Bidder selected for US$470 million Indian port PPP

Bidder selected for US$470 million Indian port PPP

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The government of the state of Andhra Pradesh has finally approved lone bidder Adani Ports and SEZ Limited as the developer of Bhavanapadu Port project. Located in the north-coastal district of Srikakulam, the proposed port would serve the hinterlands of Odisha and Chattisgarh and nearby districts in Andhra Pradesh, which is in the south-east of India.

Bhavanapadu port used to act as economic hub during the British and the Dutch regimes, exporting perfumes, textiles and other goods internationally. The state government is keen to revive economic activity by constructing a new port in the region. 

The government plans to hand over 2,500 acres of land along with waterfront to the port developer. The initial phase of the project includes the development of five berths. The estimated total investment required is INR30 billion (US$469.4 million).

The project has been in development since 2014. In February 2015, the  Infrastructure Corporation of Andhra Pradesh issued a Request for Expression of Interest for the development, operation and maintenance of the project. The RFEOI indicated that the authority intended to contract a private partner under a design, build, finance, operate and transfer (DBFOT) basis.

Adani Ports was the only company out of the three short-listed firms to submit the financial bid for the project in 2016. The Navayuga Group and Gangavaram Port Limited, two India-based port operators, pulled out of the race before the submission deadline.

The long delay between Adani's submission and the government's approval was caused by the company initially offering only 0.5% revenue share to the state. Several rounds of negotiations have since been conducted, initiated by the government. The revised proposal that has now been approved designates that Adani would give 2.3% of the port revenues as a share to the government for the first 30 years, 4.6% share for the next 10 years, and 9.2% revenue share thereafter.

The progress of the contract was also hindered by internal resistance to the proposed PPP model. In December 2015, the head of the state's Ministry of Shipping made an open offer to Chief Minister N Chandrababu Naidu to develop Bhavanapadu as a satellite port to Visakhapatnam Port. The Ministry initiated several discussions before the Chief Minister ultimately committed to private development.

Furthermore, the state has faced considerable resistance from locals regarding the land to be acquired. It has been estimated that the project will displace 10,000 families.

Adani Ports and SEZ Limited is India's largest multi-port operator. It has been operating in South India since 2016, following the INR20 billion (US$312.9 million) acquisition of Kattupalli port in Tamil Nadu from L&T Ship Building Limited.

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