Gujarat Maritime Board plans ₹1,750 crore brownfield port at Bhavnagar via Swiss Challenge Route

TE Raja Simhan Chennai | Updated on January 21, 2020

The Swiss Challenge Route is a lesser-known and lesser-used method of bidding

The Gujarat Maritime Board plans to develop a brownfield port at Bhavnagar at a cost of over ₹1,750 crore under the Swiss Challenge Route (SCR). Though the SCR has been in discussion for nearly a decade, this is only the second port development to be taken up by this method, after GMR Infrastructure bagged a greenfield commercial port project near Kakinada in Andhra Pradesh. While SCR allows innovation, the traditional way of awarding tenders through global bids is still the most favoured by investors in the port sector, feel experts.

The Gujarat Maritime Board had received a proposal from Foresight & Padmanabh Mafatlal Consortium to develop a CNG terminal and other cargo terminals at Bhavnagar port under the Build, Own, Operate, and Transfer (BOOT) Policy. Its board, in October 2019, recommended inviting bids under the SCR.

SCR is a lesser-known and lesser-used method of bidding. It is not popular, as it can be problematic. The challengers make the bids on terms different from the proposer, and hence, it is not a like-for-like situation. No port project in India has been bid by this method. In undivided Andhra Pradesh, the government had called for bids for some infrastructure projects by this method, but it was not entirely successful, said an industry source.

For example, the Metro Manila airport project bid by this method ran into legal problems and was eventually awarded to the challenger, he added.

In the Indian port sector, the most popular method is a two-stage process. The first is Request for Qualification, wherein the bidders seek qualification against the set out technical and financial qualification criteria. The second is the qualified bidders submitting their bids and whoever quotes the highest revenue share or royalty depending on what that particular bid requires, being awarded the contract. This is a process that minimises any scope for subjectivity by the evaluators, the source said.

SCR can result in lesser time for awarding the project, and prospect of optimum utilisation of resources. However, there are high chances of litigations due to lack of homogeneity in proposals and possible allegations of favouritism in award, said K Ravichandran, Senior Vice President, ICRA, who tracks the port sector.

Under SCR, a company with an innovative idea to develop an infrastructure project submits a proposal on a suo moto basis to the project authority of the State or the Central ministry. Upon being satisfied with the project’s feasibility, the authority then decides to throw open the same project to other interested parties with better ideas to develop the project. These proposals are evaluated by a committee, which selects the best among them. The original proponent is given an option to match the best bid if its original proposal was not the best option, he said.

Some of the projects awarded/being awarded include Amravati city development project in Andhra Pradesh; a floating storage and regasification unit project in Gujarat and railway station redevelopment projects under the Ministry of Railways.

SCR is only a way of selecting the bidder. Once a bidder is finalised either on SCR or by any normal method like inviting global bids, the execution of the project can be on BOOT or Design, Build, Finance, Operate and Transfer (DBFOT) basis, said R Ravi Kumar, Secretary General, Indian Private Ports & Terminals Association.

It is reported that in the port sector, the governments of AP, Odisha, Tamil Nadu and Gujarat have followed this route for some of their projects. In the major ports in India, this method does not seem to have been favoured. Although SCR is the favourite of some of the state governments, the method is not as transparent as a BOT/BOOT, said Kumar.

Published on January 21, 2020

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