminal operators, it said.

Under the 2008 upfront tariff guidelines that governs terminals such as West Quay Multiport, price bids are called after TAMP sets rates for berth hire, handling, storage and miscellaneous services. Such rates are valid for the entire 30-year duration of the contract except for the automatic annual indexation to the Wholesale Price Index (WPI) at 60 per cent.

TAMP was initially reluctant to consider the proposal stating that the 2008 tariff guidelines do not prescribe provisions to review the upfront tariff notified by it and/or review the cargo profile after the project was awarded.

The rate regulator later changed track to say that the “seed for fixation of tariff for additional cargo items was sown during the pre-bid stage itself”.

To support its case, VPT referred to a response given to one of the potential bidders during the pre-bid meeting which stated that “in case of non-availability of indicative cargoes, which is unlikely, the Port will permit positively other cargoes that can be handled at this berth subject to approval of TAMP”.

“The existence of a clarification in a pre-bid meeting which is part and parcel of the concession agreement indicates that the request made to TAMP does not amount to post-bid modification and is a legitimate commercial action initiated by the contracting parties herein in accordance with the law,” VPT’s counsel P Sriram wrote in his legal opinion on the matter.

This was endorsed by the Shipping Ministry, which said, “clarification provided during the pre-bid meeting by VPT is part and parcel of the concession agreement and fixing of rates for additional cargo is a part of the concession agreement. Therefore, observation of TAMP that this is a post-bid change, is not substantiated. Accordingly, TAMP is requested to take further necessary action on the proposal of VPT as per clarification given during the pre-bid meeting and concession agreement”.

“Such a relaxation would set a wrong precedent with similar claims from other BOT operators resulting in chaos and anomalies among the various BOT operators and the landlord ports and lead to fresh disputes,” said an official at Vizag Seaport Private Limited (VSPL), the first private terminal operator at VPT.

“If some other BOT operators are aggrieved and stressed, they can opt for the redressal mechanism put in place by the government for optimum utilisation of the facility created,” the VPT official said adding that similar relaxations for other terminals at VPT cannot be entertained in the absence of provisions in their respective concession agreements.

HBL