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DP World's Cochin port deal too sweet for Indian Auditor General's taste

INDIA's Auditor General says DP World's deal to build and operate the International Container Transshipment Terminal (ICTT) at the Port of Cochin is entirely too sweet for his taste.

The Auditor General questioned Cochin Port Trust contracts after the completion of the tender process, alleging changes to the cost structure in a set of contracts totalling INR40.23 crore (US$6 million).

DP World, through its wholly-owned subsidiary India Gateway Terminal Pvt Ltd, in January 2005 signed a 30-year contract to design, build, finance and operate the Vallarpadam terminal.

This came with an offer of a royalty share of 33.3 per cent to the port trust in a public tender, according to IHS Media.

The agreement required the private operator to take over and operate the port's existing Rajiv Gandhi Container Terminal (RGCT) until annual throughput at Cochin reached 400,000 TEU.

If this failed to happen within six years, DP World would not be obliged to build the terminal and the facility would be revert to the port trust after eight and a half years of operation.

Then the port trust realised that the bidder might operate the terminal for eight-and-a-half years without exceeding the 400,000-TEU volume, thus freeing him from building the new terminal as expected.

"The fact that the port was compelled to extend post-tender concessions to the bidder to ensure early migration to ICTT confirms that the sharing of risk was uneven," said the Auditor General's report.