Why NSIGT is be­com­ing DP World’s ‘favourite’

The rate struc­ture is ‘more com­mer­cially ben­e­fi­cial’ than at its first fa­cil­ity at JNPT

The Hindu Business Line - - FRONT PAGE - P.MANOJ

In less than two years since start­ing op­er­a­tions, Nhava Sheva (In­dia) Gate­way Ter­mi­nal (NSIGT), the sec­ond fa­cil­ity run by global port op­er­a­tor DP World at JNPT, is do­ing brisk busi­ness.

Nhava Sheva In­ter­na­tional Con­tainer Ter­mi­nal (NSICT), the Dubai gov­ern­ment-owned firm’s first fa­cil­ity at JNPT op­er­at­ing since 2000, han­dled 728,560 twen­ty­foot equiv­a­lent units (TEUs) in the year ended March 2017. Whereas, NSIGT, which was opened in Septem­ber 2015, han­dled 445,111 TEUs dur­ing FY2017. At this rate, NSIGT will over­take NSICT this year or the next and reach full ca­pac­ity.

Chang­ing tar­iffs

The sta­tis­tics clearly demon­strates the reper­cus­sions of the fre­quently chang­ing rate regime at In­dia’s ma­jor ports, wherein the ben­e­fits aris­ing from new tar­iff struc­tures does not flow to ex­ist­ing op­er­a­tors, but only ben­e­fits those who come later.

DP World, ac­cord­ing to EXIM trade and ship­ping line sources, is di­vert­ing busi­ness to NSIGT, which sits ad­ja­cent to NSICT, be­cause the rate struc­ture un­der which it op­er­ates is “more com­mer­cially ben­e­fi­cial” than NSICT.

NSIGT is de­signed to han­dle 800,000 TEUs a year. It op­er­ates un­der the 2008 tar­iff guide­lines on a rev­enue-share for­mat. It won the deal by of­fer­ing to share 28.09 per cent of its an­nual rev­enues with JNPT.

NSICT is de­signed to load 1.2 mil­lion TEUs, and op­er­ates un­der the 2005 rate guide­lines which has been a con­tentious is­sue be­tween the gov­ern­ment and some 16 ter­mi­nals cov­ered by the regime. It fol­lows the roy­alty model.

In fact, the vol­umes han­dled by NSICT has been steadily de­clin­ing since 2012 when TAMP, the rate reg­u­la­tor for ma­jor ports, no­ti­fied a rate cut of 27.85 per cent at the fa­cil­ity. The rate cut was stayed by the Mum­bai High Court.

Be­sides, from 2012, NSICT has been con­trac­tu­ally man­dated to han­dle only 600,000 TEUs till the con­ces­sion ends in 2027.

NSICT han­dled 1.4 mil­lion TEUs in 2011-12, 1.04 mil­lion TEUs in 201213, users by a re­duc­tion in tar­iffs. That aside, ter­mi­nals such as NSICT were also hit by the con­tract terms, wherein the roy­alty per con­tainer that the op­er­a­tor has to pay to the port au­thor­ity, are low in the first 10 years and rise sub­stan­tially over the bal­ance pe­riod.

Roy­alty payable rises

The roy­alty payable by NSICT to JNPT has in­creased from ₹47 per TEU in FY2000 to ₹3,214 per TEU in FY2018 as against a rate of ₹3,341 per TEU. From the next year on­wards, the roy­alty payable will be more than what it is al­lowed to charge cus­tomers.

With low rates and ris­ing roy­alty, NSICT has be­come un­vi­able. And the best course open is to han­dle only the min­i­mum vol­ume of 600,000 TEUs man­dated by the con­tract, from the point of view of min­imis­ing losses, with­out run­ning into de­fault. This ex­plains why DP World is prop­ping up NSIGT at the ex­pense of NSICT, says in­dus­try of­fi­cials.

“Both our ter­mi­nals at JNPT are gov­erned un­der dif­fer­ent con­ces­sion agree­ments and we are in com­pli­ance with their re­spec­tive pro­vi­sions de­fined in the agree­ments,” the firm said.

DP World is prop­ping up NSIGT at the ex­pense of NSICT, say in­dus­try of­fi­cials

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