In Revival Mode

Container operations at Kandla port to restart

In a big move, Kandla port recently awarded the contract for the development of a container terminal at the port. Container handling operations at Kandla port had come to a standstill when it took over Berth Nos. 11 and 12 from ABG Infralogistics Limited in 2012, due to the latter’s default in meeting the minimum guaranteed throughput (MGT) requirement. Kandla is currently the biggest cargo handling port in the country and resuming container operations will not only strengthen its position further but will also broaden its cargo base.

Background

In April 2006, ABG Infralogistics Limited won the contract to set up a container loading facility at the port with a capacity of 600,000 twenty-foot equivalent units (TEUs) on a public-

private partnership (PPP) basis. Subsequently, in June 2006, the Kandla Port Trust (KPT) entered into an agreement with ABG Kandla Container Terminal Limited (ABGKCTL), a special purpose vehicle (SPV) formed to execute the project. ABG held a 51 per cent stake in ABGKCTL while the balance was held by PSA International Pte Limited.

However, in November 2012, KPT issued a termination notice to ABGKCTL, after the latter failed to fulfil the obligation on handling the contractually-mandated MGT at the terminal. According to ABG Infralogistics, ensuring MGT was a problem due to inadequate draught and the absence of night navigation facilities at the port. As a result, ABGKCTL found it difficult to handle a greater number of container vessels and thus could not meet the required MGT. The port also faced strong competition from Mundra port which lies just 60 km to the southwest with a guaranteed draught of 18 metres.

KPT later took over the failed container terminal from ABG after depositing a security amount of Rs 1.1 billion as lender dues. Reportedly, this was the first instance of a major port being asked to pay lenders money on a failed PPP contract. The termination of the contract with ABGKCTL led to a fall in the container traffic handled by the port from 160,000 TEUs in 2010-11 to zero TEUs in 2014-15.

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Steps for revival

In order to revive container traffic at Kandla, the port trust decided to rebid the project. The request for qualification (RfQ) bids were invited in March 2014. However, the Tariff Authority for Major Ports (TAMP) did not accept KPT’s proposal and asked it to lower the container handling rates and resubmit the proposal.

Subsequently, in March 2015, KPT reinvited bids after incorporating the changes suggested by TAMP. The contract to develop, operate and maintain the container terminal at Berth Nos. 11 and 12 on a PPP basis has now been awarded to International Cargo Terminals and Infrastructure Private Limited (a part of the JM Baxi Group). On February 29, 2016, the concession agreement was signed between KPT and Kandla International Container Terminal Limited (KICTL), an SPV formed to execute the project. KICTL will be responsible for financing, designing, constructing and commissioning the terminal along with operating, managing and maintaining it under the concession agreement. The concession period of the project is 30 years. As of March 2016, all the requisite approvals including environmental clearance (EC), forest clearance, the consent to establish and the consent to operate  have been received. The estimated cost of the project is Rs 1.59 billion and the construction period is 12 months.

A draught of 13 metres will be made available at these berths, where vessels of 65,000-75,000 deadweight tonnage (DWT) can be handled. With a length of 545 metres and a handling capacity of 0.6 million TEUs per annum, the berths will be equipped with four rail-mounted quay cranes, eight rubber-tyred gantry cranes, four reach stackers and 24 tractor trailers to handle containers. The terminal will also have a backup area of 18.74 hectares. Moreover, the existing railway siding behind the backup area of these berths will be a dedicated railway corridor to the container terminal.

The way forward

Going forward, KPT is expected to start handling containers after a hiatus of four years, which will add to its traffic volume and diversify its cargo base. However, the port’s biggest competitor, Mundra, is also expected to commission its fourth container terminal with a capacity of 1.3 million TEUs by end-2016. Since both the Kandla and Mundra ports will be targeting the same hinterland, it will be interesting to see whether Kandla will be able to meet its container handling targets in the long run.

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