China tests In­dian wa­ters to take up mar­itime con­tracts

The Pak Banker - - 6BUSINESS -

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.

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