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Gammon, ABG contract approvals face delays

Mormugao Port defers Gammon’s bid approval; Kolkata Port issues a conditional letter of intent to ABG
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First Published: Sun, Dec 02 2012. 10 24 PM IST
Kolkata Port loaded 15.53% less cargo during April and October this year. Photo: Indranil Bhoumik/Mint
Kolkata Port loaded 15.53% less cargo during April and October this year. Photo: Indranil Bhoumik/Mint
Updated: Sun, Dec 02 2012. 10 26 PM IST
Bangalore: Approval for two cargo-handling contracts at Union government-controlled ports located at Mormugao and Kolkata, involving Gammon Infrastructure Projects Ltd and ABG Ports Pvt. Ltd, respectively, has landed in uncertainty for unusual reasons, potentially delaying capacity expansion plans at the two ports that are struggling with shrinking cargo.
On 30 November, the board of trustees of Mormugao Port in Goa deferred a decision on approving the highest revenue share price bid quoted by Mumbai-listed Gammon Infrastructure for a coal import terminal.
Gammon had emerged as the highest bidder for the Rs.300 crore project by placing a revenue share price bid of 33.66% when the price bids were opened on 27 November, beating JSW Infrastructure Ltd that had quoted a price bid of 27%.
Port contracts at Union government-controlled ports are decided on the basis of revenue share. The bidder willing to share the most from its annual revenue with the government-owned ports gets the contract, according to the port privatization policy.
After the bids were opened, JSW Infrastructure wrote to Mormugao Port and to all the board of trustees making a case for not awarding the project to Gammon. The JSW letter, reviewed by Mint, says that Gammon was denied security clearance a few months ago for another project at Tuticorin Port, also owned by the Union government in Tamil Nadu, and hence should not be given the Mormugao project.
A spokesman for Mormugao Port, however, said that security clearance for port bidders are given on a case-to-case basis and Gammon was security-cleared for the Mormugao terminal. He confirmed that the board of trustees had deferred approving Gammon’s bid.
Gammon declined to comment. JSW could not be reached immediately for comment.
Between April and October, Mormugao loaded 13.4 million tonnes (mt) of cargo, a steep decline of 32.9% from the
20 mt it handled during the same period last year. The port was hit by a ban on mining of the steel-making commodity, its main cargo, from August. The ban cut Mormugao’s iron ore volumes by half to 7.4 mt during April-October from
14.7 mt a year earlier and threatens to further erode its main cargo base.
On 30 November, the board of trustees of Kolkata Port located on India’s eastern coast decided to issue a so-called conditional letter of intent to ABG Ports for a new 10-year contract for handling containers at Berth 5 in the port, setting the stage for a prolonged litigation between the two sides.
ABG Ports, a unit of Mumbai-listed ABG Infralogistics Ltd, quoted a rate of Rs.1,465 per container move to emerge the lowest bidder for the operation and maintenance (O&M) contract to load containers at Berth 5 when the price bids were opened by Kolkata Port on 23 November.
On 31 October, Haldia Bulk Terminals Pvt. Ltd, a joint venture between ABG Infralogistics and French shipping firm Louis Dreyfus Armateurs SA, terminated operations at its bulk loading facility at Haldia Dock Complex in Kolkata Port citing worsening law and order at the port, making it impossible to run the facility safely.
Kolkata Port’s decision to open the price bid of ABG when it was processing a case for blacklisting the firm for abandoning the Haldia project had raised a few eyebrows.
“We had opened the price bid of ABG because we have not yet formally blacklisted or banned the firm from participating in future auctions at the port due to the Haldia fiasco. That matter is under process,” a spokesman for Kolkata Port said.
“Our legal advisors said that if we do not open the price bid of ABG being a qualified and short-listed bidder, it would have amounted to a virtual ban on the firm which is not the case today,” the port spokesman said.
Hence, the board of trustees of the port decided to issue a conditional letter of intent to ABG stating that if the blacklisting of Haldia Bulk Terminals is decided with implications on ABG, then the firm will have to give an undertaking to wind up operations at Berth 5 and refrain from making any claim on Kolkata Port. “If ABG accepts this condition, we will issue a final work order to it for Berth 5,” the port spokesman said.
A spokesman for ABG said that the decision was an “after-thought” by Kolkata Port and that it was fully compliant with the qualification rules set by the government for port bidders.
“They should have settled all these issues before opening our bid and not after,” he said.
Kolkata Port loaded 15.53% less cargo during April and October this year. It handled
22.8 mt of cargo during the seven months of the current fiscal compared with 27 mt last year.
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First Published: Sun, Dec 02 2012. 10 24 PM IST
More Topics: Gammon | ABG | Mormugao Port | Kolkata port |
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