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Monday, 15 Jul 2013
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Delayed Tendering stunts Indian Port Expansion plans

 

Ports in India are stuck with delayed projects as a number of major project tenders have collapsed due to two main reasons – prolonged tendering process, and delays in granting clearances to the selected developers. The inordinate delays have derailed the Union government’s plans to triple cargo-handling capacity at Indian ports by attracting private investments worth Rs 3 trillion and have met limited success.

 

Among the major port development projects delayed considerably are the expansion plans of JNPT, Chennai Port Trust, Ennore Port, Visakhapatnam Port Trust and Kolkata Port Trust (KoPT).

 

Indian Port_ProjectsToday

 

JNPT’s fourth container terminal project which was envisaged in 2003 has still not been taken up for implementation as the bidding process is still going on. The container terminal project was awarded to a consortium of Port of Singapore Authority (PSA), and ABG Ports in September 2011. However, JNPT withdrew the letter of award issued to PSA in October 2012 as the Singapore based port operator failed to sign the concession agreement, and ABG left the consortium due to financial issues.

 

JNPT has now invited fresh bids for the Rs 8,000 crore container terminal project. PSA, DP World, APM Terminals and Adani Group are part of the eight Indian and foreign companies that have shown interest in the project. The container terminal is to be developed on DBFOT basis and will have a handling capacity of 4.8 million TEUs.

 

Chennai Port Trust’s Rs 3,686 crore container terminal project is facing similar issues. Recently, Chennai port scrapped the tender issued in April 2008 for setting up the container terminal on DBFOT basis. In the first round of bidding in January 2011, Chennai Port failed to receive any price bids. Adani Port and Special Economic Zone (APSEZ), was the sole company to submit a price bid in response to the re-tender floated in September 2011. However, the bid was rejected as it failed to meet the Port’s expectations.

 

  Project Tenders Floated by Major Ports in FY13
Tender Issuer
Tenders
Cost (Rs Crore) 
Kandla Port
26 
1,819.46 
Chennai Port
20 
57.02 
Mumbai Port
19 
763.18 
Kolkata Port
14 
7,738.26 
Visakhapatnam Port
12 
414.85 
Jawaharlal Nehru Port
11 
243.95 
Cochin Port
250.87 
Ennore Port
5.04 
Paradip Port
4.85 
Mormugao Port
103.86 
New Mangalore Port
81.68 
V.O. Chidambaranar Port
51.39 

Chennai Port invited price bids again from the seven shortlisted bidders and received two separate bids from Essar Group and APSEZ. Following the failure of the APSEZ to get security clearance from the Union Ministry of Home, their price bid was not opened. Essar Group’s bid was rejected by the Chennai Port as the revenue share price bid of 5.25 per cent quoted by them was too low. The Port failed to receive any price bids in its third attempt to find developers.

 

Ennore Port’s Rs 1,436 crore container terminal project suffers from similar hurdles. The project was envisaged in 2003 for setting up a multipurpose berth and container terminal on a BOT basis. Bay of Bengal Gateway Terminals, an SPV promoted by UK based Eredene Capital PLC, Barcelona-based Grup Maritim TCB SL, Obrascon Huarte Lain SA and Lanco Infratech bagged the contract in June 2010 and subsequently signed the concession agreement. However, the deal came off in September 2012 when Eredene Capital left the project after failing to get bank funding due to the high revenue share it had quoted in the tender.

 

Ennore Port then decided to change the scope of the project by splitting it into three separate terminals, each having a berth length of 700 metre and designed to load 1.4 million standard containers per year. Fresh bids were invited in May 2013 and around 11 major companies including L&T, PSA and Maersk have shown an interest in the container terminal project.

 

Visakhapatnam Port Trust rejected the solitary price bid of Visakha Container Terminal (VCTPL), for the expansion of its existing container terminal, as the quoted revenue share of four per cent was way below its expectations. Visakhapatnam Port Trust is likely to invite fresh price bids from the seven qualified bidders which include VCTPL, Gammon Infrastructure and APSEZ.

