A few years into the 30-year concession for building and running the Eastern Quay Beth-10 (EQ-10) at the Southern port, the Visakhapatnam Port Authority (VPA) terminated a contract awarded to AVR Infra Pvt Ltd (AIPL), a division of Chennai-based IMC Ltd, for failing to meet minimum guaranteed throughput (MGT) obligations.
The concession agreement for the 1.84 million tonnes (mt) capacity EQ-10 berth located in the northern arm of the inner harbour of Visakhapatnam port was signed on 16 August 2010 for handling liquid cargo (Class B & C chemicals including caustic soda, phosphoric acid, edible oil, biofuel, etc). AVR Infra quoted the highest revenue share of 19.08% to the port authority to emerge the successful bidder for the project in a tender. The terminal started commercial operations in January 2017. According to the contract terms, AVR Infra was mandated to handle some 4 lakh tons as minimum guaranteed throughput a year. However, AVR Infra failed to comply with the MGT obligations for any of the six years since starting operations.
The port authority can terminate the contract if the private operator fails to meet the MGT obligations for three consecutive years, per the concession agreement. AVR Infra got a reprieve from termination during COVID since the pandemic was treated as force majeure – a clause that absolves firms from meeting their contractual commitments for reasons beyond their control.
More than three months ago, the port authority issued a termination notice, giving 90 days’ time to terminate the concession, per the contract terms. At the request of AVR Infra, a further notice period of 45 days was given, which will end on 18 January 2025.
AVR Infra was handling much less cargo than the minimum guaranteed throughput written into the contract and was “paying hardly anything to the port authority as revenue share. The private operator has cited “some restrictions” on the cargo they were meant to handle at the berth for non-compliance with the MGT stipulation. A firm involved in contract termination is barred from bidding for future tenders at major ports for three years.
This is the fourth public-private-partnership (PPP) project to end in termination for multiple reasons in the last few years at Visakhapatnam port. The EQ-10 berth, though, is debt free and this absolves the port authority from paying 90 percent of the debt due as termination payment per the concession agreement.
