Government panel tweaks bid terms for eco-tourism resort project in Lakshadweep

As the controversy over a proposed law and reform measures initiated by the Administrator of the union territory of Lakshadweep rages, a Central government panel has approved changes to the bid documents for building eco-tourism resorts in Minicoy Island with private funds.

A private developer selected through a bidding process will design, finance and construct 150 keys resort (110 keys for beach villas and 40 keys for water villas) and manage, operate and maintain the resort for a concession period of 75 years (including three years construction period) at an estimated cost of ₹319 crore.

The union territory of Lakshadweep administration (UTLA) will provide to the private developer land of about 8.53 hectares of which developable area is 4 hectares for beach villa and total lagoon area of around 6 hectares for water villa.

Strategic location

The UTLA said this is one of the anchor eco-tourism projects with high potential as it is a strategic location with best lagoon near Maldives.

This is a key project in the hospitality and tourism sector with the perspective of holistic development of the union territory of Lakshadweep, it said.

An earlier tendering process in 2019 was scrapped after no bidders showed up, forcing the government to ease some terms and conditions to attract competitive bids and give comfort to the bidders.

Tweak in tendering process

It has now been decided to re-structure the project on a ‘single stage - two envelope’ bidding process (without a separate request for qualification round) to make up for the lost time and also to increase the bid-ability of the project, according to the recommendations of a panel led by Secretary, Department of Economic Affairs.

In the earlier tendering process, the annual concession fee determined through bidding, was to be escalated by 10 per cent annually. This annual increment was identified as one of the reasons for the collapse of the bid.

The committee has now recommended fixing the yearly increment in the annual concession fee at 5 per cent to make the project more attractive.

The government has also decided to devise an appropriate mechanism for finalisation and disclosure of the reserve price for the annual concession fee after receiving the financial bid but before opening it to protect the interests of the UTLA.

A proposal by UTLA to set technical criteria of 375 rooms for bidders, which is more stringent than the one stipulated in the now abandoned earlier tender, was rejected by the panel.

Instead, it was decided that the Home Ministry and the UTLA would “decide the appropriate technical capacity threshold” to balance the requirements of generating good competition and participation of competent bidders.

According to the financial model presented by UTLA, the project is financially viable and the net present value (NPV) of revenue stream at 12 per cent discounting will be ₹2,262 crore, with economic internal rate of return of 26 per cent, equity internal rate of return of 24 per cent and project internal rate of return of 22 per cent.

The committee also decided to remove the earlier condition on sourcing a certain percentage of total employed personnel for the project from the local population as this was seen as an “onerous condition and to improve project bid-ability”.

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