Private dredging firms will lose out when port trusts become new owners of Dredging Corp

      12/04/2018

As much as 76 per cent of the 700 crore maintenance dredging market at India’s state-run major Port Trusts will be out of bounds for private dredging contractors after a consortium of four port trusts—Visakhapatnam, Deendayal, Paradip and Jawaharlal Nehru—buys the Centre’s 74.44 per cent stake in the Dredging Corporation of India Ltd (DCI).

This is because the four port trusts as the new owners of DCI will favour giving maintenance dredging contracts to DCI on nomination basis (without a tender) at their own ports. Private dredging contractors will be left with nothing if the four port trusts influence the other seven port trusts and one state-run corporate port (Kamarajar Port) to opt for the nomination route to award contracts.

“The port trusts can always take a decision to give on nomination to agencies based on whatever they feel is appropriate. The boards of port trusts are given powers without any upper limit. When DCI comes into our fold, that is one possibility. It will definitely be given on nomination,” a chairman of one of the four major port trusts, said.

To make the nomination model attractive to the port trusts and to deflect criticism over pricing, DCI has submitted a proposal to the Indian Ports Association (IPA) conveying its willingness to take up works at a ten per cent discount to the rate finalised through tenders in the previous round.

“DCI is mainly into maintenance dredging. In this, there are contracts running at all the port trusts, either undertaken by DCI or some other private agency in the last three years. Those rates were discovered through tender mechanism. Now, DCI has given an offer that during the last three years, whatever rate was discovered through tenders, it will give a 10 per cent discount on those, provided support is given on a nomination basis,” a Shipping Ministry official briefed on the proposal, said.

On top of the discount, DCI is even ready to forego the cost escalation arising from inflation and fuel charges.

IPA, an umbrella body representing all the major ports, is expected to take a decision on the DCI offer shortly, the official said.

In April 2007, all the port trusts, barring the Kolkata Port Trust, were advised by the Shipping Ministry to finalise their dredging contracts through auctions. Till then, DCI was awarded contracts by the port trusts on nomination basis at rates negotiated between the two sides.

In 2015, the Shipping Ministry unveiled a new dredging policy mandating major port trusts to opt for open competitive bids for capital/maintenance dredging works. Kolkata Port Trust continued with the nomination system to engage DCI till 2016, when it decided to finalise the dredging contractor through a tender. However, it reverted to nomination due to lack of bidders.

Cochin Port Trust finalised dredging contracts between 2007 and 2010 through auctions. But, from 2011 to 2016, it reverted to the nomination system and awarded the contract to DCI.

The four consortium partners acquiring DCI hold 70 per cent of the maintenance dredging market at major ports.

Although, a right of first refusal (RoFR) is available to Indian dredging contractors in competitive bids, the shareholders or the consortium partners have the right to nominate the works to DCI without following the Director General of Shipping (DGS) guidelines, a dredging industry official said.

The maintenance dredging business available to DCI under nomination every year is 280 crores: Deendayal Port Trust 130 crore, JNPT 40 crore, Paradip Port Trust 80 crore and Visakhapatnam Port Trust 30 crore.

“In addition, if the maintenance dredging at Haldia Dock Complex—estimated at 250 crore—is given on nomination basis to DCI, the market share will rise to 530 crore. In effect, DCI will have a maintenance dredging market share of 75.8 per cent out of the total business of 700 crore a year. This 75.8 per cent of the market will not be available to other private contractors,” the industry official said.

“We can’t challenge the decision of the Cabinet as the share-holders are changing from one arm of the government to the other. Besides, the Competition Act 2002, CVC guidelines or DGS guidelines or even the Shipping Ministry guidelines cannot restrict and debar JNPT, Paradip, Deendayal and Vizag Port from awarding works to DCI on nomination as the dredgers will be owned by them,” the industry source said.