State-owned Visakhapatnam Port banks on private funds to boost its fortunes; one cargo handling contract was awarded last week and two more will be finalised soon.
Orissa Stevedores Ltd has emerged the top bidder for revamping and operating the West Quay-6 cargo berth at State-owned Visakhapatnam Port.
Orissa Stevedores quoted a royalty of Rs45 a ton when the price bid was opened last week by the Visakhapatnam Port Authority, the State-owned entity that runs the port at Visakhapatnam on the country’s eastern coast.
Orissa Stevedores was the sole bidder to place a price bid for the project, estimated to cost Rs165.70 cores. The project cost includes Rs88.50 crores for revamping the berth and Rs77.20 crores as upfront amount for taking over the existing infrastructure, according to bid documents.
“The bid of Orissa Stevedores will be referred to the Board of Visakhapatnam Port Authority for approval,” an official said.
The project involves revamping the existing West Quay-6 terminal in the northern arm of inner harbour at Visakhapatnam Port on Design, Build, Finance, Operate and Transfer (DBFOT) basis for handling 5.18 million tonnes (mt) per annum of dry bulk cargo.
The successful bidder will be allowed to collect the berth hire charges from ships calling at the facility.
Port contracts at major ports (owned by the Centre) are decided on the basis of royalty per ton – the entity willing to share the highest royalty per ton of cargo handled at the berth with the port authority wins the deal for 30 years.
The royalty payable will rise annually in tandem with the increase in wholesale price index (WPI), a measure of costs. The terminal operator will be free to set market rates under the new Major Port Authorities Act and the model concession agreement (MCA).
The project is part of the national monetisation pipeline (NMP) of the government, wherein operational infrastructure assets including port terminals will be privatised through the public-private-partnership (PPP) route.
Visakhapatnam Port, once India’s biggest State-owned port by cargo handled, saw its business stagnate with the opening of a big private port at Gangavaram, just 15 kilometres away, and due to delays in upgrading and modernising infrastructure, deepening the channel and at cargo berths.
Gangavaram port, now controlled by Adani Ports and Special Economic Zone Ltd (APSEZ), poached State-run steel maker, Rashtriya Ispat Nigam Ltd (RINL), when it started operations in 2008.
Visakhapatnam Port, mainly a bulk cargo port, never fully recovered from the loss of its biggest customer. In FY2007, around the time Gangavaram Port started operations, Visakhapatnam Port handled 56.39 mt of cargo. In FY22, Visakhapatnam Port handled 69.030 mt, effectively adding just 13 mt over 15 years.
Between April and December 2022, Visakhapatnam Port handled 55.127 mt of cargo, compared to 50.912 mt a year ago.
The port is now seeking to bolster its business and recover lost ground by modernising and upgrading infrastructure with the help of private funds after a couple of public-private-partnership (PPP) contracts (including one run by APSEZ) collapsed due to unsustainable revenue share bids quoted by private operators, government policy changes that hit imports of some cargo and unfavourable regulatory framework.
The newfound freedom to set rates based on market forces under a new law – the Major Port Authorities Act – that governs 11 of the 12 major ports that brought them on par with private ports, and significant revisions to the model concession agreement (MCA) which sets the contract terms and conditions, have given an extra zing to the port authority’s efforts to attract private investors.
And the results are showing.
Last week, the Visakhapatnam Port Authority awarded a 30-year contract to a consortium of ArcelorMittal Nippon Steel India Ltd and Bothra Shipping Services Pvt Ltd to mechanise and run the port’s West Quay berths 7 and 8 for handling bulk cargo. The consortium quoted a royalty of Rs44 a ton to win the deal.
The port authority is also expected to award a 30-year contract this week to a consortium of Indian Potash Ltd and J M Baxi Ports & Logistics Ltd for mechanising and operating the port’s East Quay berth 7 for handling multipurpose cargo including fertilisers. The consortium placed a royalty of Rs55.44 a ton to emerge the successful bidder for the contract.
Orissa Stevedores will be awarded the deal for revamping and operating the West Quay-6 cargo berth in the next few days.
The port has received “very good royalty price bids” for all the three projects, according to an official. “All the winning bidders have assured cargo, making the projects sustainable over the long term. They will add to the port’s cargo volumes,” he said.
