Sethu project weighs down Dredging Corp4 min read . Updated: 17 Sep 2009, 08:43 PM IST
Sethu project weighs down Dredging Corp
Bangalore: State-run Dredging Corp. of India Ltd (DCI) will buy two new dredgers from a Dutch manufacturer instead of the three it had planned to purchase earlier, as the company battles a cash crunch, employee departures and a vigilance inquiry into a contract awarded to a private firm.
Finances at the country’s biggest dredger of ports have been strained mainly because the government hasn’t paid dues amounting to about Rs220 crore for carrying out work on the Sethusamudram shipping channel project.
Dredgers are specialized ships used for deepening and maintaining the channels of ports and harbours.
“We will now place orders for two dredgers as against the three planned earlier due to a financial crunch," a DCI executive said on condition of anonymity. The scaled-down proposal was discussed recently by the Public Investment Board (PIB), headed by the expenditure secretary of the Union finance ministry.
All acquisition proposals involving state-run firms have to be screened by PIB, according to government procedure, ahead of submission to the Union cabinet for final approval, the executive mentioned earlier said.
The two dredgers will cost Rs1,047 crore, compared with the Rs1,570 crore that three would have cost. DCI will contribute 25% of the purchase cost from its own resources while the balance 75% will be borrowed from banks.
IHC Holland Merwede BV, the world’s top dredger equipment maker, will build the two vessels at its facility in the Netherlands.
Lack of enough dredgers has crimped DCI’s ability to take up more contracts. Currently, DCI has a fleet of 12 dredgers with a capacity to dredge 80 million cu. m of materials from the ocean bed in a year. The firm is looking to boost its dredging capacity to 100 million cu. m a year.
DCI last purchased a dredger in 2001. A new dredger under construction at state-owned shipyard Mazagon Docks Ltd has been delayed by 18 months. It was originally scheduled for completion in December 2007. This dredger is being built at Mazagon under the supervision of VOSTA LMG GmbH, a German firm.
The Sethusamudram project has left a gaping hole in DCI’s pockets. “We are in bad shape financially because of the Sethusamudram project," the executive mentioned earlier said.
DCI was paid on an ad-hoc basis for the Sethusamudram contract that ran between July 2005 and July 2009.
Due to lack of capacity, DCI had to hire dredgers from firms such as Mercator Lines Ltd and Chellaram Shipping (Hong Kong) Ltd to undertake the Sethusamudram contract.
“The Central government is yet to reimburse us the money we paid for hiring dredgers from the market," the executive said.
The Union Budget for 2010 had made a provision of Rs10 crore for the Sethusamudram project. Hence, liquidating DCI’s outstanding of Rs220 crore would require cabinet approval. The shipping ministry is yet to start the process of getting this clearance, said a ministry official.
The firm, based in the port city of Visakhapatnam, is involved in an inquiry over subcontracting a portion of the work originally awarded to it by state-owned Paradip Port Trust for deepening its channel in January 2008 to allow bigger ships.
Because of various reasons, including shortage of fleet, DCI could not complete the work even after getting a six-month extension on the 12-month contract.
DCI decided to subcontract the work to another firm, hiring three dredgers from Mercator Lines for the Paradip work through a public auction. However, within a few days of starting work at Paradip, two of the three dredgers hired from Mercator ran into technical problems and had to be pulled out of service.
The Central Vigilance Commission is now probing the process adopted by DCI for selecting and awarding the work to Mercator at Paradip, the executive mentioned earlier said. A Union shipping ministry official confirmed this development, but did not want to be named.
DCI also recently lost a contract from the Indian Navy because they could not supply a dredger on time.
The firm reported a net profit of Rs3.16 crore on revenues of Rs160.66 crore in the first quarter of the current fiscal year beginning April compared with a net profit of Rs24.45 crore and revenues of Rs196 crore a year ago.
DCI has also been hit by an exodus of staff, both onshore and those operating dredgers. In the last two years, as much as 40 people involved in operating dredgers and 15 executives have left the company. In the past one week alone, two senior executives have resigned from the company.
Private firms such as Mercator, Essar Group and MARG Ltd, who entered the dredging sector in 2007, have poached on DCI’s fleet personnel to run their dredgers.
“There are opportunities outside with the arrival of private firms in this sector which was not the case till 2007. So, people are leaving DCI for better prospects," said a former DCI employee now employed with a private firm. He did not want to be named.
India’s dredging market is worth Rs2,000 crore a year,according to the shippingministry.
A DCI spokesman declined to comment for this story.