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Monday, September 18, 2006

Govt to change port projects bid norms

The ministry of shipping is planning to make changes in bidding norms for port projects to avoid delays caused on account of security clearances.

Privatisation of two major ports — Mumbai Port Trust (MbPT), Chennai Port Trust (CPT) — and Vizhinjam port in Kerala have been delayed by six to 18 months due to delays in obtaining security clearance for foreign bidders.

In the case of MbPT and Chennai Port, security clearance was denied to Hong Kong-based Hutchison Port Holdings — the largest independent port operator in the world — that had bid along with Larsen & Toubro (L&T).

In Vizhinjam, Kaidi Electric Power Company and Chinese Harbour Engineering (along with Mumbai-based Zoom Developers) were also denied permission. Realising that security clearance was delaying the projects, L&T replaced foreign partner Hutchison with Manila-based International Container Terminal Services in May.

L&T's request for Chennai port was scuttled and the Rs 495 crore contract finally went to PSA-SICAL combine which currently manages the Tuticorin container terminal.

Mumbai Port, however, accepted L&T's request and has postponed the deadline for submission of financial bids to October 9 to accommodate the company and its new partner.

MbPT expects ICTSI to be given clearance by the cabinet committee on security meeting on September 20. New norms will clarify issues such as the point at which security clearance for the project should be sought. Currently, ports follow varying norms.

For instance, Mumbai Port decided to first wait for the security clearance and then proceed with inviting financial bids while Chennai Port decided to invite financial bids first but the award of contract was made subject to security clearance.

Here L&T lost its chance. While a legal opinion from Mulla & Mulla gave an okay to the company to change its foreign partner (while it retained other terms and conditions of the financial bid), the issue was directed to the shipping ministry for the final approval.

Before ministry of shipping took a decision, the security clearance was denied to Hutchison which was L&T's initial partner.

"As Hutchison was denied clearance, L&T's bid was rejected," said a Chennai port official. But no one from the Chennai Port or the shipping ministry wants to clarify on what happened to L&T's request for the change in partner.

While L&T officials were tight-lipped about the issue, Mumbai Port has no recourse but to extend its bid submission dates as the delays has already turned away many bidders.

Currently, bidders participating in port projects can change consortium partners three weeks before submission of financial bids.

In case of Vizhinjam port which is to be developed as trans-shipment port giving direct competition to Dubai port, Singapore port and Colombo ports, the issue is different.

Financial bids were opened six months ago and the three-company consortium was declared winner. However, final award was subject to security clearance which was denied to the two Chinese companies one of which was the main bidder holding 26% stake in the port.

While the Indian partner, Zoom Developers is trying to salvage the project that will cost Rs 1,800 crore in the first phase itself, by proposing to change the partners, there is no clarity from the government on the issue.

The state government along with the support from the opposition parties is first trying to put pressure on the Central government to give security clearance.

But, as industry experts say, the damage has already been done to Indian ports including the 13 major ports which are planning investments of over Rs 61,000 crore in future.

Source: Times of India

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