An Indian company running the largest private port in Gujarat is considered a security risk in bidding for a port project in Kerala. But the same company is free to bid for a project in neighbouring Tamil Nadu.

The very same company, which was denied security clearance for a large port project at Jawaharlal Nehru Port, is now being awarded another project by the government-owned Kandla Port.

Call it an Indian paradox?

Adani Port and Special Economic Zone, a listed company which runs the Mundra Port in Gujarat, was denied security clearance in bidding for the Vizhinjam port in Kerala last month. Earlier, the same company was denied clearance for two other projects — the fourth container terminal at JN Port and a bulk terminal at Vizag. However, the government had no security concerns in allowing the same company to bid for the container terminal at the Chennai Port, based on clearances obtained a couple of years ago.

The company, controlled by the Adani group of Gujarat, also runs three other port terminals in the country. In Vizag, of the two projects it bid for, the group got clearance for only one.

What is more, the company has just been chosen as the highest bidder for setting up a satellite port for Kandla port. In all these projects, the company bid alone without any foreign partners. Adanis also run other businesses within the country and outside.

STRANGE REFUSAL

According to reports, the company has not obtained fresh clearances after November 2010. When the company was denied security clearance for the JN Port fourth terminal last year, it challenged this in court. The court had asked the party to approach the Shipping Ministry. Nothing has been heard since.

In the past, security clearance was denied mostly to foreign companies or joint venture projects with foreign partners. Adanis may be the only Indian group denied security clearance in port projects ever since private investment was allowed in the ports sector. In fact, there are port terminals in India run by companies with 100 per cent foreign equity such as DP World, Dubai and the APM Terminals, a European company. PSA international of Singapore was recently awarded a large port project in the Jawaharlal Nehru port. Only Chinese companies or groups are barred from bidding for port projects.

Public-private partnership (PPP) projects in the infrastructure sector require mandatory security clearance from various ministries and government agencies. For port projects, such clearance is given through the Shipping Ministry. The practice is that the Ministry sends only the names of bidders who received security clearance to the port concerned which has called for the bids. No reasons are given for a particular bidder not being granted security clearance.

PROJECTS DELAYED

As per the modal request for qualification (RFQ) document issued by the government in 2007, only foreign companies and bidders with foreign partners having 15 per cent or more foreign equity require to seek a security clearance.

However, according to officials, subsequently, the government made it mandatory for all bidders — both Indian and foreign — to seek security clearance. Separate security clearance is mandatory for each project.

There is no denying the fact that in a country with a hostile neighbourhood, national security is of utmost importance. There can be no compromise on matters regarding security.

It is understandable that any action on the part of a Ministry or an official agency with regard to ensuring national security is treated as highly classified information and their rationale is not made public. The Government should not show any mercy to an entity which is seen as security threat. Also, from the security angle, ports are strategic installations based at strategic locations. It is crucial to verify the routes and whereabouts of investors, particularly foreign, in port projects, particularly those who will eventually own and run it. But the current system of both seeking and granting security clearance, delays projects of national importance. There are plenty of examples.

Take the case of the Rs 6,700 crore fourth container terminal at Jawaharlal Nehru port. The security clearance for bidders was given just before the bids were opened. The Adanis who were denied security clearance went to court.

This delayed the project — which had already dragged on for more than a year — by another couple of months. This could have been avoided if security clearance had been given before the price bids were opened.

At Vizhinjam project, the Adanis were denied security clearance. Now, there is only one bidder left for the project, making a final decision difficult. The ports sector needs to create additional capacity to meet the growing traffic, and private investments are crucial for this. The 12th Plan working group for ports sector has anticipated the private sector investment in the next five years at over Rs 51,000 crore.

Issues such as dichotomy in regulation, pending decision on port tariff structure are already coming in the way of fresh private investments into the sector. A more consistent policy could help the investors have a level playing field.

This is not to argue the case for the Adanis. This writer has no evidence or information to argue the case for or against them. But the issue is that there are inconsistencies in the government's actions.

We have a situation where one company is operating terminals at several strategic ports, but over the last year is being considered as not worthy of security clearance. This same company is even setting up fresh projects.

If an entity is seen as a security risk, it should be prevented from participating in all strategically important projects.

Do we also need to look at whether the system of granting security clearance is foolproof?

Related Topics