Container Corporation of India Ltd (Concor) has scrapped a tender to hire two container ships for 10 years to start coastal shipping business after the lowest bidder pulled out his quote before the Navratna company launched a reverse auction.

Reverse auction is a mechanism followed by state-run firms to gauge whether any of the qualified bidders are willing to offer a rate lower than the one discovered through the initial bidding process.

Mumbai-listed Shreyas Shipping & Logistics Ltd had quoted about ₹1.9 crore per voyage to emerge the lowest bidder for the deal in the second round of tendering. The other bidders included Japan’s Mitsui & Co Ltd-backed Global United Shipping India Pvt Ltd and Seaport Cargo Logistics Pvt Ltd, a unit of the CVR Group that runs Krishnapatnam Port in Nellore district of Andhra Pradesh.

“When we were about to start the reverse auction process, Shreyas withdrew its offer,” a Concor official said, asking not to be named. The price quoted by Shreyas, he said, was 40 per cent higher than the estimates worked out by Concor.

The state-run rail hauler of containers will invite fresh bids for the contract after changing some of the tender terms.

Exclusivity clause

The entity winning the bid will have to arrange port handling and coastal transportation of bulk/break-bulk cargo and loaded and empty containers between Kandla International Container Terminal at Deendayal Port Trust (formerly Kandla Port Trust) in Gujarat and New Mangalore Port Trust, Cochin Port Trust and V O Chidambaranar Port Trust.

The scrapped tenders had incorporated an exclusivity clause whereby the winning bidder was bound by a non-compete agreement - it will not be allowed to handle containerised/bulk/break bulk cargo for other enterprises in Indian coastal waters during the duration of the contract.

This meant that the winning ship operator will have to ply his ships exclusively dedicated for Concor.

“Because, I’m giving him minimum guaranteed pay-out whether he carries 100 containers or 700 containers. I’m assuring him that this is the guaranteed lump sum I will pay so that he will ply his vessels irrespective of the quantum of containers. Which is why I want exclusivity,” the Concor official explained.

New tender

In the first round of bidding, Shreyas filed a petition in the Mumbai High Court seeking to get the exclusivity clause removed from the tender. But, the Mumbai High Court refused to entertain the petition because it was not the jurisdictional area of the contract, either as the originating point or the destination point.

Shreyas then approached the Supreme Court with the same issue but before it could be considered by the apex court, Concor discharged the tender due to lack of bidders.

Concor said that it will tighten the exclusivity clause further in the new tender besides stipulating that the port handling charges incurred by the ship operator will be paid on actual basis, whatever is invoiced, without any margins.

Concor will seek bids from fleet owners to hire two Indian flag vessels of 22,000 dead weight tons (DWT) with a capacity to carry at least 700 twenty-foot equivalent units (TEUs) each for as much as 10 years. The ships should not be more than 15 years old.

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