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Project delayed after PSA-ABG consortium refuses to pay stamp duty expenses

Delays could cost JNPT up to Rs 500 crore in revenue losses

The build of the fourth container terminal at Jawaharlal Nehru Port Trust (JNPT) has been delayed amid confusion over stamp duty responsibilities.

A consortium of the Port of Singapore Authority (PSA) and India’s ABG Ports, who were awarded the fourth terminal contract in August last year, has refused to pay a R50 crore stamp duty to the state government and has demanded that the JNPT cover the costs.

“We were not informed in advance and not communicated clearly that we have to bear the stamp duty expenses,” a senior official at ABG Ports told the Financial Express.

“The moment this issue gets sorted out, we will go ahead with the project as it is a prestigious one for us.”

Delays to the project will not only result in the Indian port losing as much as R500 crore a year in revenue losses, but could mean even greater losses as shippers seek alternatives to JNPT, according to the Financial Express.

JNPT has already lost 15 percent of its market share of containerized trade to rivals Mundra Port, Special Economic Zone (MPSEZ) and Gujarat Pipavav Port, as shippers attempt to do away with the congestion that has hampered JNPT in recent months.

These relatively new ports are looking to nearly double their current joint capacity of 8.4 million tonnes to 15 million tonnes by 2015. The proposed expansion of the three facilities is expected to put further pressure on business at JNPT.

“Demand will always find an alternative. JNPT has already started losing on trade and would have done better had it had more capacity,” Manish Saigal, partner at KPMG India, a global consultant, told the Financial Express.

Under the conditions of the contract awarded to the PSA-ABG consortium they will provide 51 percent of revenues to the government during the 30-year concession.

When completed the fourth container terminal at JNPT will add a further 4.8 million TEUs to the existing 4 million TEU capacities.

Container traffic volumes at all of India’s ports reached 9.7 million TEUs in 2011, and this figure is expected to reach 14 million TEUs by 2014.

India plans to more than double the capacity of its ports over the next three years to 22.7 million TEUs to cope with these traffic rises.

To achieve this India will not only upgrade existing facilities but will build a number of entirely new ports.

Of the planned 23 ports highlighted under the Indian government’s private-public partnership (PPP) model, as many as 70 percent could be granted approval over the coming year, according to the Financial Express.