 

KoPT’s Haldia Dock-II project also belongs to the non-starter category. To be built in two parts — Haldia Dock-II (North) and Haldia Dock-II (South) — the proposed dock complex was to expand Haldia port’s cargo handling capacity from 50 million tonne to 73 million tonne. In May 2011, Kolkata Port invited RfQs for the Rs 1,710 crore project. After two failed attempts, the Port authorities finally received a single bid, for north part of the project from a consortium of Kolkata-based Concast Infratech and Hyundai Engineering Construction. But the consortium quoted a revenue share of a mere one per cent and was therefore rejected. The south part of the project failed to receive even a single bid.

 

The above cases amply state that the government’s attempts to attract private investment in the port have been thwarted by the low bidder turnout and the single-digit revenue sharing quotations. To overcome these problems, the port trusts have to design the project scope in such a manner so that the bids will get enough number of bidders and the projects can be handed over to the winners in the shortest span of time.

 

Despite the above setbacks, the Union government seems to be still optimistic about its capacity addition plans. The shipping ministry has set a target of awarding 30 projects for 2013-14. These projects will bring in an additional capacity of 288 million tonne per annum, at an estimated investment of Rs 24,633 crore. Of the 30 port projects, 19 projects are targeted to come up through the PPP mode. The ministry might succeed in floating tenders for the 30 chosen port projects. However, without a clear cut investment policy in place, it is highly unlikely that it will find enough number of bidders so that it can finalise the award and set rolling the expansion plans in time.

 

 

Manufacturing Sector Developments

 

 
  • Birla Corporation will invest Rs 2,500 crore over a period of three years to augment the cement production capacity
  • Ultratech Cement is planning to set up a 5.5 million tpa greenfield cement plant at Karur in Dindigul district of Western Tamil Nadu
  • Mold-Tek Packaging will set up two plants - one in north India near Dehradun and the other in Dubai, by 2014
  • Rashtriya Ispat Nigam and MOIL, in a JV, are planning to set up a ferro alloy unit at Visakhapatnam
  • Mahindra World City has signed a lease agreement with the Perto S.A. - a Brazilian firm - to set up the latest manufacturing plant in Jaipur, Rajasthan

 

Infrastructure Sector Developments

 

 
  • The Centre has approved the proposal of Assam Government to set up a metro rail project in Guwahati
  • DFCCIL has shortlisted four group firms for a 320 km rail link between Vadodara in Gujarat and Vaitarna in Maharashtra
  • The West Bengal Highway Development Corporation has invited financial bids from the short listed infrastructure companies for 4-laning of the Dankuni-Chandannagar section of state highway-13
  • Ashiana Housing will construct a housing project at Bhiwadi in Rajasthan, spread over 52 acre, over the next seven years
  • The construction work of Kozhikode Monorail will commence in January 2014

 

Power Sector Developments

 

 
  • Essar Power is planning to expand its thermal power capacity by generating an additional 2,790 MW capacity by FY16
  • GMR Kamalanga Energy has synchronised the 350 MW Unit-II of Phase-I of its coal-based power plant with grid at Kamalanga in Dhenkanal district of Orissa
  • BGR Energy Systems has bagged balance of plant contract for IB Valley expansion project of Odisha Power Generation Corporation
  • NPCIL is planning enhance the capacity of its nuclear plant at Kovvada in Srikakulam district to 6 x 1,594 MW
  • Jakson Power Solutions to invest Rs 750 crore in providing solar energy solutions across India over the next three to four years

 

Quote of the week:

 


G. K. Vasan_ProjectsToday

"Ports are the gateways for Export Import trade and any deficiency will greatly affect the country’s export Import trade and competitiveness for industries."

 

 

G. K. Vasan,
Minister of Shipping

 

 
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