Trivandrum: The Left Democratic Front government in Kerala has taken a leaf out of Switzerland’s football manuals to sweeten the Rs 4,360-crore Vizhinjam Deepsea Port project. Besides adopting the Swiss Challenge approach in project-financing, the VS Achuthanandan government is toying with the idea of expanding the port plans with two special economic zones—one port-based SEZ and another industry SEZ.'

The Kerala cabinet, which cleared the Vizhinjam project plan last week, had insisted on limiting the BoT partner’s tenure to 30 years. Most investors at the pre-bid meet had sought at least 40 years. But the chief minister was unrelenting.

However, the chief minister doesn’t seem to mind the ‘Swiss Challenge’ clause. In the Swiss Challenge method (originally, a football term), the government gives the challenger a chance to make better offers than the first contestant, then allows the original contestant to countermatch. With the Kerala cabinet tailoring this clause, the Vizhinjam BoT partner has an advantage. He is empowered to match the best bidder and reclaim the project, if the state government decides to go for bidding again.

The SEZsbonanza for Vizhinjam, however, is yet to be decided. While the 100-acre port-based SEZ would fulfil the new port’s warehousing needs, getting a socio-political consesus for the 250-acre industrial SEZ near Vizhjinham port will be a difficult task.

After initial cash-flow problems, the port project picked up some momentum last week. L&T Ramboll and IL&FS are working on it simultaneously. ‘‘We expect RFQ (request for qualification) papers to be picked up by June-end,’’ says L Radhakrishnan, CEO, Vizhinjam Deepsea ICT. At the pre-bid meet, the state had promised to get it going by May 2007.

This is Kerala’s second go at Vizhinjham. The port is eyeing at least 50% of the 50,000 mother-ships that now traffic the Suez Canal route. It was on the issue of security clearance to the Chinese partner that the project's bidding schedule tripped the first time. At the renewed pre-bid meet in April, as many as 43 firms, including 12 overseas infrastructure giants, held talks with chief minister Achuthanandan.

When it is not money, it is time that's unsettling Vizhinjam plans. Even the slightest delay may impact the iInternal rate of returns. As it is, the cost is expected to have escalated by 25% to about Rs 5,500 crore.

Source: The Financial Express