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Tough tender conditions -- Why are Indian firms being dredged out?

Santanu Sanyal

IS IT necessary for a dredging firm to have at least Rs 500 crore of turnover to execute a job worth less than Rs 300 crore? The question is uppermost in the minds of many in port and shipping circles in the wake of the floatation of a global tender on c apital dredging by a major port.

As reports have it, this and other conditions as stipulated in the tender will prevent Indian dredging companies, including the public sector Dredging Corporation of India (DCI), from even bidding for the job. DCI's turnover is around Rs 420 crore while that of other Indian firms around Rs 100 crore. In other words, the bidders will be mostly foreign dredging contractors, and that too from Europe, and the job will in all probability be awarded to one of them.

Several other conditions stipulated in the tender, it is felt, are designed to favour only foreign dredging contractors, particularly European companies. Thus, the bidder has to have the experience of executing at least one single capital dredging projec t worth Rs 100 crore. Even DCI cannot claim to have executed any such project, not to speak of other Indian firms which are much smaller in size and scale of operations.

The condition that the bidder must own a cutter-suction dredger with the capacity to remove 2500 cubic metres of solid per hour for shore disposal at a distance of 3 km further disqualifies Indian firms, including DCI. None of the Indian firms, including DCI, has a dredger of that capacity. But the question being raised in this connection is: Is it really necessary to have a dredger of that much capacity to undertake the job?

A dredger with the stipulated capacity, operating for 24 hours, will remove nearly 60,000 cubic metres of silt, or 1.8 million cubic metres in one month and over 25 million cubic metres in 14 months during which the work is to be completed as per the ten der document. Does the scope of work really warrant removal of 25 million cubic metres of solids? One wonders.

What happens if a foreign dredging contractor, after satisfying all the tender conditions, gets the job and still fails to execute it to the satisfaction of the port authority concerned? Can the contractor be held responsible? If experience is any guide, the contractor, on the other hand, will not only lay the blame squarely at the doors of the port authority concerned for the failure but will also seek compensation. The issue will most probably be discussed at various levels, only to force the port to pay the compensation eventually.

How do the port authorities stand to benefit in such a situation? Not significantly. On the other, chances are that the port concerned might end up paying more to the dredging contractor. It has been found that the ultimate cost of executing a project li ke this generally far exceeds the original estimate. It happened earlier at Haldia and more recently at Paradip. At Paradip, the original cost estimate of Rs 200 crore or so eventually shot up to more than Rs 400 crore.

A Chinese firm, it is learnt, has bought the tender paper for the capital dredging work. But it stands little chance of getting the contract even if it quotes competitive rates and is also found technically qualified. This is because the same Chinese fir m had earlier bid for maintenance dredging at Mumbai port and scored over others both in technical and price bids. It even brought its own dredger to Mumbai hoping that it would get the job but was disappointed.

The Indian Navy rejected the Chinese firm on security grounds after the dredger had remained berthed at the port for several days. The matter went up to the court but nothing happened. The Navy's decision stayed. The Navy, however, found no security thre at in the execution of the job by a European dredging firm.

Those familiar with the goings-on in the country's dredging sector emphasise that henceforth every dredging tender must strictly stipulate that the contractor concerned has to guarantee the achievement of the required depth irrespective of the volume of silt it removes. This stipulation, if successfully enforced, will mean a significant departure from the present practice of insistence on the removal of a given volume of silt. Instances are in record to show that the required depth might not be achieved at all even after removing more than the stipulated volume.

Can the government not work out a scheme for distributing dredging jobs in various ports among Indian firms according to their capacity, and allocate the work still left over to foreign firms? Just as Transchart allocates business among Indian and foreig n shipping lines?

Since there is hardly any major Indian dredging firm, except DCI, the allocation of the balance work to foreign dredging contractors will be substantial, it is felt. Let there be room for everybody. Let Indian dredging firms too be allowed to grow. After all, total dependence on foreign dredging firms might not prove beneficial for the country in the long run.

Picture: A dredger at the Haldia port... Indian dredging firms must be allowed to grow.

Picture by Parth Sanyal