India puts $961m port PPP up for tender

The government of Kerala, a city in southern India, is seeking private sector bids for the development of Vizhinjam International Seaport, a INR52 billion (€619 million; $961 million) public-private partnership (PPP) that the city hopes will become a global trade port for India, according to documents on the port’s website.

After receiving conditional approval from India’s central government to convert the Vizhinjam project into a PPP, the Kerala government was encouraged to adopt a development model that required less investment from the government and more involvement from the private sector.

“[Under this model,] the breakwater construction, associated dredging and reclamation… would be taken by Government/Vizhinjam International Seaport Limited (VISL) and the rest of the port infrastructure and development work, i.e. dredging and reclamation, berths, superstructure equipment and the port operations, would be undertaken by a Private Developer cum Operator on a PPP basis,” a government document stated. “This is the optimum model with lower share from Government of Kerala and better IRR.”

India’s maritime trade has been growing steadily, from 300 million tonnes of traffic in 2001 to 883 million tonnes of traffic in 2011, according to VISL research. However, India has only 12 major ports that carry about 64 percent of that trade. Thus, the Kerala government appointed the International Finance Corporation (IFC) as an adviser on developing smaller ports to encourage maritime trade growth and alleviate current port constraints.

Kerala has been trying to develop the 197-acre port since 2004, but its previous three bidding processes have all collapsed at the last minute – whether due to regulatory clearance issues or private bidders pulling out. However, the government has again decided to move forward with the Vizhinjam port project with a “fresh bid”.

The PPP project presented on the Vizhinjam International Seaport website is detailed, listing all the aspects of the port’s infrastructure that would be the responsibility of the government. In all, VISL (a special purpose company of the Kerala government) expects to put forward $432 million of the port’s construction costs, and assumes responsibility for the preliminary dredging, reclamation, breakwater and berth building costs.

So far this year, the outcomes of India’s PPP project attempts have been disappointing. In August, the ambitious INR96 billion Mumbai TransHarbour Link road project received no bids, even after the deadline was extended twice. A pioneering PPP in the healthcare sector for an affordable cancer hospital in southern Mumbai also drew no bids from the private sector, and the government is currently revising the tender offer.

However, there have also been some silver linings. India’s Ministry of Civil Aviation (MCA) should be receiving final bids for Chennai and Lucknow airports this month, and expects to put four more airports up for PPP tenders in the coming months. In September, the state of Odisha awarded one of its largest projects yet – the INR12.9 billion expansion of State Highway No.10 – to Chennai-based L&T Infrastructure Development Projects.