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 verdict 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 state-owned 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.
“When we decided to develop and enlarge our ports business, we were very clear that this grey area had to be addressed and, thus, our dredging unit was set up,” Adani told MintAsia in December last year.
The Adani Group is now India’s biggest dredging firm by fleet size with 16 dredgers of various types and two more on order; but these are mostly used for dredging work at the group’s own ports.
On the other side, state-owned dredging firm Dredging Corp. of India Ltd (DCI) owns dredgers that are used for maintenance dredging and not capital dredging.
As a result, India’s dredging market is dominated by Dutch and Belgian dredging contractors who corner most of the channel deepening work.
It is against this backdrop that China Harbour Engineering is seeking to enter India. Its entry could shake up the Indian dredging market; but whether the government will grant it security clearance is a big issue, given the geopolitical equations between the two countries, more so after Chinese firms entrenched themselves at ports in neighbouring Sri Lanka and Pakistan and the dragon’s recent bonhomie with land-locked Nepal for transit trade. On 21 March, China agreed to a request by Nepal to build a strategic railway link between the two countries through Tibet to reduce land-locked Nepal’s total dependence on India.
The ball is now in the government’s court.
Source: Live MintPrevious Next