Only one company has come forward to bid for Chennai Port's Rs 3,700-crore mega container terminal project — a development not dissimilar to what neighbouring Ennore Port faced a year ago when it sought to build a container terminal under the build, own and transfer mode.
Mundra Port and Special Economic Zone, India's largest private port and special economic zone, was the lone bidder for the Rs 3,700 crore deepwater container terminal, the country's first such, at Chennai. In the case of Ennore port, a consortium led by the London-based Eredene Group was the lone bidder for its container terminal project. Even in a few other private projects, including the ones at Chennai and Tuticorin ports, there were at least three large players competing.
“Having a lone bidder is not a setback to the port's privatisation programme. Since it is a green-field project and needs huge investment from the private player, there are risks involved in terms of returns. This may have forced some large companies to withdraw from the bidding (process),” said Mr Atulya Mishra, Chairman, Chennai Port Trust.
The Mundra port's bid is set to be forwarded to the Chennai Port Trust board for scrutiny and clearance before the contract is awarded. Various clauses need to be studied in in a situation where there is only one bidder, Mr Mishra said.
Last-minute withdrawal
Companies such as the Dubai-based DP World, Port of Singapore Authority (PSA) and Larsen & Toubro (that bid in the initial stage) withdrew later due to various reasons. PSA could not participate due to the ‘monopoly' clause (the company got the second container terminal and hence cannot immediately bid for a similar project in the same port) while L&T is building a major shipyard near Ennore, he said.
On the low revenue share (of 1.5 per cent) offered by the Mundra Port for the project, Mr Mishra said it was not an issue considering the high project cost involved.
The mega container terminal project is to be developed north of the existing Bharathi Dock. It will have two new breakwaters (total length 4.5 km), and a continuous quay length of 2 km, which will ultimately have 22 metre alongside depth to handle ultra large container ships of over 15,000 twenty foot equivalent unit (TEU) capacity and a length of 400 m.
The project is proposed on a build, own and transfer basis with cost of dredging, floating crafts and navigational aids — costing Rs 561 crore — to be borne by the port trust. The private operator will invest on berth & breakwater construction, reclamation of backup area, handling equipment and other landside infrastructure costing Rs 3,125 crore.
Mr K. Ravichandran, Senior Vice-President, at research house ICRA Ltd, who tracks the infrastructure sector, said the one of the reasons why there was just one bidder for the project could be due to the anticipated overcapacity in the hinterland, with the port already having two terminals.
Further, Katupalli is to be soon commissioned; Ennore port's container terminal has been awarded; and there have been developments in Krishnapatnam and Marg's Karaikal port. Notwithstanding anticipated container demand growth of 12-15 per cent a year, some amount of overcapacity is here to stay, at least over the next 4-5 years if all these terminals were to come up, he said.
The high capital cost of the terminals with attendant high commercial risks, coupled with the prevailing weak macro economic environment and low level of business confidence, could also be reasons for the lone bid , he said.