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Business News/ Opinion / Online-views/  All above board | The Chinese equipment conundrum
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All above board | The Chinese equipment conundrum

There is no clarity on whether all Chinese crane makers are not allowed to supply gear to port projects or only Shanghai Zhenhua Heavy Industries

There are more than 200 Chinese-made cranes operating at Indian ports out of which 146 were supplied by ZPMC alone.Premium
There are more than 200 Chinese-made cranes operating at Indian ports out of which 146 were supplied by ZPMC alone.

India’s decision last year to deny security clearance to China’s state-owned port container crane maker Shanghai Zhenhua Heavy Industries Co. Ltd (ZPMC) to supply gear for a container terminal being constructed at state-owned Mumbai port took the port industry by surprise.

It was then that port developers came to know of a new rule that requires equipment suppliers to cargo terminals to get security clearance from the government. In the past, such a clearance was applicable only to port developers and dredging contractors selected through a competitive bidding process.

While doing so, Chinese firms or groups with Chinese links were barred from bidding for Indian port contracts, mainly due to the political mistrust between the two sides.

But there is no clarity yet on whether all Chinese crane makers are not allowed to supply gear to Indian port projects or only ZPMC is disallowed.

Because, after the Mumbai port episode, Chinese crane makers continue to supply gear to Indian ports, whether owned by the Union government or by state governments.

ZPMC itself has an order to supply four cranes to a new container loading facility being developed by Dubai’s DP World Ltd at Jawaharlal Nehru port located near Mumbai port on India’s western coast.

However, the situation is different at V. O. Chidambaranar port in Tamil Nadu on the eastern coast, where a new container terminal being developed is waiting for security clearance for six months ahead of placing an order with ZPMC for three quay cranes. In the same port, though, cranes made by another Chinese firm are functioning.

There are more than 200 Chinese-made cranes operating at Indian ports out of which 146 were supplied by ZPMC alone. Even as recently as March, ZPMC supplied cranes to Gangavaram port in Andhra Pradesh.

ZPMC cranes are functioning in Vizag port, located close to the headquarters of India’s eastern naval command. The lack of clarity in allowing Chinese cranes into India’s ports has become a cause of worry for port developers.

It not only upsets the financial estimates of port projects, but also delays the construction of the terminal to the detriment of the developer.

For instance, at Mumbai port, the developer of the terminal had to file a fresh application with the government seeking security clearance for non-Chinese crane suppliers ahead of placing firm orders with one of them. The clearance finally came in May 2014 for three crane manufacturers—one Finnish, another American and the third a joint venture between an Indian and a Japanese firm.

For the port developers, the project costs would go haywire if they are not allowed to source cranes from a maker of their choice. By extension, it would hurt the viability of the project.

Security clearance is one major factor that has stalled many port projects.

The previous United Progressive Alliance government streamlined the security clearance procedure for port developers and dredging contractors whereby a clearance, once granted to a firm, would be valid for a three-year period unless there is a change in the management control of the company or a change of more than 10% shareholding in the company by any shareholder.

Such a procedural streamlining has become necessary for port equipment suppliers.

India’s shipping minister Nitin Gadkari had assured port developers after taking charge that he would look into the Chinese port equipment issue but nothing has materialized so far.

Port developers who had pinned much hope on the Narendra Modi government to kick-start stalled infrastructure projects, including port contracts, are obviously disappointed.

In June, the Indian cabinet had agreed in principle to sign a memorandum of understanding for setting up industrial parks in partnership with Chinese companies in an indication that India was keen on big investments from Chinese firms.

In the past, Chinese firms had supplied gear to Indian power, telecom and port companies. Chinese ships call at India’s ports to load and unload cargo.

So to assume that Chinese cargo handling equipment installed at India’s ports would pose a security risk to the country defies rationale. Simply because such equipment is already being used at many Indian ports.

P. Manoj looks at trends in the shipping industry.

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Published: 31 Jul 2014, 11:42 PM IST
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