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Pre-bid meeting of potential bidders on April 17


Posted on 02 Apr 2007
Thiruvananthapuram, 02 Apr 2007: It may be pegged as the world’s deepest seaport near the international shipping route with big names, ranging from Reliance Industries to a Russian group sending business feelers to the Kerala government, but the $1-billion Vizhinjam port re-tendering process is yet to pick up momentum.

The situation is that of too many investors ‘eyeing’ the port pie and too few with the right mix of expertise and money, sources said.

“It’s an expertise-intensive job, and this is hard to find,” says a senior official. After being forced to drop the government-blacklisted Chinese Consortium, the project managers have been extra finicky about picking up the right partner, minus any security stigma.

At worst, the Rs 4,800-crore project (by 2004 prices) is expected to suffer cost escalation to over Rs 5,000 crore by 2008, when it is to get going. And at its best, from the first year of completion, Vizhinjam port is expected to yield at least Rs 1,000 crore annually in revenues.

Meanwhile, the Kerala government has invited a pre-bid meeting of potential bidders on April 17, to assess investor interest, expertise and commercial strength. While the board of directors of Vizhinjam International Seaport had recommended a 45-year tenure to the build-operate-transfer (BOT) partner, the VS Achuthanandan cabinet (the Kerala government is a 24% stakeholder) had insisted on retaining the 30-year tenure clause.

To lure those with core competency in port-building from Korea, Japan, West Asia and Europe, the state government is planning to go slow and steady. The meeting in April, therefore, is expected to be an eyeball gazing on what the ‘right partner’ would expect from the project in terms of tenure. “One could say, we are looking at giving technical expertise a larger canvas,” L Radhakrishan, CEO, Vizhinjam International Seaport.

As many as 61% of Indian containers are trans-shipped through the ports of Colombo, Singapore and Salalah. This means that Indian exporters pay extra costs (freight costs at 11.4% of cost, insurance and freight—compared to the world average of 6.1%).

The Vizhinjam port could trim these costs, forecast a recent study by Container Shipment Economics. IL&FS and Hauer Associates, who worked on the study, estimate that 1.35-1.60 million TEUs are likely to be diverted through Vizhinjam by 2016-17.

For Kerala, the delay has been costly. Dropping the Chinese Consortium (Kaidi Power and Harbour Engineering company) had dragged Vizhinjam through a whole year of opportunity cost. Worse still, is the loss of enormous savings through subsidy waiver. Out of the Rs 300-crore interest-free debt support on offer by the Kerala government for the infrastructure project, the Chinese partners had declined as much as Rs 200 crore. But then, once bitten by the Centre’s security caveat, the Kerala government will now be twice shy in the pre-bid meet, especially with regard to commercially cosy Chinese offers.

Source: Finacial Express