Vizag port may end Adani Ports' contract

Visakhapatnam: Vizag Port may initiate the process of termination of the contract with Adani Ports for default in payment of the royalty for operating the nine million tonne steam coal handling berth for over a year. 

Adani Ports, which spent about Rs 400 crore in constructing the berth, has suspended operations there for more than a year now and instead has shifted operations to the neighbouring Gangavaram port, sources said.

With the Vizag port charging Rs 5 per tonne of coal handled at the berth for taking anti-pollution measures in and around the facility and the privately-operated Gangavaram port having price flexibility, Adani port found the neighbouring port cheaper.

Also, the slump in steam coal traffic is another reason for the port operator to suspend its operations at the berth.

However, the Vizag port may try a consultation process before initiating the termination move as a last-minute bid for a settlement of the issue across the table, an official of VPT said on condition of anonymity.

The Adani Vizag Terminal Pvt Ltd, part of the Adani Group, had entered into a concession agreement with Vizag port to develop and expand the existing coal berth in March 2011. The berth development was completed in December 2013.

As per the agreement, Adani has to pay a monthly royalty of 40.29 per cent of the revenue charged by it from its users.

The agreement stipulates that if the termination is due to the operator defaulting on payment, the “compensation payable by the concessioning authority to the concessionaire shall be the lowest of the book value, 90 per cent of the debt due or the actual project cost”.