Bid controversy

BID CONTROVERSY LOOMS

Perceived inequalities in the bidding process for the Jawaharlal Nehru Port Container Terminal, which work to the advantage of existing operators, suggest it might be time for a rethink

Will the many bidders for the Jawaharlal Nehru Port Container Terminal (JNPCT) be able to compete on an equal footing?

There are two core elements of the recently released Request for Proposals (RFPs) for the terminal concession that suggest parties already operating at Jawaharlal Nehru Port (JNP) have a distinct advantage over the other bidders – the time allowed for bid submission and the ability to meet minimum volume requirements.

There are five existing container terminals at JNPT, including the now public sector operated JNPCT which is being offered for concession. DP World operates two of the terminals, the Nhava Sheva International Container Terminal (NSICT) and the Nhava Sheva (India) Gateway Terminal (NSIGT). The remaining two operators are Gateway Terminals India (GTI), which is APM Terminals together with the Container Corporation of India (CONCOR - a Government of India undertaking) and Bharat Mumbai Container Terminals operated by PSA International Pte Ltd.

All of these parties, with the exception of CONCOR, are bidders for JNPCT.

APM Terminals on this occasion is bidding together with the shipping line Wan Hai, a major operator in the region.

Also in the mix is the Mediterranean Shipping Company (MSC) via its affiliate Terminal Investment Limited (TIL). MSC is a major line active in the port and TIL is bidding together with Adani Ports, the leading Indian container terminal operator. Adani has long been trying to gain a foothold in JNP, India’s major containerport, and has previously successfully collaborated with MSC/TIL; notably in India at Mundra Port where they operate the Adani International Container Terminal Private Limited (AICTPL) on a 50: 50 equity basis.

All of these parties, due to their presence on the ground and working knowledge of JNP, are seen to be afforded a considerable advantage as a result of the very limited time made available by the Jawaharlal Nehru Port Trust in which to submit bids. The RFP was made available from December 24 and the submission date is just a few weeks on, i.e. 17 February 2022. Even under normal circumstances the typical time allowed for the submission of an RFP for a high-capacity container terminal is usually a minimum of six months and under COVID conditions longer. The incumbents can leverage this situation to gain a significant advantage over other domestic and foreign bidders which include Q Terminals, CMA Terminals together with Abu Dhabi Ports and JM Baxi Port & Logistics, International Container Terminal Services Inc, JSW Infrastructure and Ports, Essar Ports and All Cargo Logistics.

There is a particularly interesting situation associated with DP World’s bid. With terminal facilities adjacent to JNPCT if DP World wins the concession this would give it a continuous quay length of 1610m offering significant scale benefits. Conversely, if DP World does not win and MSC/TIL/Adani does it stands to lose around 60,000TEU a month through diversion of this traffic to JNPCT. DP World has it all to play for and a strong bid is expected.

UNFAIR ADVANTAGE

JNPT has set the main bid criteria as the highest royalty fee per TEU with the base for this put at US$24. Coupled with this the requirement for bidders to accept a Minimum Guaranteed Cargo volume, set at 630,000TEU in Year One rising to 1,220,000TEU in Year 10.

Again, this can be seen to offer an unfair advantage to the existing incumbents or major port users who, practically speaking, have the ability to move cargo from the other terminals to meet this requirement. Further, the requirement in itself can be seen to be challenging. In FY20 JNPCT handled 718,863TEU and in FY21 this reduced significantly to 544,027TEU. Overall, there is a record of decline with volumes dropping year on year from a high of 1.53mTEU in FY17.

FY22 is likely to show a higher throughput under COVID conditions but a slowdown is anticipated in the era of recovery from the pandemic with a potential return to the previous pattern of traffic development, a probability cited by a number of informed observers.

8 Key bid conditions

for JN Port Container Terminal raise signifi cant level playing fi eld issues

… what is the rush when it comes to bid submission? ‘‘

Competition for traffic will also be further exacerbated by the addition of major slices of new capacity and particularly that expected in the near term as a result of the phase 2 expansion of PSA’s Bharat Mumbai Container Terminal. This will take overall annual container capacity up to around the 10mTEU/yr mark. Longer term there is also the government approved development of the greenfield, deepwater port at Vadhavan, about 120 miles north of Jawaharlal Nehru Port (JNP), under a landlord model with private participation. This deep draught port (20m) is intended to function as a satellite port to JNPT and offer major new container capacity.

WHAT’S THE RUSH?

Taking into account all the above, it is relevant to ask what is the rush when it comes to bid submission? Surely, it is in everyone’s best interest including JNPT to have adequate time to submit the most robust bids as per best practice?

Equally, it is more the exception than the rule nowadays to have a financial bid based solely on royalty per TEU and such a bid basis is questionable when factoring in the actual advantages held in this respect by the existing operators.

There appears to be a good case for a rethink on these important fundamentals which if they remain in place appear set to spark significant controversy.