Bangalore: A government policy on bidding criteria for cargo terminals at ports has come under fire from several potential local and overseas bidders because — as an executive at a Mumbai-based firm with interests in logistics, port terminals and shipbuilding puts it — it will limit competition, raise costs and lead to litigation.
Eligibility criteria: An aerial view of containers being offloaded at a port in Mumbai. The model concession agreement excludes shipping firms.
The policy draws from the eligibility criteria drafted by the Planning Commission, the country’s apex planning agency that acts as the secretariat to the Prime Minister’s committee on infrastructure and which recommended that the number of bidders for large infrastructure projects be restricted to six. The policy is already being challenged in a Delhi court by a builders’ lobby that sees it keeping out smaller firms from highway building projects.
The model concession agreement for port projects finalized by the committee on infrastructure also excludes shipping firms. This means these companies are barred from participating in port projects at India’s 12 major government-owned ports.
“This is a lopsided and unfair eligibility criteria,” said an official at state-owned Shipping Corp. of India Ltd (SCI), who did not wish to be named.
SCI had planned to bid for a Rs1,300 crore container terminal to handle 1.5 million twenty-foot equivalent units — the standard size of a container — a year at the Ennore port on the east coast, but the restriction poses a problem, this executive said. The Ennore terminal will be the first project to invite bids based on the new criteria.
Meanwhile, potential bidders are lobbying the shipping ministry to review the criteria. “Limiting the shortlist of pre-qualified applicants to only six will stifle competition and may finally lead to higher costs and loss to the nation,” added the executive at the Mumbai-based logistics, port terminals and shipbuilding firm that is looking to bid for the project.
According to him, those excluded from the list even after meeting all the criteria are likely to approach the court.
The eligibility criteria include experience in port sector projects such as building marine structures, onshore and offshore terminals, berths, jetties, quays, cargo handling systems, port-based terminal facilities, container freight stations, inland container depots, etc. The criteria also take into account experience in other core sector projects such as power, telecom, highways, airports, railways, industrial parks, petroleum and natural gas, pipelines, irrigation, water supply, sewerage, and real estate development. However, it excludes shipping.
“Shipping firms, which play a vital role in bringing cargo to the terminal and help the terminal operator to achieve the guaranteed cargo throughput as mandated in the contract, have been excluded from the eligibility criteria. The criteria is absurd and is flawed,” said an executive with one of the world’s top container shipping firms based in Europe, who did not want to be named.
According to the government criteria, the credentials of eligible applicants shall be measured in terms of their experience. The sum total of the experience scores for all eligible projects shall be the aggregate experience score of a particular applicant.
In the case of a consortium, the aggregate experience score of each of its members, who have an equity share of at least 26%, shall be summed up for arriving at the combined aggregate experience score. The applicants will then be ranked on the basis of their respective scores and shortlisted for submission of price bids.
“Even if shipping firms join a consortium to bid, they will not bring anything to the table in terms of scores and, hence, would be considered untouchables by others,” the executive at the European firm added.
Firms such as SCI have asked the government to include shipping as an eligibility criteria, the SCI official said. SCI operates container ships and is looking to enter the port container terminal business as part of its overall strategy of expansion into areas that complements its existing business.
The new criteria will result in the same six companies becoming eligible to bid for all port projects, he added.