Dakshin Bharat Gateway invokes force majeure, seeks waiver of revenue share

Dakshin Bharat Gateway Terminal Private Limited (DBGT), the entity that runs a container terminal at Central government-owned V O Chidambaranar Port Trust (VOCPT) located in Tamil Nadu’s Thoothukudi district, has invoked the force majeure clause in the concession agreement, seeking waiver of revenue share until volumes return to pre-coronavirus levels.

force majeure clause absolves firms from meeting their contractual commitments for reasons beyond their control.

This is the first instance of a cargo terminal run by a private firm in public-private-partnership (PPP) mode in a state-owned major port invoking force majeure due to steep volume drop and cash flow issues, arising from the coronavirus pandemic and the lockdown restrictions, to claim waiver of revenue share.

DBGT, one of the two container terminals operating at VOCPT, is a unit of India Ports and Logistics Pvt Ltd.

India Ports and Logistics is 51 per cent owned by Star Ports Ltd, a unit of Mumbai-listed Starlog Enterprises Ltd (earlier known as ABG Infralogistics Ltd), with Bollore Africa Logistics — Africa’s biggest transport and logistics operator — holding the balance stake.

DBGT has a capacity to load 600,000 twenty-foot equivalent units (TEUs) a year.

In FY20, DBGT handled 634,112 TEUs from 386,376 TEUs in FY19, clocking a growth of about 40 per cent over the previous year and accounting for about 79 per cent of the overall VOCPT container volumes.

From April 1, DBGT’s volumes have declined by half and the operator expects the situation to continue for some time.

“On April 21, DBGT invoked force majeure written in the concession agreement and notified VOCPT about its decision,” a Shipping Ministry official briefed on the development said.

“DBGT is seeking a waiver on payment of revenue share to VOCPT until its volumes return to pre-coronavirus levels, which is about 52,000 TEUs a month, for three consecutive months,” the official said.

DBGT declined to comment.

Relief package

A few hours after DGBT notified VOCPT of its decision to invoke force majeure on Tuesday, the Shipping Ministry unveiled a relief package for PPP operators.

The package included deferment of April, May and June months’ revenue share, royalty and equipment hire charges payable by PPP operators to the government-owned major ports and to waive their lease rentals/licence fees for three months till June.

“Deferment of revenue share/royalty will not help; we want a waiver,” said the chief executive of another container terminal operating in one of the major ports.

The PPP operators are also piqued by the non-transmission of a recent cut in lending rates announced by the Reserve Bank of India to borrowers.

“PPP operators have requested that banks should reduce the rates; the benefit given by RBI is not for banks but is for the borrowers. Why is this benefit not being given by the lenders to the PPP operators at a time when our cash flows have declined very badly?” he asked, adding that the three-month moratorium on payment of loan instalments was “useless”.

“Basically, on the one hand, we have to pay revenue share/royalty to the port authority and, on the other, we have to pay higher interest cost to the banks. How do we survive? We will default. Once we default, under the concession agreement, there is a termination on account of financial default. When RBI says you reduce the rates, the banks do not reduce the rates and the lender forces us to default only to take over the assets,” he added.