The Hindu Business Line : New dredging policy — Making things easier for foreign firms?

Cauvery, the trailing suction hopper dredger commissioned by Chennai port a few months ago... Will the profitability of Indian dredging firms be hit by foreign companies being invited in? — Bijoy Ghosh

THE Union Government has thrown open maintenance dredging in major ports to private dredging firms, both Indian and foreign. The move marks a sharp departure from the erstwhile policy of reserving the job for the public sector Dredging Corporation of India (DCI). Under the new dredging policy, being formulated as part of the new maritime policy, the authorities concerned in major ports will now be able to enter into long-term contracts with private dredging firms for undertaking maintenance dredging in their respective ports. The proposed competitive bidding contemplated for the dredging sector will also strip the DCI of its right of first refusal and the price preference.

It might be noted that private sector participation, particularly of foreign dredging firms, was always permitted in respect of capital dredging. Only maintenance dredging in major ports was reserved for DCI.

With the change in government policy, both capital and maintenance dredging will now be open to participation by private sector dredging firms, Indian and foreign. Since there are not many Indian private sector dredging firms, will not the government's new policy, one wonders, help the foreign dredging firms and their Indian subsidiaries dominate the country's dredging scene.

Several dredging projects are in the pipeline. These include, among others, Sethusamudram project involving substantial dredging, mostly capital; Hooghly dredging, mostly maintenance, but reserved for DCI; the Rs 130-crore capital dredging project planned for Paradip; and a Rs 100-crore maintenance dredging operation at Kandla. Then there will be dredging at Kochi port for the proposed Vallarpadam project and also at Ennore/Chennai for the new berths due to be constructed. There will be dredging at Pipavav and Krishnapatnam ports. The list is long. Even West Bengal Government has invited bids from dredging firms for reclamation of land at Rajarhat for urban development projects. On the whole, the dredging market looks promising.

Many in dredging circles fear that the government's new policy, if implemented, will encourage not so much the growth of Indian private dredging firms as that of the Indian subsidiaries of foreign dredging firms, and that these subsidiaries, which will be registered in India, will corner the bulk of the country's dredging business.

The fear may not be unfounded. A beginning has already been made with almost all foreign dredging majors having floated wholly-owned Indian subsidiaries on seeing the potential of the Indian market. In fact, some of them have already grabbed some of the dredging contracts.

For example, the contract for maintenance dredging at Kakinada port has been bagged by the Indian subsidiary of a foreign firm. Mumbai port's maintenance dredging work, so far handled by DCI, will also be handled by the Indian subsidiary of a foreign dredging firm.

The contract for Kandla port's dredging, involving both capital and maintenance dredging, has been handed to the Indian subsidiary of a foreign firm. There has to be dredging at Mumbai port to facilitate movement of naval vessels and the contract for the job will be awarded by the Indian Navy. No foreign flag vessel will be allowed to participate in the job but the restriction will not apply to any Indian subsidiary of a foreign dredging company. The professed objective of the government's new policy is laudable: it wants to encourage competition in the country's dredging sector to help port trusts get efficient services at best rates.

Also, the proposed policy, when in place, will encourage new domestic players to enter the dredging field, more so as there is hardly any major domestic dredging firm worth the name, except perhaps one or two.

Under the proposed policy, there will be no differentiation between a public sector company and a private company. The Indian private dredging firms will also be provided with a conducive fiscal regime to facilitate growth. Joint ventures will be exempted from any additional tax at least for five years. But certain questions remain. It is not true that the entry of the private dredging firms, Indian and foreign, will necessarily lead to more efficient services at competitive rates.

There are instances to show that many port trusts were made to pay through their noses for the jobs done by private dredging firms, particularly foreign firms.

Next, there may be tendency in a liberalised regime to slap conditionalities to help a particular firm or a group of firms. For example, a major port trust, while floating a contract for maintenance dredging recently, had stipulated that the bidders must have at least two dredgers of 4,500-hopper capacity each, and that the age of the dredgers must not exceed 15 years.

The stipulations are such that only foreign dredging firms and their Indian subsidiaries can bid for the job. No Indian dredging firm, not even DCI, can fulfil such conditions. They will, therefore, not be eligible for bidding.

Interestingly, the 15-year age limit of a dredger is being insisted upon when the Director General Shipping is allowing foreign dredging companies to bring in even 30-year old dredgers for deployment in Indian waters

The question being asked is: What is more important? The capacity and age of the dredgers? Or to achieve the targeted depth within the stipulated period at the stipulated cost, irrespective of the capacity or age of the dredgers?

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