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Indian Port Considers 20-Year Dredging Contract

Indian Port Considers 20-Year Dredging Contract
BY DAVID MURRAY

Ongoing dredging difficulties at the port of Kochi (Cochin) are threatening the performance of one of India’s showcase projects, the Vallarpadam Island container transshipment terminal. As a result, the port is studying the feasibility of opening bids for an unprecedented 20-year dredging contract.

The port’s dredging needs, formerly handled under annual contracts, are provided under a three-year contract with the Dredging Corporation of India (DCI), the perpetually overburdened federal dredging authority. The contract expires in 2014.

DCI announced October 29 that three more trailing suction hopper dredges would be joining its fleet in the next two years, bringing the total number to 13, in addition to three cutter suction dredges and one backhoe dredge. DCI also announced it had acquired an electronic procurement system that its vigilance officer, S. Vasudeva Rao, said would greatly reduce corruption, according to the Hindu Business Line.

The DCI contract was signed in May of this year, after a series of well-publicized disputes between the Cochin Port Trust and the previous dredger, Mercator Limited, about dredging shortcomings.

The port said that a 20-year contract would help it control escalating and unpredictable dredging costs. Some Indian publications have suggested corruption or conspiracy in the dredging difficulties, but others say that the current contract is not well drawn, because it merely requires a specified tonnage of silt to be removed each year, instead of requiring a constant target depth for the channel.

Critics also charge that the silt simply washes back into the port from the deep-sea areas where it has been placed.
A Kochi-based consulting firm, KITCO Ltd., is preparing a feasibility report for the port about a public-private partnership (PPP) dredging contract for 20 years, the Hindu Business Line reported October 10. The port hired KITCO after its request to the federal Shipping Ministry to build its own dredge was turned down. The report is due within three months.

The first phase of the three-part Vallarpadam Island container hub project, located on Vallarpadam Island in the port’s northern part and costing an estimated $20 million U.S. (total costs are estimated at roughly US$630 million), was opened to much fanfare by Indian Prime Minister Manmohan Singh in February 2011.

The container terminal, billed as India’s only transshipment port, is meant to ease the cost and availability of goods all over India, where transportation bottlenecks and inefficiencies traditionally add significant costs to imported goods, forming a major drag on the growth of India’s consumer economy. According to its Web site, the new terminal is intended to make Cochin a key center in the shipping world, reducing India’s dependency on foreign ports to handle transshipment.

To prepare for the new terminal, India’s federal government spent tens of millions of dollars, which included building a new four-lane highway from the port to the interior and a new eight-kilometer electrified rail link that allows 15 trains to serve the terminal daily.

Vallarpadam is operated by Dubai Ports World (DPWorld), one of the world’s top five terminal and logistics firms, under a 30-year PPP contract, after which the port’s operation would revert to the Cochin Port Trust. DPWorld is owned by the government of the United Arab Emirates, one of India’s major trading partners. Strategic partners include the Container Corporation of India (Concor), Transworld, and Chakiat.

The federal government is betting so much on the success of the Vallarpadam container project that it has given Kochi port a three-year exemption from India’s cabotage (coastal trade) laws. The exemption allows foreign vessels to carry cargo between Kochi and other Indian ports.

DP World Cochin will be completed in three phases. In the first phase, the 600-meter-long quay with a draft of about 14.5 meters will be able to simultaneously serve several of the world’s largest container ships. They are the ships with a nominal capacity of about 10,000 TEUs (20-foot equivalent container units) with capacity to handle one million TEUs annually. Capacity will increase to about 1.5 million TEUs in the second phase; once fully commissioned, capacity would be about four million TEUs.

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