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Local port developers sidestep government ban on Chinese firms

Local port developers sidestep government ban on Chinese firms
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First Published: Mon, Mar 24 2008. 12 26 AM IST

Dour relations: Hong Kong billionaire Li Ka-shing, who has a stake in Westports Holdings, sold his Hutchison Essar holding last year, saying he didn’t want to do business in a country where he was not
Dour relations: Hong Kong billionaire Li Ka-shing, who has a stake in Westports Holdings, sold his Hutchison Essar holding last year, saying he didn’t want to do business in a country where he was not
Updated: Mon, Mar 24 2008. 12 26 AM IST
Indian companies bidding for rights to develop and operate domestic port projects have found a way to circumvent a Union government restriction on partnering with Chinese groups.
The Union Cabinet Committee on Security had banned Chinese companies or groups with Chinese connections from bidding for Indian port projects, chiefly a fallout of the dour political relationship between the two countries.
Dour relations: Hong Kong billionaire Li Ka-shing, who has a stake in Westports Holdings, sold his Hutchison Essar holding last year, saying he didn’t want to do business in a country where he was not welcome.
Meanwhile, local entities bidding for ports need experienced global port operators as partners to qualify for projects. Though there are many non-Chinese companies globally, Indian firms do not find many willing partners except companies such as Westports Malaysia Sdn Bhd, which, in turn, has a large stakeholder with alleged Chinese links.
As a result, Indian companies are entering into agreements with Pembinaan Redzai Sdn Bhd—the majority non-Chinese owner of Westports Malaysia—instead of the port operating company itself, to ensure they get a pre-qualification without any hiccups.
Malaysia-based Pembinaan Redzai has a 42.9% stake in Westports Holdings Sdn Bhd, the holding company for Westports Malaysia, and is considered a safe partner. Another 31.45% in Westports Holdings is controlled by Hong Kong billionaire Li Ka-shing’s Hutchison Whampoa Ltd, which is banned from participating in Indian port projects because of its alleged relations with mainland China.
Westports Holdings runs one of the two container terminals at Malaysia’s Port Klang, which ranks among the world’s Top 20 container ports.
Hutchison Port Holdings, the port operating unit of the diversified Hutchison Whampoa, is the world’s top container cargo port operator, but it has been denied permission in the past by the Indian government to bid for port projects at Jawaharlal Nehru Port.
This was one of the reasons Li sold his stake last year in mobile company Hutchison Essar Ltd to Vodafone Group Plc., saying he did not want to do business in a country where he was not welcome.
Local port developers say teaming up with Westports Malaysia could spell trouble for them.
“We decided to team up with Pembinaan Redzai and not Westports because we did not want to get into trouble with the government on security reasons,” said an executive with Chennai-based infrastructure development firm Marg Ltd, which has formed a joint venture with Pembinaan Redzai to operate its upcoming all-weather, deep-water seaport at Karaikal in Puducherry.
Karaikal is being developed to handle 10 million tonnes (mt) of cargo a year.
Hyderabad-based Lanco Infratech Ltd, in partnership with Pembinaan Redzai, is one of the five bidders for a Rs5,000 crore container terminal at Vizhinjam in Kerala.
Bangalore-based Hindustan Infrastructure Projects, a company promoted by Rajya Sabha member Rajeev Chandrasekhar, is one of the six shortlisted bidders for developing and operating a deep-sea port at Karwar in Karnataka. Hindustan Infrastructure, too, has teamed up with Pembinaan Redzai to bid for the project, which is estimated to cost more than Rs1,000 crore.
Karwar, Karaikal and Vizhinjam are ports owned by the Karnataka, Puducherry and Kerala governments, respectively. Private firms operating these ports will have the freedom to fix tariffs for services provided. In comparison, tariffs at the 12 major ports in India, owned by the Union government, are set by the Tariff Authority for Major Ports.
Indian ports currently have the capacity to handle 736mt of cargo a year. Of this, the 12 ports owned by the Union government can handle 508mt, while ports owned by states can handle 228mt annually.
The Union shipping ministry says India’s cargo handling capacity needs to be raised to 1,500mt a year by 2012 to meet the rising demand for importing raw materials and exporting finished goods in the world’s second fastest growing major economy. About 95% of the country’s trade by volume, and 70% by value, is moved by the sea route.
The shipping ministry estimates that around Rs90,000 crore will be needed to raise India’s cargo handling capacity to 1,500mt a year. Much of this money is expected to come from the private sector.
According to the ministry, the 12 major ports are expected to add 500mt a year of capacity, and ports owned by the states, an additional 610mt a year by 2012.
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First Published: Mon, Mar 24 2008. 12 26 AM IST