Financial Daily from THE HINDU group of publications
Monday, Aug 05, 2002
Columns - On the move
Dredging contracts Over-reliance on foreign firms
REPORTS have it that on more than one occasion in the recent past, giant foreign dredging contractors, entrusted with specific jobs at various ports, withdrew without having completed the jobs for some reasons.
It has happened in at least two west coast ports, Dahej and Mundra, and in one east coast port, Tuticorin. In the first two ports, the withdrawal by the foreign dredging contractors, it is learnt, was prompted by the fear of war between India and Pakistan. The western region being within striking range, the concerned foreign dredging firms, apprehending imminent war with Pakistan, left in a hurry.
In Tuticorin, the problem was different. The original work, due to be completed with a soft loan from a foreign country, was contracted at a particular rate based on a given parity rates. With the devaluation of the currency, the rate went against us and the scope of the job too was reduced. The completion of the original work would have required a fresh contract with much larger allocation of the foreign fund. Since that was not possible, an Indian firm was called upon to complete the job.
A couple of years ago, a foreign dredging contractor, originally contracted to execute a certain job in the Hooghly river, too left without completing the job following a dispute with the Kolkata Port Trust.
The question that, therefore, haunts many in dredging circles is: can giant foreign dredging contractors be really relied on to complete the contracted jobs within the scheduled time and at the agreed rate?
True, dredging is a tricky job. But, then, one expects that experienced and reputed international dredging firms, while bidding for the work, will take all the unknown factors into account.
Can Indian dredging firms rise to the occasion? The answer is both no and yes. No because there are not many dredging firms capable of undertaking dredging operations on the scale of a foreign dredging giant. The biggest of all Indian dredging firms is, of course, the public sector Dredging Corporation of India. The other Indian firm of some consequence is the private sector Jaisu Shipping. There are a few others but can only work in the small rivers and canals.
DCI being a public sector organisation has its own limitations. Jaisu Shipping has to its credit the successful completion of dredging jobs, though small, in some Indian ports.
A section in the dredging sector feels that, given an opportunity, the Indian firms too can perform as per international standards. As pointed out, it is the Indian firms that are completing the jobs left unfinished by foreign firms in Indian waters.
What, therefore, is needed is a proper government policy to promote domestic dredging capacity through appropriate measures. The Indian entrepreneurs must be encouraged to float dredging firms capable of handling sophisticated work. At the same time, the firms must be given preference in regard to award of jobs, more so to break what appears to be the stranglehold of the giant foreign dredging contractors.
In an hour of crisis, when the foreign firms will disappear having left the jobs unfinished, the Indian firms, who have nowhere to go, will continue to serve the country's needs. For example, during the Iran-Iraq war, the state-owned Shipping Corporation of India, braving all odds, did load crude in the war-ravaged regions. The foreign lines flatly refused to do it.
The example of how an Arab country forced the European dredging contractors to reduce their rates is interesting in this context. It was a massive dredging job in the Persian Gulf. Originally, the cost of the Phase I job was estimated at 2.6 billion in the local currency. The lowest rate quoted by a European firm was 2.3 billion in the local currency. However, the country's rulers decided to re-invite bids.
A Malaysian firm quoted 1.9 billion, got the job but failed to deliver. Fresh bids were invited. A Chinese firm quoted at 1.3 billion. Finally, it was settled at 1.1 billion, with the European firms having agreed to work at that rate. What a climbdown from 2.3 billion to 1.1 billion!
For Phase II, the story is even more interesting. The Chinese firm struck the deal at 0.9 billion in the local currency, with the European firm having agreed to work as the subcontractor at 0.7 billion. Which means, even the giant European contractors can be made to eat humble pie, provided they are dealt firmly.
In India, a Chinese dredging firm was not allowed to bid for dredging work following stiff resistance from the Defence ministry. The Shipping Ministry, after a good deal of effort, succeeded in having the Defence Ministry's opposition vacated. As a result, the firm became eligible for bidding for the massive dredging work to be undertaken in the Hooghly river.
The Shipping Ministry too was enthusiastic about it, hoping that the participation of the Chinese firm would encourage competition, leading to a probable drop in rates. But, then, something happened somewhere. And the Chinese firm concerned did not, after all, bid for the Hooghly job.
Send this article to Friends by E-Mail
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line