SINGAPORE's government-owned port operator PSA International Pte Ltd has backed out of a INR130 million (US$2.7 million) deal to develop a container terminal at the port of Hazira in the state of Gujarat, on the west coast of India.
"PSA has told Shell that stiff commercial terms have rendered the project unviable," an unidentified source familiar with the project said in an online report by Delhi's Hindustani Times (livemint.com-Wall Street Journal). "Unless the commercial terms are changed, it is not conducive to participate in developing the project."
The report said that Shell Gas BV holds a 74 equity interest in Hazira Port Pvt. Ltd (HPPL), an entity created to develop and operate Hazira port.
The state government awarded Shell the rights to develop and operate the port for 30 years starting from 2002. The company has set up a facility to handle 2 million tonnes of LNG imported into the country at the port.
Under the terms of the contract, HPPL is obliged to develop facilities to handle other cargo, including containers at the port. This is where PSA's expertise was called upon, and the global port operator signed an agreement with HPPL in January 2007 to develop and operate a box terminal with an annual container handling capacity of 1.23 million TEU and an opening date set for 2010.
However, the report said discussions between Shell and PSA on the financial terms of the project have coming to a grinding halt, chiefly over the payment of waterfront royalty to the state government of Gujarat, which would have been on top of the sum PSA would have had to pay HHPL for using the port.
The report said the waterfront royalty payable to Gujarat on a per container basis by the terminal operator were to have risen by 20 per cent every three years.
"If the waterfront royalty rises by 20 per cent every three years, PSA will not be able to increase the container handling charges at the terminal by 20 per cent, particularly when the environment is competitive. Customers will not pay if the rates are hiked," the same source was quoted as saying.
"PSA has told Shell that stiff commercial terms have rendered the project unviable," an unidentified source familiar with the project said in an online report by Delhi's Hindustani Times (livemint.com-Wall Street Journal). "Unless the commercial terms are changed, it is not conducive to participate in developing the project."
The report said that Shell Gas BV holds a 74 equity interest in Hazira Port Pvt. Ltd (HPPL), an entity created to develop and operate Hazira port.
The state government awarded Shell the rights to develop and operate the port for 30 years starting from 2002. The company has set up a facility to handle 2 million tonnes of LNG imported into the country at the port.
Under the terms of the contract, HPPL is obliged to develop facilities to handle other cargo, including containers at the port. This is where PSA's expertise was called upon, and the global port operator signed an agreement with HPPL in January 2007 to develop and operate a box terminal with an annual container handling capacity of 1.23 million TEU and an opening date set for 2010.
However, the report said discussions between Shell and PSA on the financial terms of the project have coming to a grinding halt, chiefly over the payment of waterfront royalty to the state government of Gujarat, which would have been on top of the sum PSA would have had to pay HHPL for using the port.
The report said the waterfront royalty payable to Gujarat on a per container basis by the terminal operator were to have risen by 20 per cent every three years.
"If the waterfront royalty rises by 20 per cent every three years, PSA will not be able to increase the container handling charges at the terminal by 20 per cent, particularly when the environment is competitive. Customers will not pay if the rates are hiked," the same source was quoted as saying.