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JNPA & Gateway Terminals signed agreement to end rate dispute

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MUMBAI : Jawaharlal Nehru Port Authority (JNPA) and Gateway Terminals India Pvt Ltd (GTI) have signed a settlement agreement on 11 March to end a decade old tariff dispute mediated by the newly formed Conciliation and Settlement Committee (CSC).

The Conciliation and Settlement Committee (CSC) is an alternate dispute resolution mechanism set up by the Ministry of Ports, Shipping and Waterways to mediate and settle contractual disputes between the public-private-partnership (PPP) operators, contractors, consultants, service providers and the State-owned major ports.

GTI is 74 per cent owned by A P M Terminals Management B V, the container port operating unit of Danish shipping and transport giant A P Moller-Maersk A/S. Container Corporation of India Ltd (Concor) holds the balance 26 per cent stake in the terminal, one of the five operating at J N Port, India’s busiest State-owned container port located near Mumbai. GTI started operations in 2006 on a 30-year contract.

After the erstwhile rate regulator cut its tariffs by 44.28 per cent in February 2012, GTI secured a stay from the Mumbai High Court that allowed it to levy rates which prevailed prior to the reduction till the case is decided. The petition is yet to be settled.

GTI was governed by the rate norms of 2005 which ended in 2010. The rate guidelines for terminals operating under the 2005 regime was revised by the Ministry in 2019 after removing many of the flaws that had resulted in litigations.

The CSC recommended that the parties to the dispute could follow the principles of the 2019 rate norms on distribution of surplus earned, to reach a settlement.

2019 rate norms

According to the 2019 rate norms, the surplus earned over and above the admissible costs and permissible return during the previous rate cycle and during the period of litigation (when the terminal is allowed to levy the rates prior to the rate cut) will be distributed per a formula approved by the Attorney General which forms a part of the guidelines.

The formula approved by the AG permits distribution of surplus only when both the physical and financial performance of the terminal exceeds 20 per cent of the estimates basis which rates were drawn up for a three-year cycle.

In such an event, 20 per cent of the surplus is allowed to be retained by the terminal operator. Of the balance 80 per cent, the operator will be allowed to retain half, ie 40 per cent, and the remaining half will be passed on to the users by way of a discount in future rates.

“The CSC has identified that there may not be any surplus from 2011 onwards if this formula is adopted,” said multiple officials briefed on the settlement agreement.

But the surplus computed by the rate regulator up to 2010 will be contributed by GTI and J N Port Authority in the ratio of 65:35 per cent (GTI pays revenue share of 35% to J N Port Authority per the contract). This surplus will be invested by J N Port to create infrastructure in and around the port, the officials said.

Based on the settlement, GTI and J N Port Authority will approach the court to drop the case.

This is the second dispute brokered by the CSC after it was set up last year to settle disputes, pending before courts for many years, quickly.

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