V.O. Chidambaranar Port Authority Cancels ₹7,056 Crore Tender for Mega Container Terminal Project.

The V.O. Chidambaranar Port Authority (VOC Port Authority) has canceled its ₹7,055.95 crore tender for constructing a 4 million TEUs capacity container terminal in the outer harbour of Thoothukudi, Tamil Nadu. This decision comes after both of the groups that had submitted initial bids failed to meet the necessary qualifications for the project.

The port authority, in a brief notice, cited "administrative reasons" for scrapping the tender but did not elaborate further on the specific issues behind the cancellation.

Among the bidders was Vedanta Ltd, a subsidiary of the global natural resources giant, and Premier Science and Technology FZE, a lesser-known entity based in Sharjah, UAE. Concerns were raised within the local port industry about the technical qualifications of Premier Science and Technology, which lacked experience in port operations. Similarly, Vedanta, while a major industrial player, also has no prior experience running container terminals, leading to doubts about its eligibility.

Typically, port authorities only consider price bids from technically qualified bidders, and in this case, neither bidder was able to meet the technical criteria. As a result, the highly anticipated project has come to a halt.

The failure of the tender process is seen as a setback for the government, especially after the foundation stone for the terminal was laid by Prime Minister Narendra Modi in February, following Cabinet approval of the project. The government had positioned this mega project as a key part of India's port development plans, with the tender aimed at attracting private investment for its execution.

Sources familiar with the project indicated that concerns over the estimated project costs played a significant role in the lack of interest from potential bidders. The VOC Port Authority had set estimates for dredging and breakwater construction that were seen as "unrealistic" by potential bidders, who expressed concerns about the financial viability of the project. This led to calls for a revision of the cost estimates or an increase in the viability gap funding (VGF) to make the project more attractive.

The port authority had previously sought bids based on the lowest VGF, with a cap set at ₹1,950 crore, which is less than 40% of the total project cost. During the pre-bid meetings, bidders had warned that the cost estimates were at least 50% lower than expected, making the project financially unfeasible under the given terms.

The cancellation of this major port project highlights the challenges in executing large-scale infrastructure initiatives under public-private partnership (PPP) models, with the port authority now facing a difficult task in rebuilding investor confidence.

ET