Why Nargol port project in Gujarat failed to find any takers?

Updated on Mar 22, 2022 01:00 AM IST

Nargol port project has been one of the most ambitious port projects by the Gujarat government in recent times.

Nargol port was proposed to be a multi-function port capable of managing solid, liquid, and container cargo. (Representational lmage)
Nargol port was proposed to be a multi-function port capable of managing solid, liquid, and container cargo. (Representational lmage)

AHMEDABAD: The Gujarat government last year invited global bids for development of the ambitious Nargol greenfield port that was to be built for an estimated project cost of 3,800 crore in the first phase. For a state that handles nearly one-third of the country’s sea traffic, it was almost after a decade that the state maritime regulator or the Gujarat Maritime Board (GMB) invited bids from private companies for development of a greenfield port. This was after the port developer Cargo Motors failed to meet project deadlines and the regulator had to cancel the work awarded to it for Nargol port development.

The state government made some relaxations in the bidding process like it increased the concession period from 30 years to 50 years, all to attract prospective bidders. After extending the deadline more than five times, the government failed to draw a single bidder when the deadline ended on February 4, 2022.

From Adani Ports and Special Economic Zone to JSW Steel and Dubai-based D P World, the project did see interest from about half a dozen private companies during the pre-bid meetings. In fact, Adani group and D P World even sought deadline extension as they wanted to conduct pre-feasibility

One of their main concerns was that a large port was planned only 50 kms from Nargol, at Vadhwan in Maharashtra by the Central government for an investment of 65,000 crore.

“Nargol would face stiff major competition from such a large port at Wadhwan. Also, the Gujarat government did not offer land for the project and the developers were to reclaim land from the sea which could be a costly affair. Closer to Nargol port, on the beach, the forest department has planned a large forest using Japanese Miyawaki method. All these factors made it challenging to develop a port here,” said a senior official working with a company that was earlier in the race to develop the project but later pulled out of it.

Nargol was planned with an aim to draw the traffic from Mumbai’s Jawaharlal Nehru Port Trust (JNPT) port that has been facing congestion issues. While JNPT has planned expansion of its existing container handling facility, it is also backing the Vadhavan port.

“Nargol has been one of the most ambitious port projects by the Gujarat government in recent times and we tried our best to draw private developers. It is ultimately their call if they see any business opportunity in it or not,” said a state maritime board official who spoke on condition of anonymity.

Officials of APSEZ, Essar group, JSW Steel confirmed that they had initially evinced interest in the project but did not take part in the bidding.

Despite concerns raised about some of the terms in the request for proposal being detrimental to the project and making it unviable in the long run, the government largely stuck to its original proposal, they said.

The state government did try to extend a long rope to the developers but it did not seem enough to get the project that has been stuck for over a decade now.

In the case of Nargol port, for the first time, GMB offered a discount of 20% for the waterfront charges in line with its Schedule of Port Charges (SoPC). GMB levies a royalty charge on per tonne of cargo to the port developer for using the state’s waterfront. These charges depend on the type of cargo handled. Also, the concession period under the state’s build-operate-own-transfer (BOOT) policy has been extended from 30 years to 50 years, another first by the government.

Cargo Motors and Israel Ports won the bid by offering high waterfront charges of 171% to develop Nargol port in August 2012. While Israel Ports soon backed out from the project, the development of the port was stuck as Cargo Motors missed several deadlines and were eventually out of the project, said an official at GMB.

Companies like DP World, Adani group and a couple of other port developers submitted more than 200 queries before the regulator in which they claimed that some of the conditions mentioned in the Request for Proposal (RFP) document posed a question mark on the viability of the project. Besides Wadhwan challenge, another area of concern for the developers has been that no compensation shall be payable by GMB upon transfer of the asset at the end of concession period, that is 50 years.

Other areas of concern include the development of rail and road infrastructure in the vicinity of the port and the lease rental policy.

History of protests

Located about 140km north of Mumbai and 120km south of Surat, Nargol was proposed to be a multi-function port capable of managing solid, liquid, and container cargo.

It was confirmed as the new port site after a port project at Maroli, approximately 10 km away from Nargol, was abandoned due to protests from local fishermen.

Back in 1997-98, GMB awarded the development rights for the port project to an Indo-US consortium comprising Unocal Corporation and a Mumbai-based telecommunications firm, National Telecom of India Ltd or Natelco to develop Maroli port.

The local fishermen’s community feared that a modern port might damage the biodiversity of the area and disrupt fishing and agricultural activities. Their protests were led by a retired Lt Col Pratap Save, who was president of the Kinara Bachao Samiti. The retired army colonel had chosen to cultivate his land at a village that was a few kilometers away from the proposed port site.

Following a violent clash with the police in April 2000, Col Save was injured and he died in a hospital at Mumbai. Soon, the Gujarat government, under the chief minister late Keshubhai Patel, abandoned the project and it was forgotten for a long time till 2008 when GMB decided to relocate the project site a little away. As the earlier port project at Maroli faced problems of land acquisition, the Nargol project was proposed to be developed on reclaimed land measuring around 75-100 hectares.

“When the government announced fresh bids for the Nargol project last year, protests broke out by the fishermen. In fact, the Nargol gram panchayat passed a resolution to oppose the port project,” said an official working with a leading port developer of the country.

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