Ap Clarifies On Kakinada Port Contract

The Andhra Pradesh government late Wednesday issued a `white paper' explaining the circumstances under which the consortium led by Singapore-based International Sea Ports Ltd (ISP) was selected for the management of the deep water port at Kakinada.

According to the document, RITES, which was engaged by the state government to evaluate the bids, bracketed ISP and KPB together as being "equally suitable". Though RITES awarded 99 points to KPB against 96 to ISP, it said certain finer points tilted the balance in favour of ISP.

ISP, along with Larsen & Toubro, Stevedore Shipping Agencies International of USA and Precious Shipping Public Company of Thailand was selected by the state Cabinet earlier this month for managing the port. The other two bidders shortlisted were Konsortium Perkapalan Berhard (KPB) of Malaysia and Mumbai-based ABG Heavy Industries Ltd (ABG).

The decision to award the contract to ISP was criticised by both Congress and BJP who suspected vested interest.

Congress had taken a similar stand four months ago, around the time of the state Chief Minister `s visit to Malaysia and Malaysian Prime Minister Mahatir Mohammed's son's visit to Hyderabad, when media reports had indicated that the contract may be awarded to KPB, in which Mahatir's son has an interest.

A second opinion sought by the state government confirmed RITES recommendation, rejecting ABG as being " irrational and devoid of any commercial logic", and bracketing KPB and ISP without indicating a clear choice between the two.

A task force set up by the state government to study the investment proposals of both, noted that RITES had given more points to KPB based on a higher percentage of earning to be shared with the government. It felt that the quantum of gross revenue accruing to the government is more important than the percentage of gross revenue, which is only a number. A higher percentage on a lower base will give less revenue than a smaller percentage on a higher base.

On this count, the 23.75 per cent offered by KPB on a gross revenue base of Rs 1,541.1 crore will give a return of only Rs 363.8 crore, while the 21.4 per cent on a base of Rs 7,512.8 crore as offered by ISP will give Rs 1,636 crore.

Besides, the investment offered by ISP was Rs 119 crore more than what KPB had indicated for expansion and modernisation of the port.

The task force felt that a higher investment would result in better facilities for port users leading to higher volume of freight and more revenue to the operator.

The white paper also said that ISP offered integrated services which will help reduce transaction costs. This was not so in the case of KPB, which is a good enough reason to reject KPB, it added. The management of the port is to be handed back to the state government in 20 years.