Andhra govt to negotiate with Adani Group on Bhavanapadu port project

The authorities feel the revenue share offered by the multi-port operator is on the lower side

Andhra Pradesh government is planning to hold negotiations with Adani Group before taking a final call on the bid submitted by the company for the development of green-field Bhavanapadu port project in north coastal district of Srikakulam. The authorities feel the revenue share offered by the country's largest private multi-port operator is on the lower side.

Adanis turned out to be the lone bidder for the project as the two home grown port operators -- Navayuga and Gangavaram Port Limited -- had withdrawn from the fray just before the submission of financial bids late last year. However, the authorities went ahead and opened the financial bid of Adanis after securing the necessary security clearances for the development of the project.

In its bid, Adani group had offered to give 0.5 per cent of the revenues from the port project in case it wins the port project. The sole criteria for selection of developer here was whoever offers the highest share as a percentage of revenue generated by the port project to the state government will get the port along with the land. The initial phase of the port project included the development of five berths along with other infrastructure.

However, with no other bidder in the fray, the authorities were left with limited options when it came to eliciting a bigger pie from a potential port developer.

"The offer of 0.5 per cent revenue share to government is on the lower side compared 2 or 2.5 per cent share offered by the private developers for other port projects in the past. We will be constituting a committee to find out a right revenue share for this port project. In any case, we are planning to hold negotiations with Adani group in the next fifteen days for revised revenue share. We will take a final call after that," Ajai Jain, principal secretary, Infrastructure and Investment Department, told Business Standard.

Cancellation of the bids is the last option, though there was no guarantee that a fresh bidding will result in a bigger participation, according to Jain. Bhavanapadu port development was considered as a challenge because there was local resistance to the land acquisition initially. Later, the government had scaled down the land requirement to 2,500 acres from 4,500 acres, meant for the development of logistics infrastructure and port-based industries at the port.

A slump in bulk cargo like coal is also said to be the reason for muted response from the port developers.

According to Jain, there were absolutely no issues on the project front as the local people were also ready to fully back the port project.

Adani group's Adani Ports and SEZ Limited(APSEZ), which has reported more than Rs 6000 crore revenues for the nine-month period ending December, 2016, operates 10 ports and port terminals on the western and eastern sea coasts.

The company had taken interest in Bhavanapadu for its strategic location as the port can develop serve hinterlands across parts of Odisha, Chattisgarh and Andhra Pradesh.

Adani group spokesperson did not respond to queries on AP government's move to negotiate with the company on revenue sharing issue before awarding the project.