The Deendayal Port Authority has foregone a potential revenue of Rs 350 crores by scrapping the tender to mechanise berth number 14 at Deendayal Port. The cancellation was amidst the heat generated by the disqualification of Adani Ports and Special Economic Zone Ltd from auctions at State-owned major ports.
The potential loss of some Rs 350 crore, has been calculated based on the cargo handling rate of about Rs. 450 per ton prevailing in the region and the royalty per ton on cargo that the port authority would have received from the private operator of the berth. The royalty per ton is in the range of 20-25 per cent going by the outcome of some of the recently concluded tenders in other major ports.
The mechanisation of Berth No 14 would have led to better and more efficient utilisation of the asset to help handle bigger volume at Deendayal Port. The Berth No 14 currently handles cargo using the ship’s gear and lack of mechanisation is considered a handicap to handle more.
APSEZ was disqualified by Deendayal Port Authority due to a tender condition that forbids firms involved in contract termination at other ports from participating. A coal handling terminal run by a unit of APSEZ at Visakhapatnam Port Authority was terminated in December 2020, a few years into its 30-year contract.
Following a petition filed by APSEZ seeking to reverse its disqualification, the Gujarat High Court directed the port authority to “accept” the price bid of the company and decide on it subject to the outcome of the court verdict.
The Gujarat High Court is yet to pronounce its final order on the case and sources believe that the high court could be waiting for the Supreme Court to rule on a separate petition brought by APSEZ challenging its exclusion from port tenders issued by major port authorities.
The bids for mechanisation of Berth No 14 with an investment of Rs300.28 crore to handle clean cargo including fertilisers on the public-private-partnership (PPP) model was called by the Deendayal Port Authority on 31 July 2021.
The PPP mode for mechanisation of Berth No 14 was adopted with the approval of the Standing Finance Committee (SFC) in the Ministry of Ports, Shipping and Waterways after the port authority discarded an earlier plan in January 2020 to upgrade and modernise the berth through the so-called Engineering, Procurement and Construction (EPC) mode wherein the entire investment was to be borne by the port authority.
After the mechanised cargo handling system was supplied and erected by the EPC contractor, the port authority planned to run the berth either by itself or by hiring an operation and maintenance contractor.
The EPC tender issued sometime in 2019 was cancelled in January 2020 because the rate of Rs 393 crore quoted by the lowest bidder – RVR Projects Pvt Ltd – for the contract was 42 per cent more than the Rs 277 crore estimated by the port authority.
The approval from the Ministry of Ports, Shipping and Waterways for switching the mode of development of the project from EPC to PPP took more than a year and was finally accorded in July 2021 post which the port authority issued the tender the same month.
Deendayal Port Authority defended its move to cancel the PPP tender in August this year while rejecting the allegations.
“In any public tender, there is a standard clause which says that the public authority issuing the tender retains the right to discharge the tender any time without assigning any reasons thereof. We are well within our rights to discharge the PPP tender for Berth No 14,” said a port official.
Referring to the charge that the port authority lost a potential revenue of some Rs350 crore from discharging the tender, the official said: “It is a brownfield project, and we are not losing anything. We continue to operate the berth and handle cargo with the help of the ship’s gear and are earning money. There is nothing blocking the functioning of the berth and the operation is going on”.
“The only issue is that there is no mechanisation which we are trying to address,” he said.
Elaborating on the crux of the reasons for discharging the tender, the official said that four entities participated in the tender out of which three were qualified.
“However, none of the three qualified bidders participated in the price bid submission round, which means the pre-qualified bidders did not place a price bid. APSEZ till today are not pre-qualified for the tender,” he stated.
The port authority, he said, extended the price bid submission timeline 17 times. “Yet, the three pre-qualified bidders chose not to submit their price bids. This means that it was a futile and infructuous exercise, so why will we wait for somebody who is disqualified. In other words, somebody will say or can say that we were waiting only for the court verdict to come in favour of Adani so that we will qualify them for the tender”.
Apart from staying away despite the repeated extensions of time to put price quotations, the three qualified bidders also wrote to the port authority many times seeking modification of the contract terms, restructuring the mechanisation process including the machinery and components involved and the estimated cost of the project.
The three bidders sought changes in the project scope in view of the “uncertainty looming over the project”.
The “uncertainty” cropped up as the estimated project cost escalated within a few months of the issue of tender, mainly due to the Russia-Ukraine war and partly on account of the pandemic.
“The Russia-Ukraine conflict posed a risk to sourcing key machinery and components which we have envisaged for the project from Germany or other European countries. The conflict, thus, introduced an element of uncertainty in the delivery time of the machinery and parts for which the successful bidder would be penalised by the port authority for any delays,” the official said.
Two, the cost of the machinery and parts escalated by 26-27 percent because of the Russia-Ukraine conflict. Further, with the all India Consumer Price Index (CPI) and the Wholesale Price Index (WPI) crossing double digits, these things could not be accommodated in the Rs300 crore budget for the project.
“The pre-qualified bidders kept on writing on two issues, one is the delivery period and the other was the estimated cost because it was felt that they cannot compensate for all these variations or escalations within the permissible 20 percent,” he said.
The three pre-qualified bidders also urged the port authority to enlarge the restricted/limited cargo pool stipulated in the tender by allowing the successful operator to handle all clean cargo including fertiliser to help them deliver on the contract. This was agreed to by the port authority as the bidders were apprehensive of meeting the output of 20,000 tons per day set by the contract, irrespective of the clean cargo, failing which they could face penal action.
“We have tried to address some of their concerns by issuing a corrigendum but that also did not meet their requirements and they decided to stay away from the price bid stage,” the official pointed out.
With the three pre-qualified bidders notifying the port authority in writing about their intentions not to participate in the price bids unless the project was restructured, APSEZ would be the only bidder to place a price bid if the Supreme Court decides in their favour and allows them to qualify.
“Then, APSEZ will be the single bidder and we cannot go for a single bidder because there will be no competition,” the official explained.
However, critics have cited precedents where Deendayal Port Authority have considered and accepted single bids.
Shipping industry officials have also questioned the port authority’s decision to cancel the tender for mechanisation of Berth No 14 without waiting for the Gujarat High Court and/or the Supreme Court to give its verdict.
“The exception to consider a single bid will be acceptable to us only when they are qualified. Now, they are just saying things which are happening in heaven. We are talking about heaven which is not shown to us or seen by us. The matter is in the courts and is sub-judice,” the port official said, cryptically.
“We don’t know when the Supreme Court is going to give a judgement on the case, and we can’t wait forever. It’s a national project, so the tender was discharged,” he said, adding that the port authority will re-issue the tender soon after restructuring the project scope and terms.
