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Building capacity: JN port has been struggling to implement the channel-deepening project for the last eight years. By Mint

Building capacity: JN port has been struggling to implement the channel-deepening project for the last eight years. By Mint

JN port, Mumbai port spar over sharing costs of dredging project

JN port, Mumbai port spar over sharing costs of dredging project

Bangalore: Union government-controlled Mumbai port and Jawaharlal Nehru (JN) port that are located just a few kilometres apart are sparring over sharing costs for a channel-deepening project for a common navigational channel, potentially delaying the award of contract to Dutch dredging firm Royal Boskalis Westminster NV.

Building capacity: JN port has been struggling to implement the channel-deepening project for the last eight years. By Mint

Though JN port, India’s busiest container gateway, had initiated the project, a major portion of the work on deepening and widening of Mumbai harbour and JN port channel falls within the channel belonging to Mumbai port.

In the absence of a separate channel for itself, ships heading for JN port to unload and load containers have to pass through the channel of Mumbai port to reach there, an arrangement that was agreed upon between the two ports when JN port was set up in 1989.

When JN port first conceptualized the project a decade back, the two ports had signed a so-called memorandum of understanding according to which Mumbai port had agreed to share one-eighth of the cost of the project budgeted at 800 crore.

The agreement lapsed in 2010 and has not been renewed.

“The cost sharing agreed then needs to be reviewed because of cost escalation and also because Mumbai port will stand to benefit from the channel-deepening project," a spokesman for JN port said. In December, Mumbai port will open a new container loading facility built by Gammon Infrastructure Projects Ltd.

JN port now wants Mumbai port to contribute half of the budget for the dredging work, but Mumbai port has rejected this plea.

“JN port has asked us to share 50% of the project cost, which we have rejected outright," said a spokesman for Mumbai port. “It’s their (JN port) project. We have agreed to share one-eighth of the cost, which is a bonus for them. Now they are becoming greedy," he said, adding that the port was not in favour of raising its earlier-agreed contribution for the project designed to give larger ships access to JN port.

On 5 July, the board of trustees of JN port approved the price bid of Royal Boskalis but asked the port management to take the concurrence of Mumbai port on sharing cost ahead of awarding the work to the Dutch firm, at least two trustees who attended the meeting said. The JN port spokesman confirmed that the board of trustees had signed off on the Royal Boskalis price quotation subject to the agreement on cost sharing with Mumbai port.

“Without a cost-sharing agreement with Mumbai port for the project, JN port cannot award the work to Royal Boskalis," a dredging industry executive said on condition of anonymity.

Twelve of the 13 ports controlled by the Union government are run as trusts under a law known as the Major Port Trusts Act, 1963.

JN port has been struggling to implement the channel-deepening project, a key to its capacity expansion plans, for the last eight years.

The port is currently not deep enough at 11.5m and can handle ships with a capacity to load only up to 3,000 standard containers. This in itself is difficult and the port manages it by ensuring these ships enter it at high tide.

It also handles bigger ships, but these enter only after off-loading some of their cargo elsewhere to reduce weight and draft requirements. The underutilization of capacity results in losses to shipping lines. The port plans to deepen the channel to 14m from the existing 11.5m to enable ships with a capacity to load 6,000 standard containers to berth.

The dredging work covers an area of 33km, out of which 26km is in Mumbai harbour and the balance in JN port channel.

The project has been delayed by at least four years and is now slated to be completed by 2014 instead of the earlier estimate of 2010, if an earlier auction had gone through.

The last auction had to be scrapped in July 2008 because the lowest bid of 1,050 crore for the work had exceeded the budget of 800 crore.

The port, one of the 13 controlled by the Union government, loads more than half of India’s container cargo passing through its ports.

p.manoj@livemint.com

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