“It doesn`t make sense if someone buys it, if you know well enough that the concession will only be there for ten years and there is no certainty that the concession will be extended or not thereafter,” said a port councillor from Bombay. The Gujarat government is “considering” an application by Mumbai-listed Gujarat Pipavav Port Ltd, requesting permission to extend the concession period for the country`s first private port beyond 2028. The concession can be renewed for up to two years, in accordance with the agreement signed between gmbh and GPPL. The Gujarat Maritime Board (GMB), the authority responsible for monitoring ports held by the state government, has indicated that Pipavav could be auctioned again after the initial concession period expires in 2028. “When the concession agreement expires, all assets will be transferred to the RAD on the basis of evaluation by an independent evaluation team,” says the GPPL concession pact. “The valuation of real estate contractual assets and essential personal assets on the basis of the replacement value of depreciated assets is therefore carried out in accordance with the latest guidelines of the Asset Valuation Committee, Asset Valuation Statements and Guidelines, royal Institution of Chartered Surveyors, United Kingdom, published in January 1995 or in the amended version from time to time.” This could be mitigated somewhat if Pipavav`s concession contract requires the port authority to pay “fair compensation” to the private developer if it returns it at the end of 30 years. Such clauses are usually written in port concessions – if the private developer is compensated for the assets he has created or if he returns free of charge to the government agency. The reason is that the 30-year concession contract for the facility expires in 2028, which experts say could be a potential deal breaker/spoiler. A Gujarat government official said the proposal put forward by Gujarat Pipavav Port was “under consideration” and said that an extension of the concession period beyond 30 years could be possible “on mutually agreed terms, which have yet to be decided.” APM Terminals, which owns a majority of 43.01 per cent of the Mumbai-listed Gujarat Pipavav Port Ltd (GPPL), can only operate the port for 10 years, as the 30-year concession contract for the facility expires in 2028. Uncertainty about extending the concession period beyond 2028 is a problem for bidders, the industry source said. “With this investment, we want to strengthen our network and continue to provide first-class services to all our stakeholders.
However, we are awaiting confirmation of the renewal of the concession by the Gujarat Maritime Board (GMB) to implement the expansion plan. Container shipyard capacity will be increased as soon as freight growth is visible after the dedicated freight corridor (DFC) is commissioned,” said Jakob Friis Sorenson, General Manager, Gujarat Pipavav Port. Extending the concession is the key to Denpsavav`s expansion plans. “With the Supreme Court`s decision on the acceptance of the auction route for the sale of natural resources, including telecommunications frequencies, no one in the country will have the courage to extend the concession agreement in the same way,” said the industry source. “It will have to be auctioned and there will be a lot of bidders who will want to take over such fully developed facilities,” he said. GPPL paid a concession fee of $5 per tonne for fixed freight and $10 per tonne for liquid freight for many years, until the authorized cost of capital for the port ended in return for the difference between the waterfront royalty and the waterfront concession fee.