4-Jul-2013
India’s plan to triple cargo-handling capacity at its ports to 3.2 billion tonnes by 2020 with private funds worth Rs.3 trillion is losing steam after many marquee project tenders collapsed because of a lack of interest from bidders.
A mega container terminal at Chennai port failed to receive any price bids after several deadline extensions. In many instances, port authorities are receiving just one-two price bids, offering revenue share in the single digits. Notable among these is a project to ramp up capacity at Haldia Dock Complex of Kolkata port with private funds worth Rs.1,710 crore. Kolkata port received a solitary bid from a private firm that offered a revenue share of 1%. Port contracts are decided on the basis of revenue share—the entity that’s willing to share the most from its annual revenue gets the deal. A Rs.650-crore plan to expand container-handling capacity at Visakhapatnam port is in trouble as the lone bidder offered a revenue share of 4%.
While India’s shipping ministry appears to be optimistic about the success of its port privatization plans, the ground reality presents an entirely different picture with the annual target for awarding port contracts being missed repeatedly.
So much so that Prime Minister Manmohan Singh stopped short of setting an annual target for awarding port projects for the fiscal that began on 1 April, unlike in the previous two years.
Of the proposed two new ports—one in Andhra Pradesh and the other in West Bengal—he directed the shipping ministry to award only one over the next six months at a review meeting of infrastructure ministries held on 28 June. Projects awarded at very high revenue share quotations have failed to progress after the successful bidder realized the project was unviable at that rate, as in the case of the fourth container terminal at Jawaharlal Nehru port, near Mumbai, and had to be scrapped. At Ennore port, the successful bidder for a container terminal abandoned the contract after failing to get bank funding due to the high revenue share it had quoted in the tender.
A private container loading facility at Kandla port collapsed last year, just a few years into a 30-year contract, because the port authority did not fulfil its obligations under the contract.
Given the general slowdown in the economy, accompanied by low cargo volume and a difficult funding environment, port developers are seen to prefer smaller projects with a lower risk profile. Developers having captive cargo are also increasingly winning port contracts because they are better placed to implement projects without any snags. As India’s port expansion plans face multiple hurdles, the shipping ministry is smug in its belief that all is well, hoping that the tide will turn when the economy improves.
In the ports sector, public-private partnerships (PPPs) are partnerships only in name. That’s because the risks associated with PPP port projects are heavily loaded onto the private developer; there is no proper risk sharing between the two sides. Squeezing out the highest revenue share from private developers is the cornerstone of India’s port privatization programme.
The low bidder turnout and the single-digit price quotations should be a cause for worry for port authorities in awarding contracts because it will lead to allegations of selling port assets cheaply. Secondly, it has sparked fresh demands from port unions that the capacity expansion plan should be financed by the government-owned ports themselves from internal resources without relying on private funds. Unions have opposed the privatization of cargo-handling activities for fear of losing jobs.
Their fears have been borne out by the fact that the number of regular workers at the 12 Union government-controlled ports has fallen below 51,000 from nearly 100,000 about a decade ago when the port privatization programme was flagged off.
The government recently approved several policy decisions to hasten the implementation of highway projects, another sector in which projects have got stuck. These include altering the timeline for stake sales by the original promoters of highway projects and streamlining the environment clearance process.
India’s ports sector could similarly benefit from some policy decisions, such as granting flexibility to port operators to build capacity gradually, depending upon the growth in cargo rather than in one go at the beginning of the contract period, irrespective of volume.
Projects also have to be structured in such a way that they attract more bidders and, more so, competitive price bids. Port projects should also be put to tender only after receiving environmental clearance rather than the other way round, which is currently the norm. This will help insulate the private investor from cost escalations due to delays in statutory approvals. And the sooner the guidelines on a free-pricing regime are announced by the shipping ministry that controls the 12 ports, the better it will be for boosting investor sentiment in the sector.
Source:-www.livemint.com
No comments:
Post a Comment