APM Terminals pledges Rs 3,320 crore for expanding Pipavav Port as concession extension chances brighten

GANDHINAGAR : APM Terminals Management B V-controlled Gujarat Pipavav Port Ltd has pledged Rs3,320 crores to expand the cargo handling capacity of the private port located at Pipavav and has sought “necessary permissions” from the Gujarat government for the work amidst strongest indications yet that an extension of the concession beyond 2028 was imminent.

APM Terminals, the port operating unit of Danish transport and logistics group A P Moller-Maersk A/S, holds 43.01 percent stake in Gujarat Pipavav Port Ltd, the entity that runs India’s first public-private-partnership (PPP) port.

The port operator has made no secret of its desire to get the concession extended from the Gujarat government, which it previously said was key to its capacity expansion plans.

On Wednesday, Gujarat Pipavav Port Ltd and Gujarat Maritime Board signed a memorandum of understanding at the Vibrant Gujarat Global Summit to facilitate necessary permissions for the construction of liquid berth, container berth and yard, container handling equipment, and marine infrastructure development at Pipavav Port, estimated to cost some Rs 3,320 crore, APM Terminals said in a statement.

Separately, APM Terminals and Welspun Group signed an MoU to explore opportunities for development of green hydrogen facilities at Pipavav Port in a collaboration that targets export and domestic uses.

In the run up to the Summit, APM Terminals Chief Executive Officer Mr. Keith Svendsen flew down to Gujarat and met Prime Minister Shri Narendra Modi and Gujarat Chief Minister Shri Bhupendra Patel to discuss growth opportunities for Gujarat and India.

With the end of the concession just four years away, how justified is the investment in expansion?

“The investments are aligned with our long-term strategic vision and the evolving needs of the industry,” APM Terminals Pipavav said in an emailed response.

“The MoU serves as a foundation for mutual growth and sustainability beyond the concession period, contributing to the overall development of the region,” it said.

The investment is planned basis business requirements, and this strategic decision reflects our commitment to India, the operator said. “The investment will be implemented in a phased manner, allowing for careful and strategic development in line with the evolving needs of the industry,” it said.

Does this imply that APM Terminals has received an assurance from the Gujarat government on getting the concession extended?

“The conversation (on extension of the concession agreement) is progressing in the right direction,” APM Terminals said, adding, however, that it was “unable to disclose further details at this time”.

Work on some of the capacity expansion has started. For instance, APM Terminals had previously said it is investing some $90 million to build a new liquid cargo berth at the port that will help expand the liquid bulk cargo handling capacity to 5.2 million tonnes (mt) from 2 mt.

The Gujarat government’s Build, Own, Operate and Transfer (BOOT) policy finalised in 2007 for developing new ports with private funds suggests options for extending the concession beyond the original timeframe of 30 years either to the existing developer or bid it out to select a new developer and operator.

These options, though, are not specified in the earliest concessions awarded by the Gujarat Maritime Board (GMB) for developing ports such as Mundra, Pipavav, Hazira and Dahej.

Two years ago, GMB hired consultancy firm A T Kearney to help decide on the future of port concessions awarded to private firms such as A P M Terminals Management and Adani Ports and Special Economic Zone Ltd, some of which will complete their 30-year tenures in a few years.

The state government, however, is yet to take a call on how and whether to proceed on extending the concessions awarded to private firms in the 1990s for building and operating ports.

The uncertainty over the extension of the concession beyond 2028 had forced Mumbai-listed Gujarat Pipavav Port to halt previously announced plan on a Rs700-crore expansion approved by its board a few years ago that involves upgrading existing facilities for handling bigger ships and increasing the container handling capacity to 1.6 million twenty-foot equivalent units (TEUs) from 1.35 million TEUs.

The expansion covers replacement of three existing cranes with four new cranes with a wider outreach and progressive increase in container yard capacity to 1.6 million TEUs. It also includes purchase of two, yard cranes.