GMR, Tatas to stay out of Navi Mumbai airport bid

The GMR Group and Tata Realty will not bid for the Navi Mumbai airport project, citing “onerous” bid conditions, among other reasons. “We are not bidding on account of project implementation and execution challenges as well as onerous timelines and bid conditions,” a GMR Group spokesperson said.

This means there will be only two companies — GVKled Mumbai International Airport (MIAL) and Hiranandani Developers-Zurich Airport consortium — in the race for the ~16,000-crore project.

This is the second recent instance of qualified companies not participating in financial bids. Last August, GVK Group and Hiranandani Developers did not submit financial offers for the Goa airport and the GMR Group won the bid.

Financial bids for the much-delayed project will open next Monday. The Navi Mumbai airport will be developed through a publicprivate partnership and the planning authority, City and Industrial Development Corporation (Cidco), will hold 26 per cent stake in the project. MIAL, which operates the airport, has the right of first refusal and it can revise its bid if it is 10 per cent below the highest offer.

While the GVK Group declined to comment, sources at Tata Realty said the company would not participate in the bids unless there was a revision of bid terms or submission deadlines.

It could not ascertained whether the Hiranandani Group will participate in the bid.

Cidco Vice-Chairperson Bhushan Gagrani said the agency was expecting financial offers from all the companies. In case only one company submits bid, the state Cabinet will have to take a decision on the award of the bid.

In their submission to the government last month, the GMR Group pointed out the challenges in predevelopment work, delay in land acquisition and rehabilitation, and absence of stage-II environmental clearance as key concerns for meeting project deadlines. GMR also raised issues regarding conflict of interest in award of pre-development work. Tata Realty is said to have raised concerns in a letter to the government.

There is a conflict of interest situation, as the agencies appointed for two pre-development works’ packages are associates of MIAL, GMR Airport’s President Sidharath Kapur wrote in a letter to the Maharashtra government last month.

The GMR Group runs Delhi and Hyderabad airports. Last August, it won the bid for a second airport in Goa and has participated in a dozen airport bids around the world. The group has a total debt of ~49,000 crore and it is divesting stakes in its road and energy projects to pare down its debt. The group’s financials, too, have been impacted due to stress in their road and energy business.

In his letter, Kapur also raised the issue of capping Cidco’s equity contribution at ~430 crore irrespective of the project cost, saying it will complicate the financing of project and impact long-term viability. The company has also raised issues regarding the terms for repayment of soft loan for the pre-development work. Funds spent by Cidco on pre-development work will be deemed as soft loan according to bid conditions.

The main issue of the bidders pertains to project timeline and bidders think the completion date of December 2019 is unrealistic, a government official said. All the issues that bidders have raised were discussed with them before finalisation of the concession agreement, the official added.

The Maharashtra government’s project monitoring and implementation committee will have to take a call whether to amend the bid conditions and that would mean further delays in the project. Investors who defied surpluses and low prices to make winning bets on agriculture in 2016 have tiny bugs and hungry Chinese pigs to thank for their windfalls.

Orange juice, which soared 34 per cent, was the biggest winner for crop and livestock markets. Futures zoomed as a citrus disease shrunk fruit production. The soybean complex, which includes the vegetable oil and animal feed made from the beans, rallied as US exports to China surged. In contrast, there was pain for those who bet on cocoa or wheat, where supply remains plentiful.

It was a lackluster year for the asset class as a whole — the Bloomberg Agriculture Subindex of nine components was up less than two per cent in 2016. Still, that was the first annual advance since 2012. Goldman Sachs Group Inc is among those predicting more gains for 2017. The bank in November recommended an overweight commodities position for the first time in four years and predicted a 12-month return of more than 4 per cent for agriculture as rising demand erodes cheap supplies.

“We are at very low levels for many of these commodities, and based on valuations, I see very little downside,” said Ben Ross, co-portfolio manager, commodity strategy, at New York-based Cohen & Steers Capital Management, which oversees about $56.5 billion. “We could expect to see some deficits for the year, but markets will still have high inventories to contend with.”

Here’s a closer look at some of the agriculture winners and losers: Orange Juice Prices on ICE Futures US in New York reached an alltime high of $2.275 a pound in November. The Asian citrus psyllid, the diseasespreading bug, sent fruit production in Florida down for fifth straight season, the longest slide in a century. Output in Brazil, the world’s top producer and exporter, fell to the lowest in 22 years. Despite the price gains, it’s not boom times for all growers. The psyllid plague has gotten so bad that some of Florida’s farmers are giving up on the crop, and acreage has dropped to the lowest in 50 years. In Brazil, farmers on average sold their fruit at 36 percent below market prices because they were locked in to contracts made earlier, said Gilberto Tozatti of Araras, Sao Paulo-based GCONCI-Group Citrus Consulting. Sugar, Soybeans Sugar’s had a roller-coaster year, first surging as much as 58 percent to a peak in September before tumbling into a bear market in December. Drought in Asia had meant that production was lagging behind demand, but better weather returned and crop prospects also improved in Brazil. While prices still posted an annual gain of 28 percent, hedge funds have drastically cut back their bets on further gains as many analysts predict the market will move to a supply surplus.

For the soy complex, supply disruptions in South America altered global buying patterns. Flooding in Argentina and drought in Brazil in early 2016 sent prices soaring as demand shifted to U.S. supplies. China is the world’s biggest consumer and uses the oilseed and its products to feed growing hog and dairy herds and chicken flocks. In the season that started Sept. 1, importers have already committed to buying 28 percent more soybeans from the U.S. than at this time last year, government data show. Still, Rabobank International, the secondbiggest U.S. agricultural lender, says farmers should be locking in 2017 profits before beneficial rain in South America boosts harvests and washes away potential income.

Soybeans for March delivery slipped 0.4 percent to $10.005 a bushel as of 6:12 a.m. in Chicago on Tuesday. There’s so much wheat in the world that at the end of the current crop season, there will be enough left over in global grain bins to feed both the European Union and China, the two biggest consumers, for another year, data from the US Department of Agriculture show. That highlights why the market -- plagued by burdensome supply -- was among the gloomiest commodities in 2016.