Bangalore: State-run Dredging Corp. of India Ltd (DCI) may end up paying Rs483 crore more than originally intended for buying three dredgers because of delayed decision by the government.
Dredgers are specialized ships used for deepening and maintaining the channels of ports and harbours.
When DCI first called a bid for the dredgers in 2006, Dutch firm IHC Holland Merwede BV, the world’s top dredging equipment maker and the sole qualified bidder, quoted Rs1,087 crore for building the three ships.
The price was considered higher than the global cost prevailing at the time for dredgers of similar size and capacity, and the Union government’s cabinet committee on economic affairs (CCEA) took until 20 July 2007 to give its clearance.
By then, the validity of IHC’s price bid had lapsed. The firm declined to extend the date and the tender was scrapped. Unlike many of its smaller private rivals, DCI cannot negotiate and buy dredgers; it has to make purchases only through public auctions.
Nearly two years later, on 4 May, DCI’s board has approved a proposal to buy three trailer suction hopper dredgers of 5,000 cu. m capacity each from IHC at a total cost of Rs1,570 crore, a DCI executive said. He did not want to be named.
IHC, which had again emerged as the sole qualified bidder for the contract, had quoted about Rs1,770 crore for the three dredgers, which two dredging industry executives said was high, as prices had declined in the wake of the global recession.
As a result, following lengthy negotiations between the two parties, the acquisition cost was reduced to Rs1,570 crore, according to three persons familiar with the discussions. They did not want to be named ahead of a final clearance from CCEA.
A DCI spokesperson declined to comment for this story. Biswajit Basu, general manager at the India office of IHC, was not available for comment. A shipping ministry spokesman also declined to comment.
DCI, which plans to fund the purchase through a mix of debt and internal resources, had since submitted the proposal to the shipping ministry for its approval, in accordance with India’s rules on purchases and capital expenditure by state-run firms.
The proposal will now be vetted first by the Public Investment Board (PIB) headed by the expenditure secretary in the Union finance ministry. The CCEA will consider the proposal only after clearance from the PIB.
The dredger purchase is a part of the 100-day action plan announced by shipping minister G.K. Vasan on 1 July.
DCI has a fleet of 12 dredgers with a capacity to dredge 80 million cu. m a year. The firm is looking to boost its dredging capacity to 100 million cu. m a year.