The bidding process to develop two cargo berths at the V.O. Chidambaranar port (formerly Tuticorin port) may witness intense competition with as many as seven parties in fray.
The Port Trust plans to build North Cargo Berth (NCB) – III for handling thermal coal and rock phosphate cargo through public-private partnership on design, build, finance, operate and transfer (DBFOT).
Similarly, NCB-IV is being developed to handle thermal coal and copper concentrate. The bid for both the projects will be finalised on Thursday and Friday.
In competition
The berths have attracted interest from Marg Ltd, Sterlite Ports, Adani Ports, besides consortiums including the Hyderabad-based Transstroy (India) and Russian company OJSC and SEW Infra and Malaysian company Pembinan Radzai Sdn Bhd.
IL&FS has teamed up with Italian firm Marine SPA, while ABG has taken Netherland-based LDA (Louis Dreyfus) as partner for the port project.
Clearance issue
The Tuticorin projects are yet to receive environment clearance. Many port projects have derailed in recent times due to prolonged delay in getting clearances.
A consortium led by Singapore-based Noble Group walked out of a project to build an iron ore terminal at Paradip port in Odisha as the three-year delay in environment clearances escalated project cost from Rs 590 crore to over Rs 800 crore.
In 2009, the Singapore company tied up with Gammon Infrastructure Projects and MMTC for building a 10 million tonne iron ore loading berth at Paradip port.
The bid of Sterlite Ports placed last year for setting up iron ore export terminal at Mormugao Port is yet to be finalised due to various issues.
The Jawaharlal Nehru Port Trust recently cancelled the contract for building the fourth container terminal and encashed the security deposit of Rs 67 crore given by Singapore's PSA International.
The consortium of PSA International and ABG bagged the Rs 8,500-crore project after promising to share 51 per cent of revenue, the highest-ever offered in India's port sector.
“Uncertainty caused by environment and other regulatory clearances not being in place on time is a big risk for projects in Tuticorin,” said a Sterlite Ports spokesperson.
Tariff disparity
The tariff for Tuticorin projects has been capped at $134 a tonne (coal and rock phosphate) and $114 a tonne (coal and copper concentrates) compared to $186 a tonne levied at NCB-II terminal.
This will pose a major hurdle if the cargo arrival falls short of expectations.
Rising Project cost
The port has estimated the cumulative project cost at Rs 660-700 crore. Both the tariff and project costs have been pegged lower as it was conceived four years ago.
In the current scenario, the estimated cost may be higher by at least 70 per cent, he said.
Capacity details
The overall berth capacity for coal will be of 30 million tonnes per annum against the floating cargo of 3.5 mpta.
The capacity is being enhanced keeping in mind the proposed power projects coming up near the region, said an industry source.
“It is intriguing that the tariff has been fixed lower even as interest rates have gone up substantially in last few years. Given the uncertainty in power projects and excess capacity being built up for coal handling, the project may not be viable even with a single digit revenue share," he said.