The Inland Waterways Authority of India (IWAI) has scrapped a tender to select a private firm to operate, manage and develop (OMD) a multi-modal terminal at Varanasi on National Waterway 1 due to lack of response from bidders, dealing a blow to the government’s efforts to attract private funds in running waterway projects.

In a separate yet related development, the government has revealed that only 20 of the 106 new waterways (NW) declared by the Centre through a new waterway law is technically feasible for shipping and navigation.

“Based on the outcome of the techno-economic feasibility and the detailed project reports (DPRs) for the 106 new national waterways undertaken by the IWAI, only 20 NWs have been found technically feasible for shipping and navigation,” Shipping Minister Mansukh Mandaviya told Parliament in a written reply on February 6.

“The Varanasi MMT tender was cancelled because there was no response from bidders,” a government official briefed on the plan said. “A new tender will come out after changing the terms,” he said.

Dubai’s DP World Ltd, Adani Ports and Special Economic Zone Ltd and JM Baxi Group were shortlisted to bid for the project, for which the request for proposals (RFP) were invited by the IWAI in July 2019.

The first phase of the multi-modal terminal at Varanasi, built by the IWAI with an investment of ₹200 crore (excluding land cost) with a capacity to handle 1.26 million tonnes (mt) of cargo, is one of the three terminals built by the waterways development agency on the 1,400-km-long Varanasi to Haldia stretch on NW 1 with World Bank funding. The other two such terminals are located at Sahibganj and Haldia.

The terminals at Varanasi and Sahibganj have started commercial operations, while the Haldia terminal is slated to be inaugurated soon.

Under the tender terms, the winning bidder will operate and manage the terminal having road connectivity to NH 7 for seven years, after which it will be responsible for developing the second phase of the terminal with an investment of ₹334.38 crore. The second phase will have rail connectivity with an investment of ₹85 crore.

The project with a final rated capacity of 3.85 mt will have a concession period of 30 years and can be extended by another 30 years.

The bid was to be decided on the basis of the highest royalty per tonne quoted by the bidder.

No to ‘bundling’ request

The bidders had sought bundling of all the three multi-modal terminals, but this was not agreeable to the IWAI due to the varying schedule of completion of the three terminals.

To attract bidder interest, the government included a so-called conditional ‘right of first refusal’ in the tender terms that allow the winning bidder of the Varanasi terminal to match the highest bid quoted for the Sahibganj and Haldia terminals and win the deal, if its bid is not less than 90 per cent of the highest bids for the other two terminals.

“The terminals at Varanasi, Sahibganj and Haldia should have been a single PPP project ideally. The Varanasi multi- modal terminal would become unattractive to the bidders if there is no option of the conditional right of first refusal for the other two terminals,” the government official said.

While including this option to increase bidder participation, the IWAI also decided to incorporate a minimum reserve rate during the bidding process for the Sahibganj and Haldia terminals to check artificially low bids, particularly if the Varanasi contractor is the sole bidder for the other terminals.

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