Michael Pinto: How to nobble a port project

Source : BUSINESS_STANDARD
By : Michael Pinto
Last Updated: Sat, Oct 27, 2012 18:50 hrs

This has not been the kindest of times for the ministry of shipping and the ports sector. Ambitious plans to expand capacity by attracting large amounts of private investment into major ports have met with limited success. All available figures show that the ministry has been able to attract barely a small percentage of what it thought it could get by way of private investment.

Much has been said about the laid-back manner in which the government has gone about the task of attracting private investment into the maritime sector. While much of the criticism is valid, policy makers do have to deal with a number of extraneous factors. The most talked about case is the fourth container terminal at Jawaharlal Nehru Port Trust in Navi Mumbai. This is one of the 23 projects worth about Rs 17,000 crores that should have been awarded long ago. The port’s three existing terminals now function at well above their rated capacity. Congestion has played havoc with the port’s efficiency and has added immensely to transactional costs. A rapidly expanding economy and higher export-import trade have put an unbearable strain on India’s limited container handling capacity. At a time when every effort should have been made to expand rapidly, a vital project with an investment of Rs 6,500 crores which will more than double the port’s capacity was delayed for nearly two years. The delay has led to a cost escalation of more than Rs 1,000 crores.

In all fairness, it must be recognised that this, like some other delays, was outside the control of the authorities. When, in pursuance of a policy that was intended to encourage competition and prevent near monopoly conditions in the port, one party was debarred from bidding, they approached the high court, alleging discrimination. Their plea was rejected first by a single bench of the high court and then, in appeal, by a division bench of the same court. Against this the party went in appeal to the Supreme Court and here they were successful. The SC ruled that they should be allowed to bid along with other short-listed parties. It was here that the story took an interesting twist. Instead of celebrating victory in a nearly two-year court battle by offering a competitive bid, the party stated that, having established their point in the long legal proceedings at different levels, they were no longer keen to participate in the bid.

The question that immediately arose was why they fought such a desperate court battle to establish their rights to bid for a project in which they were not really interested. By way of explanation we were told that, on studying the detailed tender terms and conditions, the party felt that they were too onerous and that bidding in such a tender was not worth their while. This did little to quell doubts that had been raised because it was beyond belief that a savvy, commercially oriented party would fight such a long court battle without even being sure if the prize to be won was worth fighting for. Instead, speculation was rife that by delaying the project for the two-year period over which litigation was spread, other less attractive terminals in other ports were able to develop and consolidate in a manner that would not have been possible if work on JNPT’s fourth terminal had commenced.

This is not the first time that interested parties have raised what in trade terms would have been described as non-tariff barriers to achieve their ends. The award of the third terminal in JNPT was similarly held up by court proceedings, first before a single bench and then before a divisional bench of the high court. When the party was unsuccessful in both places they approached the Supreme Court, where again they were unsuccessful. The result, however, was to delay the award of the third terminal and allow consolidation of business elsewhere.

Many years ago, the BJP-Shiv Sena government in Maharashtra awarded, with great fanfare, a project to develop a greenfield port north of Mumbai. It was hoped that the port would act as a counter magnet to JNPT. Unfortunately, this did not fit in with the plans of existing operators in other ports and, before long, friendly neighbourhood environmentalists had been encouraged to start a massive protest against the project. In the turmoil that followed the matter was referred to the court where, more than 15 years later, it still stays.

Bidding for a container terminal in Kandla port was similarly delayed by vague allegations of corruption at the port level in the proposed award of the tender. The allegations were shown to be hollow, but the time taken for doing this was enough for rivals to consolidate their own projects and ensure that they were not faced with stiff competition from day one.

Policy makers will now have to address the question of how to ensure that the democratic system of the country, committed to the establishment of a level playing field for all parties, is not misused by rivals who see in delay a method of developing their business. Clearly, resort to the legal process cannot and should not be banned. The only thing that can be done is to see that the length of time for which vital policy decisions are held up by litigation is kept to the minimum. And of course the other initiative is for activists to examine very carefully the causes they espouse, to ensure that, in the name of protecting the environment or fighting corruption, they do not unwittingly play into the hands of those with hidden agendas.


The writer is a former Secretary for Shipping




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