ISLAMABAD, Jan 4: The Port of Singapore Authority (PSA) informed the Supreme Court on Tuesday that its contract to run the Gwadar Port has been challenged in the court not in the public interest but to protect the interests of a Karachi-based cartel.

The bench, headed by Chief Justice Iftikhar Mohammad Chaudhry, had taken up a joint petition filed by five citizens challenging the award of a contract to the Singapore company.

The petitioners requested the court to cancel the Feb 6, 2007, concession agreement (CA) between the Gwadar Port Authority (GPA) and Port of Singapore Authority (PSA) Gwadar Pte Ltd and order the government to take back possession, operation and management of the port because the operator had failed to bring further investment for development of the project.

Gwadar is located on the shores of the Arabian Sea in Balochistan, at the mouth of the Gulf just outside the Straits of Hormuz, near the key shipping routes in and out of the Gulf. It is 533km from Karachi and 120km from the Iranian border.

In its reply filed by Advocate Anwar Kamal, the PSA denied almost all the accusations levelled against it in the petition, especially that the operator had failed to exploit geographical advantage of the port. It said the government had so far failed to provide the port connectivity with the upcountry and land-locked states in the region (Central Asia and Afghanistan) in view of the prevalent national and regional political environment.

Justifying the contract awarded to the PSA, the reply said that its salient features were similar to those of other concession agreements granted by the government in the port sector.

The PSA said: “It is a recognised principle of economic development to grant incentives to pioneer investors in remote and high-risk under-development areas. The government granted such concessions in the past in different sectors of the industry and the Gwadar Port is no exception.

“In 1996, the government had proposed to provide a list of fiscal incentives, including income tax holiday, complete exemption from duty and sales tax, duties on plants, equipment and machinery, capital gains, local government taxes, levies, octroi and many other taxes to promote investment in the Gwadar Port. The government also proposed in 1996 to exempt the port from labour laws.

“The CA was granted to the PSA through a transparent bidding process which was initiated in 2004 when the government decided to develop the Gwadar Port on the pattern of Singapore and Dubai. Even the services of Arthur D Little, consultants of international repute, were hired on the request of the GPA to prepare a master plan for the port and to select an operator.

“The PSA has made operational the facilities despite adverse, rather hostile environment allegedly created by certain vested interests, including some of the petitioners.

The operator has spent in excess of hundreds of millions of rupees through equity and sponsor's loans.

“The master plan proposed to declare the entire Gwadar city a special economic zone to set the stage for accelerated economic development during the first 15 to 20 years. The economic activity generated thereby could have provided the desired volumes for the area. But no initiative has been taken by the relevant authorities and hence the operator is deprived of the key driver for marketing the multi-purpose terminal.”

The court adjourned the hearing for two weeks.