Dredging Corp awaits ministry nod for Dubai business plan

With increased competition from international dredging firms, DCI stands to lose out a big opportunity unless it upgrades

The Dredging Corporation of India (DCI)’s proposal to deploy its fleet in Dubai has found no takers in the shipping ministry yet. Instead, the company has been told to focus on dredging in India, before venturing outside.

The company is still struggling to recover about two-thirds of its annual revenue from Sethusamudram Corporation Ltd (SCL). The total dues stand at Rs 426 crore. DCI had employed all its dredgers in the Sethusamudram project in 2006, when T R Balu was shipping minister.

In 2012, when Mukul Roy was minister of state for shipping, DCI had shifted most of its equipment to Kolkata Port Trust, though it is yet to receive the full payment.

It is expected the Dubai contract will help DCI strengthen its balance sheet. “We will get foreign exchange from the project, which will help us in writing off our loan,” said D K Mohanty, DCI chairman. Currently, the company has a loan of Rs 1,000 crore, which it had taken for acquisitions. DCI has to bear a monthly outgo of Rs 160 crore towards repaying this loan.

Dredging is one of the crucial and primary requirements for strengthening the country’s port infrastructure. DCI enjoys the tag of being the preferred dredger for the 12 major ports and the Indian Navy. Under the overall strategy for the maritime sector, all ports have to increase draught to 14 metres and, subsequently, to 16 metres.

With increased competition from international dredging companies, DCI stands to lose a big opportunity, unless it upgrades. DCI has a fleet of old dredgers and high labour costs. Since the company no longer enjoys the first right of refusal or the 10 per cent preference for government contracts (which it did a couple of years ago), it has been exposed to competition from private and international firms.

The biggest challenge for DCI has been collecting dues from various ports.

DCI also stares at losing trained manpower to private dredging companies. “Government companies are a training ground. DCI has a lot of strengths. We have knowledge of Indian waters, good equipment and good manpower. We have bagged tenders at Kandla and Kochi ports and hope to build our efficiencies,” Mohanty added.

Every year, the Union Budget allots funds to various ports for dredging projects. The amount is used to pay DCI. The shipping ministry was allotted Rs 137 crore for capital dredging at the Tuticorin and Chennai port trusts. This year, no allocation was made for the Sethusamudram project. The government had appointed an arbitrator to settle the claims made on SCL for dredging works, foreign exchange variation, fuel escalation, environmental monitoring claims, etc, in respect of the Palk Strait and Adams Bridge area of the Sethusamudram project.

Currently, DCI has 15 dredgers, with an average age of 25 years. This year, it acquired two new dredgers and expects the delivery of a third in February 2014, from the Netherlands. The company has dredging capacity of 70 million cubic metres a year.