Home >Companies >News >Kandla port scraps `5,992 crore tender for loading facility

Bangalore: Union government-owned Kandla port in Gujarat has scrapped a tender to build a 5,992 crore container loading facility with private funds after the two groups that had applied for the project backed out without putting price bids, citing viability concerns.

Adani Ports and Special Economic Zone Ltd (APSEZ), India’s biggest private port operator, and a consortium of Hyundai Engineering and Construction Co. Ltd and Concast Infratech Ltd were the two groups that applied for the project planned at Tuna-Tekra, in the Gulf of Kutch outside Kandla creek.

Containers are not handled at Kandla port after a private terminal operating there shut last year following a dispute. At its peak in 2011-12, this facility handled 167,000 standard containers, compared with a capacity of 600,000 standard containers.

Kandla port trust, India’s biggest state-owned cargo handler, confirmed that the tender was scrapped last week.

“The two bidding groups declined to put price bids for the project due to viability issues," a spokesman for Kandla port trust said. “We will soon hold a road show for the project in Mumbai to gauge the mood of the investors and based on their feedback we will re-design the project."

“Kandla port trust has informed us that it was discharging the tender," an executive at one of the two bidding groups said on condition of anonymity. “The port trust plans to issue a fresh tender for the project after making changes in the scope of the project," he added.

The two bidders had sought flexibility to build the terminal based on cargo demand in phases. The tender terms framed by Kandla Port Trust made it mandatory for the private operator to build six berths with a capacity to load 4.2 million standard containers a year irrespective of cargo demand.

“We told Kandla port to grant flexibility to the private operator to construct 3-4 berths initially and later add the remaining berths based on cargo potential," the executive at one of the two bidding groups mentioned earlier said.

This was not agreed to by Kandla port trust.

This is the second big container terminal tender to collapse at the dozen ports owned by the Union government. Last year, Chennai port trust discharged a tender to build a 3,686 crore container terminal at the port with a capacity to load 4 million standard containers a year after none of the seven short-listed bidding groups put in price bids for the project.

Like Kandla, Chennai is currently restructuring the project ahead of calling fresh bids.

The lack of response for the Kandla project also indicate that the new tariff-setting guidelines announced by the shipping ministry in July 2013 for new cargo handling projects has not made any impact on private investors, a Mumbai-based port consultant said.

The Kandla project was put to tender on the basis of the new guideline for market-linked tariff-setting at ports owned by the Union government, which was announced on 31 July.

The new rules grant flexibility to cargo handlers to raise their base rates every year based on market conditions, subject to a cap of 15%, provided performance standards are met. In the earlier rule, cargo handlers had to seek approval for rate increases from the tariff regulator, which was either partially granted or rejected.

The Kandla project also flopped because of over-capacity concerns in the region.

APSEZ runs India’s biggest private port at Mundra, which is about 60 km away from Kandla port.

Mundra, India’s biggest container port after the Jawaharlal Nehru port near Mumbai, loaded 1.74 million standard containers in the year to March 2013.

Mundra port currently runs three container handling facilities with a capacity to load 4 million standard containers a year.

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