Three state-owned major port trusts have not only saved Dredging Corporation of India Ltd (DCI) from going into private hands, but are also set to give assured business to the public sector dredging contractor by reverting to the nomination method of awarding contracts.

Earlier this month, Visakhapatnam Port Trust, Paradip Port Trust and New Mangalore Port Trust agreed to buy a controlling stake in DCI in a deal brokered by the Shipping Ministry.

A high-level panel set up by the Ministry to work out the finer details of the deal is weighing a proposal to award contracts to DCI on nomination basis (without tenders), a Government official said.

This is part of Shipping Minister Nitin Gadkari’s plan to strengthen the finances of DCI. “The three Port Trusts or even all the 12 major ports run by the Centre will be forced to give business to DCI on nomination basis now that they own DCI because if DCI incurs losses, it will be their losses too,” said a dredging industry executive.

DCI has been pleading with the Government to give business on nomination basis.

“If the Port Trusts are really serious about exiting from non-core activities as advised by the Shipping Ministry, they can entrust their dredging activities to us; we’ll be responsible for dredging of all the major port trusts,” a DCI official said.

“If they give work on nomination basis, then it is a real benefit to DCI. But, if we have to participate in tenders, then it is just like somebody purchasing shares in our company and they will have control by having a chairman and we’ll continue to reel under pressure. Because, we follow all the government rules and to be deprived of nomination means, it’s a double loss,” the official said, asking not to be named.

For many years, the DCI survived on assured business given by the major Port Trusts on nomination basis at rates negotiated between the two sides.

In 2007, the Shipping Ministry advised all the major port trusts, barring Kolkata Port Trust, to finalise their dredging contracts through auctions. Again in 2015, it unveiled a new dredging policy mandating major Port Trusts to opt for open competitive bids for capital/maintenance dredging works.

The Kolkata Port Trust continued with the nomination system to engage DCI till 2016 when it decided to finalise the dredging contractor through a tender.

The Cochin Port Trust finalised dredging contracts between 2007 and 2010 through auctions. But, from 2011 to 2016, it reverted to the nomination system and awarded the contracts to DCI.

In fact, more than half of DCI’s annual revenues came from the maintenance dredging contract at Kolkata Port Trust and a big portion of the balance was from the Cochin Port Trust.

The end of the nomination system forced DCI to become price competitive while putting in quotations and its participation in tenders had a sobering influence on private rivals – both Indian and overseas – fetching lower rates for Port Trusts, irrespective of whether DCI emerged the successful bidder or not.

DCI under-cut its private rivals in tenders to take up dredging contracts at major Port Trusts, taking a huge hit on its margins.

Related Topics
comment COMMENT NOW