The Hindu Business Line : New dredging policy in muddy waters

THE status of the new dredging policy announced by the Shipping Ministry on January 19 is unclear as the same has not yet been intimated to the major port trusts, minor ports, private ports and the dredging industry.

This intriguing situation is bound to have an impact on the proposed public offer of 20 per cent Government equity constituting 56 lakh shares in state-owned Dredging Corporation of India (DCI) which is slated to hit the market in the last week of February/first week of March.

Interestingly, the new policy was announced by the Shipping Ministry (that too only to the media) under intense pressure from the Disinvestment Ministry which wanted to incorporate the new policy in the prospectus for the proposed book-built public issue of DCI. "Investors keen on buying the DCI scrip during the public offer may want to know, among other things, the Government's dredging policy before taking an investment decision," a banker told Business Line.

The earlier policy was valid till March 31, 2004 and the new policy was slated to come into force from April 1, 2004 for a three-year period.

However, Government sources said that the Shipping Minister, Mr Shatrughan Sinha, was yet to approve and sign the file relating to the new dredging policy. "As a result, the process of intimating the new dredging policy to the stakeholders has been held up. The new dredging policy as it stands today has only been circulated to the media for publicity," the sources disclosed.

The new dredging policy framed after extensive consultations with the stakeholders appears to have created a wedge within the Shipping Ministry, making the Shipping Minister's task a little tough.

Moreover, DCI, private domestic dredgers and foreign dredging firms are also not particularly happy with the new policy which is considered to be "vague".

"Either DCI should benefit from the new policy in terms of committed business or the ports should benefit through lower dredging costs. The new policy addresses neither of the two and is really not in the interests of ports which are looking at reducing their huge annual dredging costs running into hundreds of crores," a foreign dredging company official said.

The new policy applicable for both maintenance and capital dredging works states that all major ports (except Kolkata) should invite bids for dredging wherein DCI shall have the right of first refusal vis-à-vis other companies only if its rate is within 10 per cent of the lowest technically qualified offer. Earlier, DCI could offer any rate and still be given the right of first refusal to match the lowest bid. The new policy also effectively sealed DCI's chances of getting dredging works from major ports on nomination basis.

The earlier policy allowed major ports to give contracts to DCI either on nomination basis or to award the work to Indian or foreign dredging companies through a competitive bidding process.

Besides, foreign dredging companies say that the Shipping Ministry had no business to include minor ports owned by the State Governments and private ports under the new policy. The minor ports and private ports normally call for limited tenders to give dredging works mainly to cut costs arising out of floating full-fledged public tenders.

As per the new policy, the Director-General of Shipping will be asked to frame guidelines to ensure that permission to charter foreign dredging vessels (under Sections 406 and 407 of the Merchant Shipping Act) to minor ports/private ports is given only if they adopted a competitive bidding process for awarding the contract in which Indian companies have been given full opportunity to participate.

This will be patterned on the recent DG (Shipping) guidelines granting right of first refusal to Indian shipping companies for carrying private cargo only when their bid comes within 10 per cent of the lowest foreign offer.

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