To insulate potential bidders from any adverse fall out of the arbitration proceedings initiated by Kandla Oil Terminal Pvt Ltd (a unit of IMC Ltd), which is developing a 3.39 million tonnes (mt) capacity liquid cargo jetty cum ship bunkering terminal at Kandla, the port authority has assured investors that it will “handle” the liability towards damages or compensation, if any, given by the arbitral tribunal “on its own”.
The concession agreement for constructing Oil Jetty 0 signed between the port authority and Kandla Oil Terminal grants an exclusivity period for the developer by stipulating that the port authority “shall not operationalise any additional facility within port limits for handling liquid cargo including bunker fuel either on its own or through any other person until the earlier of five years from the ‘Scheduled Project Completion Date’ or the average annual volume of cargo handled at the project facilities and services reaches a level of 75 percent of the project capacity for two consecutive years.
However, this restriction shall not apply to additional facilities planned at existing and future projects proposed by the port authority to be implemented through internal resources, public private partnerships, joint ventures or as captive facility within port limits i.e. inside Kandla Creek as well as outside Kandla creek viz. at Tuna, Tekra, Khori, Vadinar, Veera etc.
Kandla Port has seven oil jetties, of which five are operated by the port authority itself and one each by Indian Oil Corporation and IFFCO. Work on the Oil Jetty 8 is expected to be completed by March next year, taking the combined capacity of the oil jetties at the western coast port to 16.32 mt by March 2024 and 23.49 mt by FY35. This translates into a demand supply gap of 2.45 mt by FY25 and 16.91 mt by FY35 when the liquid cargo traffic is projected to reach 40.4 mt.
To cater to the demand, the port authority propose to develop three more oil/liquid jetties, each with a capacity to handle 3.2 mt of liquid cargo other than crude oil, with private funds and had floated a tender earlier this year to build a new oil jetty, the ninth at the port. Global tenders for oil jetties 10 and 11 will be issued in 2024 or 2025.
The tender for Oil Jetty 9, though, was put in abeyance after the Kandla Oil Terminal initiated arbitration proceedings citing the exclusivity period/competing facility clause written into its concession agreement for Oil Jetty 0. With the port authority pledging its commitment to assume the liability on damages/compensation arising out of the arbitral award, the tender will now be re-started.
“The arbitration is on the competing facility clause; nothing else,” Sanjay Mehta, Chairman, Deendayal Port Authority, told prospective investors during an interaction held in Mumbai on 11 December to showcase the projects.
