PSA faces damages for not signing port deal
Jawaharlal Nehru (JN) Port may seek damages from Singapore-based port operator PSA International for failing to sign a concession agreement to build a container-loading facility within a deadline that ended on Monday.
A consortium of PSA and local firm ABG Ports was awarded the US$1.2 billion project on 26 September 2011 after it emerged as the successful bidder in a public auction.
The port asked PSA on August 30 to sign the concession agreement within 10 days, a deadline that ended on September 10. PSA asked for more time but the port refused, reported The Mint.
JN Port now plans to encash the bid security of $12 million submitted by the consortium and take other "appropriate action" against PSA. The matter will be discussed at the next meeting of the port's board of trustees slated for September 17, a spokesman said.
"We are not interested in encashing the bid security alone," the spokesman said. "We will work out the consequential damages to be claimed from PSA for delaying the project by one year after it was issued a letter of award for the contract."
If that happens, it will be the first instance of a Union government-controlled port seeking consequential damages from a successful bidder of a contract for failure to sign a concession agreement within the stipulated time after the sector was opened to private investments in 1997.
The bid security shall be appropriated by the port authority and compensation and damages payable to the authority for time, cost and effort of the authority if the selected bidder fails to sign the concession agreement within the specified time limit, according to the so-called model concession agreement for port contracts finalided by the government in 2007.
"After the bidding process is completed with the issue of letter of award to the successful bidder, he has no alternative but to sign the concession agreement, submit the performance guarantee, achieve financial closure and build the facility," said the JN Port spokesman.
JN Port handles around 57 percent of India's container cargo passing through its ports. In the year to March 31, the port handled 4.32 million TEUs, operating at more than its designed capacity of 3.6 million TEUs a year. The port cannot handle more containers unless it expands capacity.
JN Port is expected to handle 11 million TEUs by 2016 and 23 million TEUs by 2020, according to a 10-year plan for ports unveiled by the shipping ministry in 2011.
The new terminal, the fourth at India's busiest container port, is designed to handle 4.8 million TEUs a year, which will double the current container handling capacity of JN Port.
PSA and ABG were not immediately available for comment.