The Ministry of Ports, Shipping and Waterways has asked the Jawaharlal Nehru Port Authority (JNPA) to take a call on whether to extend the concession period of Nhava Sheva International Container Terminal Pvt Ltd (NSICT)—India’s first private container terminal operated by DP World—beyond its current 30-year tenure ending in June 2028.
According to multiple sources, the Ministry has informed JNPA that the matter is essentially between the port authority and the terminal operator, and that JNPA should take an appropriate decision and communicate it accordingly.
The direction comes after JNPA’s board last year endorsed a proposal to extend the NSICT concession by four years and forwarded it to the Ministry for ratification. The port authority, however, is yet to receive a formal approval, leaving the issue unresolved.
Absence of Extension Clause
The matter is particularly sensitive because the concession agreements used in the early years of India’s port privatisation programme did not include provisions for extending the lease beyond the stipulated 30-year period.
Under the Public-Private Partnership (PPP) framework adopted at the time, cargo-handling contracts at major ports owned by the Union government were awarded through competitive tenders with non-negotiable conditions, including a fixed 30-year concession term.
Industry sources say that any extension typically requires directions from the Ministry, and that granting such an extension without a broader policy framework could invite scrutiny. The Ministry has yet to finalise a policy governing the rollover of concession agreements that lack a built-in extension clause.
“Major ports have been permitted to lease assets only for 30 years. Extensions for any reason have to go to the Ministry for directions. If handled selectively at the port level, it could attract audit queries,” a source familiar with the matter said.
Plan to Combine DP World Terminals
The proposal to extend the NSICT concession is linked to JNPA’s plan to combine two adjacent terminals operated by DP World into a single larger facility.
NSICT, which has a 600-metre berth, is one of five container terminals operating at the port near Mumbai and is scheduled to complete its 30-year tenure on June 30, 2028.
Next to it is the Nhava Sheva (India) Gateway Terminal Pvt Ltd (NSIGT), a 330-metre terminal also run by DP World. According to a Press Information Bureau statement issued in June 2013 when the agreement was signed, NSIGT’s 17-year concession period runs until 2031.
JNPA believes that aligning the concession periods of both terminals would enable them to be bundled into a single facility with a 930-metre berth length and offered to private operators in 2031. The port authority expects that combining the terminals would improve operational efficiency and attract higher royalty bids due to economies of scale.
Independent studies conducted by the port authority indicated that operating the two terminals separately after 2028 could reduce capacity utilisation and royalty revenues.
The issue had earlier drawn attention from Parliament’s Public Accounts Committee, which questioned JNPA’s earlier plan to tender the two facilities separately rather than combining them into one large terminal.
Tender Delays Created Tenure Mismatch
JNPA had initially structured the tender for the 330-metre berth with the intention of synchronising its concession period with that of NSICT in 2028. However, delays in finalising the tender pushed the timeline by four years, resulting in the current mismatch between the concession end dates of the two terminals.
DP World eventually won the NSIGT project through a global bidding process.
Former officials involved in the tendering process say the concession agreement for NSICT does not allow extensions, meaning the terminal technically needs to be retendered once its 30-year tenure ends in 2028.
Long-Running Tariff Dispute
The issue of extending the NSICT concession is also intertwined with a long-standing tariff dispute between DP World and JNPA.
When NSICT began operations in 1997, it was permitted to recover the full annual royalty payable to the landlord port authority as a cost component while determining tariffs. However, in 2003, the government changed the policy and allowed only partial pass-through of royalty, limiting it to the level quoted by the second-highest bidder in the original auction.
As a result, the Tariff Authority for Major Ports (TAMP) permitted only 69.5 percent of the royalty paid by NSICT to be treated as a cost while fixing tariffs.
DP World argued that the policy change—introduced after the concession agreement was signed—placed the operator at a financial disadvantage. Between 2005 and 2006, TAMP cut tariffs at NSICT by a cumulative 25 percent, followed by another 27.85 percent reduction in 2012, even as the operator had sought a tariff increase.
NSICT challenged the decision and secured a stay from the Bombay High Court.
Despite being designed for 600,000 TEUs annually, the terminal handled more than 1 million TEUs per year from 2002-03 onwards. However, from 2015-16 onward, the operator deliberately reduced volumes to limit losses arising from the tariff dispute.
Arbitration and Settlement
DP World initiated arbitration, seeking modifications to the concession agreement and claiming ₹1,831 crore in damages, which rose to ₹2,653 crore including interest.
In September 2019, the arbitration tribunal directed both parties to amend the contract to make it commercially viable.
The dispute was subsequently referred to the Indian Port Association through its Conciliation and Settlement Committee, which assessed the tariff deficit at ₹705.78 crore for the period between April 2005 and March 2020.
The committee recommended that the deficit be compensated through a volume-based royalty discount linked to capacity utilisation, capped at 95 percent, subject to a minimum royalty payment of ₹380 crore annually.
The settlement, implemented from April 2022 until June 2028 or until the deficit is fully adjusted, received a no-objection certificate from the Ministry after consultations with the Ministry of Law and Justice.
Three Possible Scenarios After 2028
Industry sources say JNPA now faces three possible scenarios for the terminals after 2028.
In the first scenario, DP World could retain NSICT through a fresh tender by exercising a potential right of first refusal, while NSIGT continues separately until 2031. However, this would result in two smaller terminals—600 metres and 330 metres—operating independently, limiting vessel-handling efficiency.
In the second scenario, retaining NSICT could give DP World a strategic advantage when NSIGT is tendered later, potentially reducing competition and lowering royalty bids.
The third and most commercially attractive option, according to industry sources, is to combine both facilities into a single terminal. This would allow operators to berth larger vessels simultaneously and benefit from economies of scale, generating higher revenue for the port authority.
However, achieving this would require extending the NSICT concession by four years to match the NSIGT tenure.
JNPA had earlier explored the possibility of asking DP World to surrender the NSIGT facility in 2028—three years before its concession expires—but the company declined, citing financing constraints and the already shorter concession period.
With limited alternatives, extending the NSICT concession until 2031 remains the only viable path if the port authority wishes to bundle the two terminals and tender them as a single large facility.
