The premature exit of PSA container terminal from the VOC Port in Thoothukudi has left the trade with the box terminal at the port being operated by Dakshin Bharat Gateway Terminal Pvt Ltd (DBGT) and JM Baxi Ports & Terminal.
PSA was India’s first foreign-invested container terminal, and it was forced to exit the VOC port on March 1 after a long legal battle over royalty payment for container handling. The VOC Port Authority took over the terminal from PSA even though the 30-year concession period was to end only in 2028.
The DBGT has been operating since 2014 with a full handling capacity of 0.72 million TEUs annually. In 2024-25, the port handled 7.95 lakh TEUs, a 6.41 percent growth over the previous year.
DBGT and JM Baxi Terminal are in agreement with the VOC Port Authority regarding revenue share.
PSA Sical Terminals Ltd, a joint venture between Singapore’s PSA (earlier called Port of Singapore Authority) and the Chennai-based South India Corporation (Agencies) Ltd signed the concession agreement in 1998 and started operations in 1999.
During the license period, PSA Sical was required to share a per TEU royalty payment (increasing through the license period) with the Tuticorin Port Trust (now called VOC Port Authority), which was finalised as part of the initial bidding. The terminal’s annual capacity was to handle nearly 0.50 million twenty-foot equivalent units (TEUs) or twenty-feet containers.
However, nearly 9 years after the operations, the company found that the royalty payable was higher than the tariff allowed to be charged. This was the start of a long battle, including legal, between the private operator and the landlord.
PSA was served a termination notice by the port authority for non-payment of royalty dues to the tune of ₹1,090 crore as of December 31, 2021. The notice was issued after the terminal operator lost an appeal in the Madras High Court. Multiple litigations were filed, and all of them were in favour of the port authority.
The legal battle continues, and even arbitration proceedings are going on, sources said.
“It is a sad end. PSA was the second private terminal in the country after Jawaharlal Nehru Port in Mumbai. The revenue share model was not a workable model and the government has changed the model subsequently for other terminals. Both sides could have worked out an amicable solution instead of going for litigation,” said Edwin Samuel, founder and CEO of Thoothukudi-based Pearl Shipping.
According to Jagannarayan Padmanabhan, Senior Director at CRISIL, the dispute heavily involved the escalating royalty structure, which became unsustainable for PSA SICAL as operational challenges arose. This underscores the need for more flexible and adaptable contract terms that account for fluctuating market conditions and operational realities. It highlights the risk of rigid, long-term contracts that do not adjust well to changing market conditions.
The PSA-Sical terminal dispute helped in bringing out some recent reforms like plans to migrate all terminals to market-driven tariff, and dispute resolution by the Conciliation and Settlement Committee, which is becoming fairer, said an official knowing the dispute.
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