China tests Indian waters to take up maritime contracts
China Harbour Engineering Co. Ltd is testing the Indian waters once again to check whether the country's policy of disallowing Chinese firms or those with Chinese links to work in the maritime sector has changed.
China Harbour Engineering, a unit of Chinese state-owned and Fortune 500 company China Communications Construction Co. Ltd, has applied for a tender issued by state-owned Kamarajar Port Ltd that runs the port at Ennore near Chennai on the eastern coast to dig its channel to accommodate capesize ships, largest of the dry bulk carriers.
China's largest dredging firm and the world's second biggest by fleet capacity has teamed up with local firm Mercator Ltd to bid for the contract at Kamarajar, one of the many dredging projects lined up by India.
Kamarajar Port says it has forwarded the application of China Harbour Engineering to the shipping ministry for security clearance. The ministry's ver- dict will decide whether China Harbour Engineering can work in India. India's maritime sector has remained out of bounds for Chinese firms because of mistrust between the two countries. A few years ago, China Harbour Engineering bid successfully to develop a port in Kerala through a joint venture with an Indian company. The bid, though, had to be scrapped because China Harbour was declined security clearance by the government.
Shanghai Zhenhua Heavy Industry Co. Ltd (ZPMC), a heavy-duty equipment manufacturer, and a separate unit of China Communications Construction, also had difficult working relations with India.
ZPMC, which is also the world's top maker of cranes used to load and unload containers onto and from ships, was denied security clearance to sell cranes to container terminals at stateowned Mumbai Port and V.O. Chidambaranar Port located in Tuticorin, Tamil Nadu, but has been given the green signal to supply cranes to other Indian ports. More than 100 ZPMC cranes are currently functioning at Indian ports.
So, why is China Harbour Engineering taking a chance? Dredging industry executives say it is the huge potential business opportunity in India that is driving China Harbour Engineering to seek entry. With many new big and small ports being planned in tandem with the government's intention to deepen the channel of a few existing ports to accommodate capesize ships to reduce logistics costs for industries, the Indian dredging market is hotting up.
India has been protecting its local dredging contractors from foreign competition for channel deepening and maintenance works at state-owned ports. Indian firms owning Indian-flag dredgers are given a so-called first right of refusal to take the contract if their rate is within 10% of the lowest valid offer in a global tender. This would apply to both capital (deepening the channel) and maintenance dredging (to maintain the channel at a certain depth). If more than one firm owning an Indian-flag dredger participates in the tender, the right of first refusal will go to that Indian company which has quoted the lowest rate and is within 10% of the lowest offer.
Many local firms have entered the dredging space in the past decade (a couple of them have also perished), either for their own in-house work or for others. Many of these firms are unable to take up large dredging works due to lack of experience and equipment. Some of them who have taken up dredging contracts have found the going tough due to delays in completing the work on time.
Dredging is one of the critical requirements in the development and operation of ports and is an area of concern in India due to a paucity of resources, high costs and delays in completion of projects, says Gautam Adani, chairman of the diversified Adani Group, which is also India's biggest private port operating firm.