From the Viewsroom

Blow to competitive bidding

P Manoj | Updated on January 05, 2021

‘Nomination’ clause in the draft dredging norms should be dropped

The draft dredging norms for major port trusts prepared by the government will turn Dredging Corporation of India (DCI) into a monopoly. This is because the draft norms say that the major port trusts will have to give dredging works to a ports’ owned company, in which it owns controlling share, on nomination basis (without tender).

DCI is no longer a PSU but is jointly owned by Visakhapatnam Port Trust, Paradip Port Trust, Jawaharlal Nehru Port Trust and Deendayal Port Trust following a strategic divestment deal in March 2019.

The major ports, according to the norms, may invite open competitive bidding for dredging projects after obtaining the approval of Board of Trustees/Directors of the port.

This is seen as a fait accompli because the first option will always be to award dredging works on nomination and if DCI declines, only then will it go for tendering. In effect, DCI will have the power to decide whether a major port trust should take the nomination or the tender route for dredging works.

The draft norms also say that when the work is awarded on nomination to DCI, the principle of competitive market price discovery for the same quality and conditions shall be followed. This is easier said than done.

Jawaharlal Nehru Port Trust’s decision to award a three-year annual maintenance dredging contract to DCI in 2019 has had its repercussions.

In the first year of the dredging contract, DCI outsourced a large portion of the ₹165-crore work agreed with JNPT to a private contractor for a much lower value, making more than ₹30 crore of “extra money” in the process from the deal. JNPT has now asked DCI to refund the “extra money” it made from the contract, an embarrassment given that a shareholder is seeking refund from its own company.

The government would be better off allowing major port trusts to go for open tenders to give dredging works to reap the benefits of efficiency and better pricing.

Published on January 05, 2021

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