India’s port privatization program suffered a serious blow Monday when the Jawaharlal Nehru Port Authority (Nhava Sheva), the country’s largest container handler, cancelled a global tender to develop its long-awaited fourth container terminal project.
The decision was expected after the top bidder, Singapore’s PSA International, failed to sign a concession agreement with the port authority within the stipulated deadline that ended last month.
“The board has decided to terminate the letter of intent issued to the PSA-led consortium and also forfeit the bidder’s bond amount [$12.5 million]. The port will call for new bids for the project. There was no other option,” a port official said.
An official announcement is expected shortly.
PSA and its Indian partner, ABG Ports, had won the $1.5 billion bid in September last year after offering a 50.8 percent share of revenue as annual royalty to the landlord port.
The bidders’ lack of interest was attributed to the growing concerns over the financial viability of the project given its high cost and the current downturn in the global container shipping market.
The authority planned to develop the project in two phases on a 30-year, build-operate-transfer basis, with a total designed capacity of 4.8 million 20-foot-equivalent units. The government had hoped to sign a contract with the consortium in January, and the first phase was expected to be operational in three years with an annual capacity of 2.4 million TEUs. Now the project is likely to be seriously delayed.
Nehru has three terminals: DP World’s Nhava Sheva International Container Terminal; Gateway Terminals operated by APM Terminals; and port-run Jawaharlal Nehru Container Terminal, which cumulatively handled a record 4.32 million TEUs in fiscal 2011-12 that ended March 31. Based on current projections, the port is expected to handle 10 million TEUs by 2015-16 and roughly 23 million TEUs by 2024-25.