JNPA and NSICT finalise settlement to resolve long-standing dispute
Boost to PPP in port sector
Jawaharlal Nehru Port Authority (JNPA)—recognised as India’s Best Performing Port—has finalised a tariff settlement with NSICT, part of DP World (DPW), a UAE government company. NSICT operates a container terminal at Jawaharlal Nehru Port.
Background
JNPA and DPW have finalised a conciliation agreement, the broad contours of which the board had earlier approved. With this, a long-standing issue spanning many years and involving lengthy legal battles has been resolved amicably to the satisfaction of both parties. This also sends a positive signal to PPP operations in the port sector, emphasised a release.
Settlement
The details of the settlement are being worked out. Broadly, it involves additional cargo commitment by NSICT, which will enable the terminal to become eligible for volume discounts. The discounts will kick in once the volumes touch certain levels. Given that the cargo volumes had gone down to more than half of what they were prior to the tariff dispute, this is expected to result in substantial increase in volumes. The claims of the operator will be partly recovered by them over the remaining period of the concession through the discounts they obtain against the enhanced traffic.
It was in 1997 that JNPA awarded the terminal concession to DP World. NSICT, DP World’s Special Purpose Vehicle (SPV), entered into a 30-year concession agreement with the port authority, thereby initiating the first Public-Private Partnership (PPP) agreement in India’s port sector.
Dispute
The dispute arose in 2005 when full royalty as a cost was disallowed, leading NSICT to file claims totalling approximately Rs 2,653 crore against JNPA. Following arbitration proceedings and conciliation process, a compromise formula was agreed. The settlement determined Rs 705 crore as the amount adjustable through future volume-based royalty discounts until the remaining period of the concession. This settlement structure protects JNPA’s revenue while requiring NSICT to increase future volumes to claim volume-based discounts, making it a win-win solution for both parties. This is expected to significantly boost traffic at JNPA, generating higher revenues to the port from vessel-related charges, berth hire and royalties.
This settlement provides substantial benefits to the port, resolves a long-standing dispute and sends a positive signal regarding the robustness and success of the PPP model in India, the release added.
Source: Exim News Service: Navi Mumbai, April 7