Monday, June 22, 2009

Stalling of two prestige projects causes concern

Gulf Today

TWO major projects which the Left Democratic Front (LDF) government has been pursuing since it came to power three years ago have run into controversies, leading to delays and concern about their future.

One is the Smart City project, a 15-billion rupee joint venture with the promoters of the Dubai Internet City, which aims at setting up at Kochi a hub capable of attracting global information and communications technology players and creating about 100,000 jobs.

The other is the Vizhinjam port project, which envisages the development of a deepwater container transhipment terminal with a handling capacity of 4.1 million TEUs (short for Twenty-foot Equivalent Units) a year.

In the absence of a deepwater port, India now depends upon transhipment facilities of Colombo and Dubai ports.

The Colombo port annually handles 1.7 million TEUs, of which 40 per cent is Indian transhipment cargo.

Both these prestige projects originated before the LDF came to power in 2006.

The Smart City project was initiated by the last United Democratic Front (UDF) government. VS Achuthanandan, who was then leader of the opposition, objected to some terms of the agreement it had negotiated with the Dubai authorities.

On becoming chief minister, he negotiated a new agreement which was more favourable to the state than the one the UDF government had finalised.

The agreement was signed in 2007 during the first anniversary celebrations of the LDF government. More than two years later, the project still remains on the ground.

In the words of State Minister S. Sharma, who is a member of the Smart City board of directors, not one brick has been laid so far.

A statement by Achuthanandan that the Dubai authorities appeared to be going slow because of the global meltdown brought an immediate rebuttal from Smart City CEO Fareed Abdulrahman. He said the company would start work as soon as land was registered in its name. Sharma said later that difficulties had arisen because of the company's demand for freehold rights on 12 per cent of the project land.

He did not dispute the company's right to make the demand.

The agreement actually provides for it. The snag is that it says freehold rights will be given after the master plan is ready.

In an apparent bid to pressure the state government into responding to the company's demand, Abdulrahman announced withdrawal of the contract given to a British firm to prepare the master plan.

Public statements coming from Dubai and Thiruvananthapuram suggest that some terms of the agreement are sticky and need to be reworked. Although neither side is forthcoming, there is reason to suspect that intransigence on the part of local political and bureaucratic interests is making forward movement difficult. A faint hope of early resolution of the dispute has arisen following the government's decision to authorise the chief secretary to talk to the Dubai authorities and settle the matter.

On the initiative of the UDF government the Vizhinjam International Seaport Limited (VISL) was incorporated in December 2004 to take up the deepwater terminal project.

The chief minister is the company's chairman, and its board of directors consists of four other ministers and two senior officials.

In 2005, after global tendering, the UDF government had selected a consortium led by Zoom Developers of Mumbai to implement the project on BOOT (build, own, operate, transfer) basis.

The Centre refused permission as the consortium included a Chinese company, which did not have security clearance.

The LDF government invited fresh tenders and picked another consortium headed by Lanco Kondapalli Power Limited of Hyderabad.

However, it could not proceed with the project as Zoom Developers went to court, alleging that a fresh bid submitted by it excluding the Chinese firm had not been considered. The high court asked the government to consider its bid too.

The government appealed to the Supreme Court, which upheld the high court order.

During the Lok Sabha election campaign, State Congress president Ramesh Chennithala claimed Zoom Developers' financial bid was Rs3.32 billion less than that of Lanco Kondapalli Power and alleged the project was getting mired in corruption.

Last week a committee of officials rejected the technical bid by Zoom Developers saying it did not secure the minimum qualifying points on evaluation.

The company has said it will move the high court again. If it does, the project is certain to suffer further delay.

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