Companies

Dredging Corporation to gain from government’s new dredging norms

P Manoj Mumbai | Updated on June 21, 2021

The dredging guidelines have also introduced the concept of awarding dredging works at major ports through the public-private-partnership route

The government has approved new norms for awarding dredging works at State-run ports that allows the four shareholder ports controlling Dredging Corporation of India (DCI) to finalise their respective dredging contracts with the company on nomination basis (without a tender).

The dredging guidelines have also introduced, for the first time, the concept of awarding dredging works at major ports through the public-private-partnership (PPP) route.

“Whenever this (nomination) route for award is followed, the principle of competitive market price discovery for the same quality and conditions shall be followed (to ensure high efficiency in cost, time and quality in execution of dredging projects),” the dredging guidelines approved by the ministry of ports, shipping and waterways said.

The guidelines also give an option to the major port trusts to float open competitive bidding for dredging projects after taking approval from Board of trustees/port directors.

The ministry of ports, shipping and waterways said it reserves the right to assign in public interest, any contract for dredging work in any major port on nomination basis to DCI.

Currently, major port trusts finalise their dredging works mostly through open tenders. In some cases, nomination route is used with the approval of the ministry

Flexibility offered

The new norms also give flexibility to the major ports to explore models such as assured depth contract, EPC contract, annuity model/hybrid annuity model through the public-private-partnership (PPP) route while awarding works.

State-run ports have been advised to ensure that the pre-qualification for tenders is not “very stringent to restrict entry of certain potential Indian bidders.”

The pre-qualification conditions should be exhaustive yet specific and should be clearly specified in the bid documents “to ensure fair competition and transparency”.

While fixing the pre-qualification criteria, first preference should be given to dredgers built in India under the Make in India plan, availing government subsidy.

PPP model

The ministry’s guidelines allow major port trusts to follow the PPP model for deepening the channel draft to allow bigger capacity ships to dock, that entails huge capital expenditure. The PPP model will ensure funding from the private agencies with support from the major ports. This model emerges as a potential option with limited investment from the major ports and minimal operation burden on the port authority.

“A PPP model may be worked out for the dredging projects with the hybrid model of combining the capital dredging with maintenance dredging for 10-20 years. The revenue share between major port and the PPP operator may be the bidding parameter for floating the PPP projects,” the guidelines said.

The existing PPP operators of the (cargo) berth may share proportionate cost based on the volume of cargo handled along with the berths operated by major ports themselves to recover the cost of the PPP dredging operator.

However, the complex traffic structure at major ports for different berth operators with different category of cargo could pose a risk in this model, the ministry pointed out.

Also read: Cochin Shipyard to build two large dredgers for Dredging Corp in ₹2,000-cr deal

Besides, the major ports have limited flexibility to change the parameters during the concession period which may have restrictions on channel dimensions for a period of time.

Taking the advantages and risks involved in the PPP model into consideration, the ministry has suggested that the PPP dredging projects should be designed for adequate duration to ensure viability throughout the concession period.

The major ports should also work out measurable performance indicators that includes assured depth during the concession period and adequate financial returns as per the financial viability structure.

Published on June 21, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor