Ban on ZPMC cranes to hurt Indian ports
Move upsets investment plans of ABG, DP World and APSEZ, which have ordered cranes worth a combined $115 million
Bangalore: India’s decision to deny security clearance to the world’s biggest port crane maker, China’s state-owned Shanghai Zhenhua Heavy Industries Co. Ltd (ZPMC), to supply cargo handling equipment to cargo terminals at Union government-owned ports will have “serious implications” for the country’s port industry, according to industry executives.
The reasons for the denial have not been disclosed by the government.
The decision has upset investment plans of private firms such as Dubai’s DP World Ltd, Adani Ports and Special Economic Zone Ltd (APSEZ) and ABG Container Handling Pvt. Ltd that are building new container loading facilities at Jawaharlal Nehru Port, Kamarajar Port and VO Chidambaranar Port, respectively. All the three firms have separately ordered cranes from ZPMC worth a combined $115 million. It could also delay the construction schedule of these new facilities.
Earlier this week, the shipping ministry informed VO Chidambaranar Port located in Tamil Nadu on India’s eastern coast that ZPMC has been denied clearance by security agencies to supply gears to a new container terminal being developed there by ABG Container Handling, a spokesman for the ministry said. ABG had ordered three ship-to-shore cranes commonly referred to as quay cranes at ZPMC in October 2013 and had sought security clearance for ZPMC.
“The security ban on ZPMC will have an impact on the viability of the new terminal,” an executive at ABG said. “We will have to order cranes from other manufacturers at higher prices. Our revenue-share price bid was based on certain capital costs including equipment ordered at ZPMC and operating expenses,” he said asking not to be named.
In December 2013, DP World ordered four quay cranes at ZPMC for its under construction container terminal at JN Port.
In April this year, APSEZ ordered six quay cranes and 18 rubber tyred gantry cranes from ZPMC. All these will be hurt by the decision.
Last year, the security agencies had denied clearance to ZPMC to supply cranes to a container terminal being developed by Gammon Infrastructure Projects Ltd at Mumbai port located on the western coast.
At the time, it was seen as a one-off case because of the presence of the western naval command in the vicinity. It also marked the first time a Chinese crane maker was denied clearance. Thus far, Chinese firms or groups with Chinese links were barred from bidding for Indian port contracts mainly due to the dour political ties between the two sides.
“There will be mayhem,” said an executive at DP World. “The decision will have serious implications. There will be breach of contracts entered into with ZPMC for supplying cranes and would lead to litigation. It could become a global issue,” he said on condition of anonymity because of company policy on speaking to the media.
ZPMC is the world’s largest port crane maker with a 70% share of the global quay crane market, according to an APSEZ official. The firm is the largest supplier of cranes to India’s ports.
“It would be difficult to get cranes from other suppliers on time. ZPMC plant in China has a fabricated framework of cranes ready which enables the company to supply cranes in 12-14 months. The typical lead time in the industry to supply cranes is 24 months,” the APSEZ official said.
Port industry executives say the cost of building cargo terminals will also increase as a fall-out of the ban on ZPMC. “The cost of ZPMC cranes are at least ₹ 5 crore lower compared with others,” he added.
“Port developers may not get a competitive bid for buying cranes if ZPMC is excluded,” said another executive at the India office of a global port operating company based in South-East Asia.
It is not clear whether the ban is applicable to ports outside the control of the Union government many of which load/unload cargo with the help of ZPMC cranes.
About 146 ZPMC cranes are currently operating, including at Mundra, Cochin and Chennai ports. Even as recent as March 2014, 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.
“If a company is considered a security threat to the nation, there should be no differentiation between major (Union government-owned) and non-major ports (owned by state governments but given to private firms for development and operations),” the shipping ministry spokesman said.
“Still, it’s a call that has to be taken by the security agencies. Major ports fall in our domain. For minor ports, we had requested the state governments to follow the security clearance guidelines approved by the cabinet in 2012,” he added.
ZPMC could not be reached immediately for comment.
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First Published:31 Oct 2014, 12:06 AM IST
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