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Supreme Court dismisses plea by Lanco, Kerala government

Supreme Court dismisses plea by Lanco, Kerala government
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First Published: Wed, Feb 11 2009. 12 34 AM IST
Updated: Wed, Feb 11 2009. 12 34 AM IST
Hyderabad/New Delhi: In a potential setback to the Lanco group, the Supreme Court on Tuesday asked the Kerala government to consider a bid by a Mumbai-based developer for the Rs6,000 crore port project at Vizhinjam near Thiruvananthapuram that was awarded to a Lanco-led consortium.
A bench comprising justices A. Pasayat and S.H. Kapadia dismissed an appeal by Hyderabad-based Lanco Kondapalli Power Pvt. Ltd, the Kerala government and its nodal agency Vizhinjam International Sea Port Ltd, and ordered the state administration to look at the bid by Zoom Developers Pvt. Ltd within the next 15 days.
The Kerala high court had on 4 December set aside the state government’s decision rejecting Zoom’s bid and declared it “non-responsive”. It had also asked the government to reconsider Zoom’s financial and technical bid and to cancel the contract awarded to the Lanco-led consortium if the bids submitted by Zoom were found to be competitive.
The international container transhipment port project, coming up at Vizhinjam, some 16km south of Thiruvananthapuram, Kerala’s capital, was awarded in May last year to the Lanco-led consortium under the public-private partnership, or PPP, model with a 33-year concession period.
Lanco, with interests in construction, real estate, roads, power and airports, had tied up with Malaysian container terminal company Pembinaan Redzai Sdn Bhd (PRSB) for the Vizhinjam project.
The other contenders in the race for the Vizhinjam project, bid out by the Kerala government in August 2007, included consortiums grouping Nagarjuna Construction Co. Ltd, Singapore-based Overseas Port Management Pte Ltd and Maytas Infra Ltd; Videocon Industries Ltd, Gammon India Ltd, Gammon Infrastructure Projects Ltd, Sical Logistics Ltd, Apollo Enterprises Ltd and DS Constructions Ltd; and Zoom Developers Pvt. Ltd and Portia Management Services Ltd.
Zoom’s tender was rejected by the state government-appointed committee citing a violation of provisions in the original bid document, while awarding the project to the Lanco-led consortium.
Challenging its disqualification, Zoom moved the Kerala high court in early 2008. Its plea, however, was dismissed in July. Zoom then filed an appeal, pursuant to which the Kerala high court set aside its earlier order and directed the state government to consider the bid submitted by Zoom.
The high court also said the state government was not justified in excluding the bid by Zoom from consideration during the evaluation stage on the ground that a new partner was added at a later stage.
In 2005, the Kerala government had to terminate the bid process for the Vizhinjam port project for lack of bids. The tender had been awarded to a consortium in which Zoom Developers was a member, subject to the Indian government’s clearance. After an internal inquiry, the Centre declined security clearance for the consortium.
“Lanco shall await the outcome of the evaluation process of the Kerala government in this respect,” V. Srinivas, director, corporate affairs, Lanco Infratech Ltd, said in a statement on Tuesday.
Vizhinjam port, with a 15m natural draft and proximity to international sea routes, was to be developed in four phases with an ultimate capacity of 6.5 million TEUs (twenty foot equivalent units), the standard container size.
The construction of the initial phase was to be completed in 60 months and the other three phases to be initiated after reaching stipulated traffic levels.
The port, when developed, is expected to attract a fair share of the container transhipment traffic meant for India, which is now being handled by international ports at Colombo, Malaysia, Al-Salalah (Oman) and Singapore. Currently, the annual container traffic either originating from or destined for India is estimated at around 6.5 million TEUs.
Lanco Infratech, the flagship of the Lanco group that earned Rs3,337 crore in revenue and Rs354 crore in profit for the year ended March, planned to hold a majority stake of 51% in the project. Its director, infrastructure, Sanjay Divakar Joshi, had said that the first phase of the project was estimated to cost some Rs2,700 crore with a debt-equity ratio of 70:30.
Of the equity component of around Rs810 crore, the Kerala government planned to pick up 25%, Pembinaan Redzai 24% and Lanco 51%, Joshi had said. “By the final phase of the project, the international partner will have the option to raise its equity to up to 26%, while Lanco will continue to hold majority stake of 51%,” he had said.
To maintain the majority holding of 51% in the first phase, Lanco Infratech needed to pump in around Rs413 crore as its contribution. At the end of March last year, the company had reserves of Rs1,614 crore.
c.sukumar@livemint.com
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First Published: Wed, Feb 11 2009. 12 34 AM IST