Bangalore: A second attempt by Chennai port to build a big container-loading facility costing Rs.3,686 crore with private funds has floundered yet again, with a consortium of Essar Ports Ltd and Vadinar Oil Terminal Ltd quoting a revenue share price bid of 5.25% when the bid was opened on Monday.
Significantly, the bid submitted by Adani Ports and Special Economic Zone Ltd (APSEZ), the only other bidder to place a price quotation from a list of seven pre-qualified bidders, was not opened because the firm did not receive security clearance from the government, at least two people familiar with the outcome of the bid said. They declined to be named because the bid results have not been made public yet.
“Only the price bid submitted by Essar was opened; the bid of APSEZ was not opened because it did not get security clearance,” a shipping ministry official, one of the two persons mentioned earlier, said. He declined to be named.
According to practice, price bids for port contracts are opened only after pre-qualified bidders are granted security clearance by Union government ministries such as home, defence, external affairs, shipping as well as the Intelligence Bureau and the cabinet secretariat. Such clearances are sought on a project-to-project basis.
Both APSEZ and Essar, India’s top two private ports operating firms, were granted security clearance earlier.
In the last round of bidding, APSEZ was the only bidder to submit a price bid, but its bid of 1%, which was later scaled up to 5% through negotiations, 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 the bids of Essar and APSEZ were received on 22 March this year. But, the opening of the bids was delayed because the port was awaiting security clearance for the two bidders. In the case of Essar, a security clearance was sought afresh because there was a change in the directorship of one of the consortium members after the first round of bidding.
For Adani, fresh security clearance was necessitated because the firm has of late been denied security clearance by the government.
APSEZ, India’s biggest private port operator, is a unit of the diversified Adani Group.
APSEZ was earlier granted security clearance for this project before November 2010.
But, after November 2010, APSEZ has been denied security clearance by the government in projects such as the fourth container terminal at Jawaharlal Nehru port, two projects at Vizag port and one at Vizhinjam port in Kerala. The reasons for the denial have not been disclosed by the government.
Port contracts are decided on the basis of revenue share— the entity willing to share the most from its annual revenue with the government-owned port gets the contract, typically lasting 30 years, according to the port privatization policy of the Union government.
Essar’s bid of 5.25% is almost the same as the one placed by APSEZ in the earlier round and could be rejected unless the firm scales up the price bid substantially, the shipping ministry official mentioned earlier said.
“A decision on the lone price bid and further course of action will be taken by the board of trustees of Chennai port,” he added.
K.K. Sinha, the chief executive officer of Essar Ports, declined to discuss the outcome of the bidding process citing client confidentiality.
A spokesman for APSEZ declined to comment. Atulya Misra, chairman of Chennai port, did not respond to calls made to his mobile seeking comment. The planned terminal will have a berth length of 2 km with a water depth of 22 metres, enabling ultra large container ships with a capacity to load 15,000 standard containers to dock. It can load 4 million standard containers a year when fully operational.
Chennai, India’s second biggest container port, currently has two container loading facilities that are run separately by DP World Pvt. Ltd and PSA International Pte Ltd with a capacity to load 2.8 million standard containers a year. These two terminals loaded a combined 1.55 million standard containers in 2011-12. Between April 2012 and November 2012, the two terminals loaded a total of 1.04 million standard containers.