THE international port operators, looking out for acquisitions abroad, are finding themselves in rough seas, as the governments have begun raising the security-related issues.

A few months ago, the Dubai Ports World was forced by the US politicians to abort its bid to operate six American ports, which came as a part of its $6.8 billion acquisition of the UK major Peninsular & Oriental Steam Navigation Co (P&O) on the grounds of security.

Now it appears to be the turn of the Hutchison Port Holdings (HPH), the world’s largest operator of container ports, which is facing problems with the Indian government, in its bid to operate offshore container terminals in Mumbai and Chennai ports.

The HPH’s attempt has been stiffly opposed by the Indian intelligence and security agencies, and reportedly even by the defence ministry, on the grounds that if it emerges successful, it would be operating in close proximity to the Western Naval Command’s hub in Mumbai.

The federal government, it is believed, is likely to accept the security agencies’ concerns, and block the HPH’s plans to bid for the two projects. Though based in Hong Kong, the Indian security agencies fear that the HPH has links with the Chinese establishment.

The entire bidding process has got unduly delayed because of the refusal of the security agencies to give a clearance to the leading container ports operator. Nearly a dozen international companies are in the fray for the $260 million Mumbai offshore box terminal project.

But the Mumbai Port Trust, which initiated the bidding process last August, has had to extend the deadline at least seven times, to enable the HPH to get security clearance.

The HPH has tied up with the Indian engineering and construction giant Larsen & Toubro (L&T) for the Mumbai and Chennai port terminals. The latter project is worth around $160 million.

But a Taiwanese bidder, the Evergreen Marine, has obtained security clearance from the Indian government, along with about 10 other international bidders.

The L&T is now believed to be toying with the idea of seeking another foreign partner, probably the International Container Terminal Services Inc (ICTSI), a Philippines-based port operator. The HPH had faced similar problems in the past while bidding for port projects, with the government refusing to give it a security clearance.

Similarly, the Indian government has to clear a proposal by a consortium of Chinese companies wanting to build a deepwater international container trans-shipment terminal near Thiruvananthapuram, the capital of the southern state of Kerala.

The Kaidi Electric Power Company and the China Harbour Engineering Company (CHEC) have bid for the project. The CHEC is building the Gwadar deep-sea port in Pakistan, and is involved with the container terminal project in Chittagong in Bangladesh.

But it is not just Chinese port operators who are facing problems in India. Two Chinese telecommunications companies – the ZTE and Huawei – are also not being allowed to expand their operations in India, or even move over to new facilities.

INDIA has for long ignored the dramatic developments in the shipping world, especially the massive containerisation of cargo movement that has occurred in recent years. Many leading international ports today are able to handle containers with a capacity of 8,000-TEU (Twenty-foot equivalent units).

The biggest container ship today can carry 9,383-TEUs, and next month, a 9,560-TEU vessel will be delivered to a container shipping company. The South Korean giant, Hyundai is building a 10,000-TEU vessel, while designers are already preparing plans for 18,000-TEU vessels.

But Indian ports have lagged behind, unable to handle modern vessels. Even today, much of India’s international cargo is handled through trans-shipment hubs like Colombo and Singapore, and only smaller vessels call at the dozen-odd major ports in the country.

The Shipping Corporation of India (SCI), government-owned shipping giant, is only now planning to buy large container vessels. According to the SCI director S.S. Rangnekar, the company is acquiring two, 4,003-TEUs, and two, 5,000-TEUs vessels, which are expected to be delivered by the end of this year and the middle of next year. The SCI plans to invest about $3.5 billion over the next six years to acquire about 70 vessels.

The federal government, however, is pushing ahead with an ambitious plan to transform the Indian ports sector. Indian container ports currently handle 4.6 million TEUs annually; this is expected to jump to 20 million TEUs in about 10 years. About $2.2 billion is likely to be invested in setting up new container terminals in the major ports of India over the next five years.

About $500 million is being invested in the International Transhipment container terminal at Kochi in Kerala, which is being developed by the Dubai Ports World. The Shipping Minister, T.R. Baalu said last week that work at the transshipment container terminal was progressing rapidly, and it would be completed on schedule.

A third container terminal, at a cost of $220 million, is coming up at the Jawaharlal Nehru Port (JNPT) near Mumbai, which is being developed by the Danish major Maersk Sealand and the government-controlled Container Corporation of India. A fourth container terminal will also be taken up at the JNPT, which handles nearly 60 per cent of India’s container traffic.

Other container terminals are also to be built near the Tuticorin and Ennore ports in the south. Most of the investment in the ports sector will be done through private sector participation, and on a ‘build operate transfer’ (BOT) basis.

The major ports are also investing billions of rupees in dredging projects, to prepare them to accept large container vessels and other ships.

According to R.K. Jain, managing director, the Indian Ports Association, a whopping $12 billion would be invested in the Indian ports sector over the coming years, mainly through private public partnerships.

The major Indian ports have traditionally been managed by the government-controlled ‘port trusts,’ many of which have failed to invest in upgrading infrastructure. Most port trusts are over-staffed, the efficiency levels are abysmally low, and congestion at ports is rampant.

With the government finding it difficult to spare cash for upgrading ports or developing new ones, the private sector has been encouraged to build container terminals, and get involved in port development. Many private ports are coming up in India, especially in states like Gujarat.

The Indian entrepreneurs have also started investing in ports and related projects. The brothers Ambani – now estranged, and heading their own empires – are keenly eyeing several projects in the country.

Mukesh Ambani, chairman of the Reliance Industries – who has unveiled ambitious projects covering special economic zones, refineries, retailing, and a host of other industries – is keen to participate in the fourth container terminal project at the JNPT. So too is younger brother, Anil – who heads the Reliance Energy and Reliance Capital, and has won the prestigious Mumbai Metro project, but had failed in his bid to modernise Mumbai and Delhi airports.

For the elder Ambani, who plans to put up a sprawling special economic zone adjacent to the JNPT, it makes sense to bid for the new container terminal, which would be the largest in India.

The fourth container terminal at the JNPT would cost about $1.5 billion; the private partner would have to bring in about a billion dollars, and the JNPT would invest the remaining in dredging a shipping channel. The new terminal will have a capacity of handling about 4.5 million TEUs annually, way above the JNPT’s current capacity of 2.5 million TEUs.

The project has invited the attention of top Indian corporates (besides the Ambani brothers) and also international majors. Domestic business groups include the Tatas, the Essar group, and the Larsen & Toubro, while international operators include the Dubai Ports, the Port of Singapore Authority, the APM Terminals, and even the Hutchison Port, which will expectedly face security-related problems.

The government-owned SCI has also submitted its ‘expression of interest’ as part of a consortium for the fourth terminal. But though the JNPT is going in for a massive expansion, the infrastructure – in terms of rail and road connectivity to the hinterland – is in an appalling shape.