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Dredging Corp seen paying too high a price for its new dredgers

Dredging Corp seen paying too high a price for its new dredgers
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First Published: Wed, Aug 08 2007. 01 38 AM IST

Murky waters: DCI does dredging mainly for Indian seaports, though occasionally it dredges at foreign ports. The bulk of the dredging for the Sethusamudram project is also being carried out by DCI.
Murky waters: DCI does dredging mainly for Indian seaports, though occasionally it dredges at foreign ports. The bulk of the dredging for the Sethusamudram project is also being carried out by DCI.
Updated: Wed, Aug 08 2007. 01 38 AM IST
Mumbai: The price that India’s biggest dredging firm, the state-run Dredging Corp. of India (DCI), is paying to build three new dredgers at the facility of the world’s top dredging equipment-maker, IHC Holland Merwede BV, is much higher than the prevailing market rates for building such vessels, according to experts who did not want to be named.
On 20 July, the Cabinet Committee on Economic Affairs cleared DCI’s proposal to buy three trailer suction hopper dredgers of 5,000 cu. m capacity each at a cost of Rs1,087 crore to expand its fleet. This means that each dredger would cost about Rs362.33 crore. A trailer suction hopper dredger digs sand and silt from the seabed, collects the dredged material and takes it to the deep sea or shore for dumping it.
However, dredging industry sources who did not want to be named said that dredgers of this type would at current rates cost about Rs230 crore to build in The
Murky waters: DCI does dredging mainly for Indian seaports, though occasionally it dredges at foreign ports. The bulk of the dredging for the Sethusamudram project is also being carried out by DCI.
Netherlands, about Rs130 crore at Indian yards and Rs70-80 crore in China.
Recently, Hong Kong-based dry bulk shipowner Chellaram Shipping Co. Pvt Ltd and Essar Shipping Ltd each purchased a Chinese-built trailer suction hopper dredger for less than $23 million (Rs93 crore) per dredger.
When contacted over telephone, a spokesman for IHC Holland Merwede, based in The Netherlands, said: “I am not going to comment on that (the price).”
According to government officials who had scrutinized the acquisition proposal, IHC Holland was the only qualified bidder whose price bid was opened by the Visakhapatnam-based firm. The other bidder, ABG Shipyard Ltd, who had offered to build the dredgers at their under-construction facility at Dahej in Gujarat, failed to cross the pre-qualification criteria set by DCI.
The cost of building new dredgers has increased given the boom in shipbuilding the world over and, as a result, yards are booked till 2010.
“IHC Holland Merwede had told the government that it would not be able to hold on to the prices that it had quoted about a year back for building the three dredgers,” the government official said.
This partly explains, he said, why the cost of each dredger varies though the total acquisition cost is Rs1,087 crore with each dredger costing Rs362.33 crore on an average.
“You cannot calculate the cost of each dredger just by dividing the total acquisition cost by three. The cost varies because of the import taxes,” said the spokesman for IHC Holland Merwede.
Given its full order book position, IHC has “offered to build one of the three dredgers at its own yard in The Netherlands while the other two would be built at any of the European yards under the supervision of IHC”. The company spokesman declined to give more details.
A spokesman for DCI did not comment. A shipping ministry official, who did not want to be named, said that DCI has followed the due process of tendering while selecting IHC Holland Merwede. “If you have authentic information about the prevailing global price for building these dredgers, please give it to me. It will be helpful to the government in preventing people from taking us for a ride,” he said.
A shipping industry expert under condition of anonymity said that DCI had to pay a higher price for the dredgers because the equipment was being built by an entity that had a monopoly over constructing such dredgers. “Naturally, it has to be built at a place that has vast experience in building such specialized equipment,” he pointed out.
Though yards in China are building dredgers at throw-away prices, the quality of Chinese-built dredgers is being questioned. “The quality of work as well as the machinery and equipment used are very poor in dredgers that are built in China,” said Suresh G. Kewalramani, chairman and managing director of the Kandla-based Jaisu Dredging and Shipping Ltd.
DCI does dredging mainly for Indian seaports, though occasionally it dredges at foreign seaports in countries such as Taiwan and Dubai. It is mainly involved in maintenance dredging; almost all the maintenance dredging in Indian seaports is carried out by DCI. DCI is also involved in capital dredging, beach nourishment, and land reclamation.
The main seaports in which DCI does business are Haldia and Kandla. The bulk of the dredging for the Sethusamudram Shipping Canal Project is also being carried out by DCI.
DCI, a mini-ratna company, is without a full-time chairman and managing director after the previous incumbent N.K. Gupta completed his tenure on 30 November 2006.
K.R. Kishore, chairman of the central government-owned Visakhaptanam Port Trust, who was given additional charge of chairman and managing director of DCI since then, was changed on 25 June and the charge was entrusted to A.K. Dhar, the company’s finance director.
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First Published: Wed, Aug 08 2007. 01 38 AM IST