rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » JNPT wants only 'big boys' for the 4th container terminal

JNPT wants only 'big boys' for the 4th container terminal

August 06, 2013 14:40 IST

PortJawaharlal Nehru Port Trust at Navi Mumbai has invited bids for developing its fourth container terminal, with stricter criteria for participants — only those with stronger financial muscles and prior experience will be qualified for bidding.

The project has been delayed by three years, after a consortium of Port of Singapore and ABG Ports, which had won the bid by offering to share more than 50 per cent of the revenue with JNPT, backed off from the project, citing several reasons.

“We are only following the Planning Commission guidelines in this regard.

This will ensure frivolous parties should not come,” said N N Kumar, deputy chairman, referring to the riders set for new bidding. The last date Request for Qualification is August 19.

The recently held pre-RFQ meeting was attended by the so-called crème-de-la-crème of the port sector -- Maersk Group, PSA, Dubai Port World, Port of Hamburg, Mediterranean Shipping Company and Adani Ports.

Some say it is only natural that the terminal, which once completed will be one of the largest for containers in the country, be left for the 'big boys'.

The terminal will have a capacity of 2.4 million twenty-foot equivalent units and a berth of two km in length.

Unlike the last time, when the size of the company bidding could be 100 per cent of the project size, it has to be at least 150 per cent of the project cost now.

However, the riders have sparked a debate in the industry on whether it is fair to keep smaller players out of the bid.

The port trust had earlier planned to divide the project into two, which would have given an opportunity to smaller players and brought down the time of project completion from eight to four years.

“There are clearly some vested interests at play to reduce competition.

"First, by reducing the number of players and, second, by making the project less attractive,” said a senior government official, who did not want to be named.

The trust was not keen on going ahead with the second phase of dredging at the fourth terminal, which will increase the draft from 14 metres to 17 metres, the official added.

Accordong to JNPT’s Kumar: “The second phase of dredging is still at the evaluation stage. We are talking to our consultants if it is economically viable.”

This could mean that larger vessels would not be able to dock at the terminal, unlike the nearby Mundra port in Gujarat, where the draft goes up to 17 metres.

Even with the smaller players out, the project is likely to remain vulnerable, with the security deposit required to be paid by the winning company being reduced from one per cent to 0.25 per cent of the total cost.

“Anyone can use it to sabotage the project and keep additional capacity from coming to the port. The neighbouring ports would stand to gain,” said the government official quoted above.

To make matters worse, the bids are expected to be even lower than half of what was offered last time.

“JNPT should consider itself lucky if someone quotes even 10 per cent revenue share this time,” a senior executive of a port operating company said on condition of anonymity.

The cost of the project has gone up to Rs 8,000 crore (Rs 80 billion) and with a weakening rupee, it can go even higher.

With paucity of funds and limited credit supply, it would be difficult to live up to such financial commitment. All things aside, considering fourth container terminal’s past, industry experts say it would not be a big surprise if the matter ends up in a court, keeping the project in limbo for another few years, as has happened several times before.

CHOPPY WATERS

  • JNPT invited bids for the first time in 2009
  • APM Maersk filed suit after being barred from bidding in 2010
  • In the same round, Adani Group-led Mundra Port and SEZ moved court for not being allowed to bid for security reasons
  • PSA-ABG placed a winning bid of 50.8% revenue share, the highest ever in the sector, in 2012
  • The consortium broke up and backed out, putting the project up for rebid this year
Ruchika Chitravanshi in New Delhi
Source: