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Lankan Ports may Force Vizhinjam to Sail into Rough Waters

Published: 29th May 2015 06:01 AM  |   Last Updated: 29th May 2015 06:01 AM   |  A+A-

Rough Waters

THIRUVANANTHAPURAM:Come June 3, the all-party meet convened by Chief Minister Oommen Chandy will take a call on the lone bid secured for the Vizhinjam seaport project, but tough battles await the port once it gets built.

China-backed ports in Sri Lanka will pose stiff competition to Vizhinjam, Gajendra Haldea, former principal adviser (infrastructure and PPP), Planning Commission, has warned, even as he endorsed the steps taken by the UDF Government to attract investors.

“The project is challenged by a high level of commercial risk arising from the stiff competition that would be posed by the Chinese-supported Colombo port as well as a newly-constructed Lankan port (Hambantota), also built with Chinese assistance,” Haldea said in a brief report to the state government.

The UDF Government had sought Haldea’s opinion, among others, before the empowered committee headed by the chief secretary approved Adani Ports’s bid.

Haldea assured the government that it had done its best to ensure a fair selection procedure, describing it as “fair, transparent and competitive.”In his brief report which has now been made public, he also outlined the challenges before the proposed port.

“With economies of scale, depreciated costs and an established dominance in the market, the Colombo port would pose a very stiff challenge for any new entrant. In addition, a new port has since been constructed at Hambantota in Sri Lanka, also with Chinese support. Hence, the traffic risks of the Vizhinjam project are very significant and substantial, implying a great deal of financial risk for any investor,” Haldea, who had been the top infrastructure man for the UPA Government, said.

Colombo port handles the bulk of the transshipment traffic in this part of the Indian Ocean.

The Hambantota port has been fully built by a Chinese firm which once had bid for Vizhinjam but lost out after the Centre denied it security clearance.

Additionally, the project is also beset with issues related to the cabotage regime and the prevailing dismal investment climate.

Financially, Kerala stands to gain from the current proposal, Haldea said, adding; “to argue that something better can be achieved in a future bidding process would only be speculative and may also have the potential of putting this entire initiative in jeopardy.”

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