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Chennai port to invite fresh bids for construction of mega container terminal - 2013-05-31

State-run Chennai Port will invite fresh bids from seven companies that are qualified to participate in the construction of a mega container terminal at the port for an estimated Rs 4,000 crore. The port rejected an offer by Essar Ports as the company offered to share with it only 5.25% of the revenues. This is the third time in the past five years that the port is seeking bids for the project.

Essar Ports and Adani Ports were the only companies to submit the bids last year. While Essar offered a paltry 5.25%, Adani's bids were not opened as the company did not have security clearance from the home ministry to participate in the project. Other qualified companies include Larsen & Toubro, Port of Singapore, GMR and Lanco Infratech.Adani Ports has managed to secure the clearance from the home ministry earlier this month, but the port maintains that the due process was complete and the bid submitted by the company could not be opened now.

The project has been delayed by more than five years since the ministry of shipping identified the project as a potential money churner due to its strategic advantage on the east coast of the country. In recent years, the eastern coast has seen mushrooming of a number minor ports, including Dhamra port and Krishnapatnam port, due to rising trade between India and China. Adani Ports had offered to share 5% of the revenue to the port when the port had invited bids for the first time in 2008, but the port had rejected the offer. The port then decided to invite fresh bids last year and Essar and Adani were the only companies to participate in the project.

"Chennai port needs to seriously understand that the delay will affect it future in the long run. Container volumes had seen a dip last year and the major ports did not feel the pinch in terms of capacity. But as global trade picks up, if the ports like Chennai do not have adequate capacity they will lose out on volume to the minor ports," said Manish Saigal, Partner, KPMG.

The union shipping ministry had recently streamlined some of the policy measures, including tariff deregulation and security clearance to private companies as it was increasingly finding it difficult to attract companies to invest in port projects in the country.

Various port projects worth more than Rs22,000 crore have been held up since the past few years due to policy hurdles and lack of interest from private investors. These include the fourth container terminal at Jawaharlal Nehru Port Trust, Vizhinjam Port and a new container terminal at Ennore Port

Source: The Economic Times