Bangalore: Chennai port’s proposed third terminal has received only one price bid after six groups backed out of the auction to build the Rs 3,686 crore facility, posing a setback to India’s container terminal privatization programme.
The lone, single-digit bid is also the lowest ever quoted for a terminal at a Union government-owned port.
Chennai port is India’s second biggest after Jawaharlal Nehru port near Mumbai. Its new terminal will have a capacity to load four million standard containers (msc) a year and be deep enough to allow berthing of ultra large ships capable of carrying more than 15,000 containers.
File photo of Chennai Port.
But only Mundra Port and Special Economic Zone Ltd (MPSEZ) submitted a price bid for the facility when the deadline ended on Friday. It offered a revenue share of 1.5% to Chennai port to develop and operate the new terminal, a Chennai port official said on condition of anonymity because the bid results have not been made public yet.
A spokesman for Chennai port declined to comment.
An executive at MPSEZ confirmed that his firm was the sole bidder for the Chennai port terminal, but declined to give details ahead of an announcement from the port authority.
“We are shocked and disappointed at the outcome of the bidding process,” the Chennai port official said. “A decision on the project will now be left for the board of trustees to decide.”
The official admitted that the financial viability of the project was hit by the port’s decision to make the successful bidder bear the expenses for constructing a 4.23km-long breakwater, which would cost at least Rs 1,000 crore. A breakwater is an offshore structure to protect a harbour, anchorage or marina basin from water waves and is typically funded by port authorities in India and overseas.
“The breakwater cost was a big issue with the bidders. The port will have to restructure the bid conditions to make it attractive,” said an executive at a Mumbai-based infrastructure consultancy, asking not to be identified.
Mundra Port’s offer is the lowest revenue share quoted by a private firm to a state-owned port since India’s container port privatization programme began in 1997. Under the programme, the entity willing to share the most from its annual revenue with the government-owned port gets the contract, typically stretching 30 years.
The lowest bid before this was the 33.33% revenue share DP World Pvt. Ltd quoted to build India’s first container transhipment terminal at Vallarpadam in Cochin port.
DP World, L&T Transco Development Projects Pvt. Ltd, Vadinar Oil Terminal Ltd, Lanco Infratech Ltd, GVK Developmental Projects Ltd-Leighton Contractors (India) Pvt. Ltd, IMC Ltd and IL&FS Maritime Infrastructure Co. Ltd pulled out of the Chennai port project after being shortlisted.
Chennai has two container terminals with a combined capacity to load 2.8 msc a year. In the year to March, the terminals, run separately by DP World and PSA International, loaded 1.52 msc, up from 1.21 msc a year earlier.
“Considering the steady growth in the container volumes at Chennai port, the container demand is expected to outstrip the available capacity of 2.8 msc by 2017-18,” India’s cabinet committee on infrastructure said after clearing the project and calling for price bids in October last year.
Incidentally, MPSEZ was granted security clearance by the Union government to bid for the Chennai facility, though it had denied the same security clearance to the company to participate in the recently concluded auction to build a container terminal at Jawaharlal Nehru port.
Price bids for port contracts are opened only after pre-qualified bidders are granted security clearances by the cabinet committee on security that comprises officials from the ministries of home, defence, finance and shipping.