Chennai Port Trust to talk to Essar Ports for hike in revenue share

With Essar Ports-led consortium offering about 5.25 per cent revenue share in the proposed Rs. 3686-crore mega container terminal project, the management of Chennai Port Trust has decided to negotiate with the former to increase the share substantially so that both the parties end on the winning side.

According to official sources, a special Board meeting of Chennai Port Trust was held on Dec. 26 to discuss the future of the project as Essar Ports, the only eligible bidder for the port’s ambitious project, offered about 5.25 per cent revenue share (a little above the preferred basic percentage of five).

The other bidder, Adani Ports, failed to secure Security Clearance from the Government of India. Hence, the company’s bid was not opened, when the bids were opened on Dec. 24.

With the revenue share offered by Essar Ports in its bidding is abysmally low given the cost and of the project, the port management has decided to negotiate with the company for increasing the percentage of revenue share.

Final outcome of the bid is depending on the negotiations and Chennai Port Trust may reject the bid if not satisfied with the amended revenue share offer.

It may be noted here that the port had rejected Adani Port’s bid (in previous bidding process in December 2011) citing problems in revenue sharing patterns with the landlord port. They offered 1.5 per cent initially and after negotiations the bidder offered about five per cent. Even after such proposal, Chennai Port management rejected its offer.

BACKGROUND

 Chennai Port Trust has proposed to develop a 2-km long mega container terminal in a straight line at the new outer harbour, with a 2.75 km extension of existing outer arm breakwater and a new northern breakwater of about 1.73 km emanating from the eastern breakwater of the fishing harbour.

The proposed initial depth in front of the new terminal is 18 metre, which will be increased to 22 metre later on. The 90 hectares of land area behind the terminal will be the back-up and storage area which has to be reclaimed.

The estimated rated capacity of the terminal is 4 million TEUs. The preliminary estimate works out to Rs. 3,686 crores for the entire development, out of which the selected bidder is estimated to invest Rs. 3125 crores. The balance investment of Rs. 561 crores would be made by Chennai Port Trust towards dredging, navigational aids and tugs.

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