VO Chidambaranar Port Authority Shelves Rs 7,055 Crore Mega Container Terminal Tender

The V O Chidambaranar (VOC) Port Authority in Thoothukudi, Tamil Nadu, has withdrawn a tender for constructing a 4 million TEU capacity container terminal at the port's outer harbour.

This Rs 7,055.95 crore project was set to be funded privately, but the bid was scrapped due to the failure of the two initial bidding groups to meet qualification standards.

The port authority cited “administrative reasons” for cancelling the tender but did not provide further details. Among the bidders were Vedanta Ltd, an Indian subsidiary of London-listed Vedanta Resources, and Premier Science and Technology FZE, a recently established entity in the UAE with no prior experience in port operations, which raised concerns within the port industry regarding its eligibility.

As per Economic Times report, both Vedanta and Premier Science and Technology lacked the required technical qualifications, making it impossible to proceed.

This setback follows the laying of the foundation stone by Prime Minister Narendra Modi in February, soon after Cabinet approval. The sudden cancellation, especially after high-profile backing, has led to speculation within industry circles.

Port industry sources have pointed to underlying concerns regarding the project’s estimated costs, especially regarding dredging and breakwater construction, which the National Technology Centre for Ports, Waterways, and Coasts (NTCPWC) under IIT Madras helped calculate.

Potential bidders, during a roadshow in March, expressed that these cost estimates were “unrealistic,” suggesting the port authority may have underestimated project costs by at least 50 per cent.

As a result, stakeholders requested a reassessment of these estimates or an increase in the viability gap funding (VGF) to make the project financially feasible.

VOC Port Authority initially offered VGF as a measure to attract bidders, setting the cap at Rs 1,950 crore or 27.64 per cent of the project cost, lower than the allowable 40 per cent under the VGF scheme.

Additionally, the authority offered a ten-year holiday on revenue sharing with the private operator to further incentivise participation.

The port authority had also mapped out a phased minimum guaranteed cargo (MGC) for the operator, set to begin from the 16th year of operation, growing incrementally over the project’s 45-year timeline.

V O Chidambaranar Port

V O Chidambaranar Port, strategically close to the east-west international sea routes on the southeastern coast, is one of the 12 major ports in India and the second-largest in Tamil Nadu.

The port is an artificial harbour protected by two breakwaters and is connected to deep water by a dredged channel. The port has a handling capacity of around 70 million tonnes per annum with 16 berths, including two container berths.

The port handles major cargoes such as coal, copper concentrate, timber logs, phosphoric acid, rock phosphate, granite stone, salt, wheat sugar, construction materials, pulses, VCM, LPG naphtha, furnace oil, ammonia fertiliser, etc.