JNPA, the biggest beneficiary of the container terminal deal award to JM Baxi – CMA Terminals

“The deal with a consortium of J M Baxi Ports & Logistics and CMA Terminals Holding is a golden goose for JNPA,” said a port industry consultant.

The equal joint venture between J M Baxi and CMA Terminals (a unit of CMA CGM S A, the world’s third largest container shipping firm), placed a royalty price bid of Rs4,520 per twenty-foot equivalent unit (TEU) to win the tender.

Port tenders at major ports are decided on the basis of royalty per TEU

Port tenders at major ports (owned by the Centre) are decided on the basis of royalty per TEU: the entity willing to share the highest royalty per TEU with the port authority wins the deal for 30 years.

The royalty payable will rise annually in tandem with the increase in wholesale price index (WPI), a measure of costs. The terminal operator will be free to set market rates under the new Major Port Authorities Act and the model concession agreement (MCA).

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With the J M Baxi-CMA deal, JNPA will earn more revenue (Rs4,520 per TEU) as royalty than what it is currently earning (Rs3,938 per TEU) from operating the terminal on its own.

“With a fixed royalty per TEU and increasing with WPI each year along with a minimum guaranteed cargo, the main beneficiary of the deal is the port authority,” said the consultant.

The difference between the winning and the second and third highest bidders is a little over Rs200 per TEU.

The winning bid is within range

It is not an outlier bid. The royalty quoted by the top three bidders indicate that the winning bid is within range, so it did make sense for some bidders to quote above Rs4,000 per TEU, particularly those with synergies and backed by liners,” the consultant added.