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A file photo of a dredging ship. Kolkata port, India’s only riverine port, is the largest dredging customer in India. Photo: Bloomberg
A file photo of a dredging ship. Kolkata port, India’s only riverine port, is the largest dredging customer in India. Photo: Bloomberg

Dredging Corp may be hit if it loses Kolkata port contract

State-run firm will potentially lose half its annual revenue if it fails to win the contract

Bangalore: The work for maintaining the channel at Union government-owned Kolkata port has been opened up for competitive bids when the cabinet on 28 November approved extending financial support to the port to meet the dredging costs by four years beginning 1 April 2012.

State-run Dredging Corp. of India Ltd (DCI), the nation’s biggest dredging contractor, will potentially lose half its annual revenue if it fails to win the contract when the bids are called by the port authority.

“More than 50% of our annual revenue comes from the dredging contract at Kolkata port," said P.P. Govinda Chari, general manager (finance), Dredging Corp. The Vizag-based firm got around 350 crore a year from maintenance dredging at the port for which it deploys four dredgers—specialized equipment used to deepen and maintain the channel of ports and harbours.

In the year ended March, DCI got 634.92 crore.

Kolkata port, India’s only riverine port, is the largest dredging customer in India. The port’s channel has a depth of 4.5 metres and, hence, ships are berthed during high water tide when the depth increases to 9-10 metres, allowing ships with a draft of 7-8 metres to dock.

For several years, the annual dredging at Kolkata port is given to DCI on nomination basis (without a tender), according to a government policy.

“A future change in this dredging policy for Kolkata port, including by opening the port’s dredging requirements to competitive bidding, may lead to a change in the deployment of our resources which may have a bearing on our financial results," Mumbai-listed DCI said in a 5 March prospectus for selling tax-free bonds.

Barring Kolkata, all the remaining 11 ports owned by the Union government finalize their dredging contracts through competitive bids, according to a dredging policy finalized by the shipping ministry in April 2007.

In a public tender, local firms owning dredgers registered in India, including DCI, get a so-called right of first refusal to match the lowest rate offered by a foreign dredging firm, provided the rate quoted by the Indian firm is within 10% of the lowest offer placed by a foreign firm.

“The extant policy for awarding the dredging work in other major ports (those owned by the Union government) will be followed in respect of the dredging work to be carried out in Kolkata port," a government statement said after the cabinet meeting on 28 November.

The dredging bill of Kolkata port is fully funded by the union government as a grant.

The cabinet has cleared a budget of 1,501.35 crore for funding maintenance dredging at Kolkata port four years.

“This will make transactions through the port commercially viable for the port users," the government statement added.

A shipping ministry spokesman said the cabinet decision to finalize the dredging work at Kolkata port through competitive bids was aimed at price discovery. “DCI will now have to participate in the tender to get the business", he said.

In contracts given on nomination basis, the price is negotiated between DCI and Kolkata port, he added.

DCI’s Chari said his firm offered competitive rates for dredging works, whether finalized through tender or through nomination. “Nobody can match our rates".

Kolkata port will have to follow the new eligibility criteria set by the directorate general of shipping for exercising the right of first refusal in a tender. Accordingly, the first preference for exercising the right of first refusal will be given to Indian built, Indian registered dredgers followed by dredgers that are registered in India but not necessarily built in India.

The third preference will be given to foreign registered dredgers that were manufactured at Indian yards.

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