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Lack of security clearance nixes Adani’s port expansion plans

In the past, APSEZ has been denied govt nod to bid for a JN port container terminal, a Vizag iron ore facility and operating Vizhinjam port
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First Published: Thu, Dec 27 2012. 10 59 PM IST
Earlier this week, APSEZ was denied a security clearance to bid for a `3,686 crore container terminal at Union-government-controlled Chennai port. Photo: Hemant Mishra/Mint
Earlier this week, APSEZ was denied a security clearance to bid for a Rs.3,686 crore container terminal at Union-government-controlled Chennai port. Photo: Hemant Mishra/Mint
Updated: Thu, Dec 27 2012. 11 48 PM IST
Bangalore: Billionaire Gautam Adani-owned Adani Ports and Special Economic Zone Ltd (APSEZ) has become ineligible to bid for port contracts in his own country for undisclosed security reasons, potentially nipping plans of India’s biggest private port operator to build cargo loading capacity of 200 million tonnes (mt) by 2020.
APSEZ has consistently been refused security clearance for projects in Union-government controlled ports and last week, the government also closed an alternative window of opportunity for the company by making it mandatory for coastal states to seek security clearance ahead of awarding port contracts to private firms.
Security clearance for bidders of port projects being developed by coastal states with private funds was not mandatory so far—while some states sought security clearance, some others did not. The change was made in new guidelines framed by the union government for processing security clearance of bidders for port projects including dredging projects.
A spokesperson for APSEZ declined to comment.
Earlier this week, APSEZ was denied a security clearance to bid for a Rs.3,686 crore container terminal at union-government-controlled Chennai port.
This is the latest such case involving India’s biggest private port operator.
Since November 2010, APSEZ has been denied security clearance by the government to bid for projects such as the fourth container terminal at Jawaharlal Nehru port, mechanized iron ore loading facilities at Vizag port, operating Vizhinjam port in Kerala and now the container terminal at Chennai port. The reasons for denial have not been disclosed by the government. Since 1997, Chinese companies or groups with Chinese connections have been barred from bidding for Indian port projects by the union cabinet committee on security grounds.
APSEZ’s efforts to expand by building capacity in ports not owned by the Union government will now meet the same fate.
If the states were to seek security clearance from the Centre for their port development projects, APSEZ will not get a security permit given the current situation, a Mumbai-based port consultant said on condition of anonymity.
“As more than one-third of India’s shipping trade takes place through non-major ports (those not controlled by the Union government), security clearance is essential for non-major ports, including private ports, set up in the public-private-partnership (PPP) mode in the state sector due to the sensitiveness of the port sector. Accordingly, all states and union territories will also have to seek necessary security inputs for new projects being developed by them,” say the new guidelines for security clearance posted on the website of the shipping ministry.
The state maritime boards/state governments may apply to the ministry of home affairs which will coordinate with other security agencies to get security inputs on bidders for projects at non-major ports, the guidelines said.
APSEZ meanwhile is running/developing port assets overseas. In 2010, APSEZ bought the Abbot Point coal terminal in Australia’s Queensland state for 1.8 billion Australian dollars ($2 billion).
Adani Mining Pty Ltd, another group company, has also won the rights to develop a $5 billion, 90 million tonne capacity coal export terminal at Dudgeon Point next to the existing port of Hay Point in Queensland, Australia.
Mumbai-listed APSEZ is 77.5% owned by Adani Enterprises Ltd, the flagship business of Ahmedabad-based Adani Group.
The firm currently has port-operating assets that can load about 115 mt of cargo and most of these are located on India’s western coast, and in Gujarat, the home-state of Gautam Adani. APSEZ runs ports at Mundra, Dahej and Hazira—all in Gujarat and outside the control of the Union government.
The firm is also developing facilities at Union government-controlled ports located at Mormugao, Vizag and Kandla. The cargo-handling contracts at Vizag and Kandla were awarded in 2011 and 2012, respectively, much after the government stopped giving security clearance to the firm from November 2010.
The shipping ministry had earlier explained this by saying that the tendering process for these two projects started before November 2010 and hence the firm was given security clearance to participate.
The tender for the container terminal at Chennai port was issued before November 2010 and APSEZ was granted security clearance to bid. In the first round of bidding, APSEZ was the only bidder to submit a price bid, but it was rejected by the union government-controlled port because it was “ below expectations”. Chennai port then re-invited price bids form all the seven short-listed bidders and received two bids from Essar Group and APSEZ.
But the price bid of APSEZ was not opened because it was not given security clearance. The port and the shipping ministry declined to offer any explanation.
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First Published: Thu, Dec 27 2012. 10 59 PM IST
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