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India’s Cochin Port Trust has invited five shortlisted companies to submit business models to build a bunker terminal.

The facility will be a multi-user liquid terminal built on 26 hectares of land at the special economic zone at Puthuvypu, off Kochi.

The project will be awarded on a design, build, finance, operate and transfer (DBFOT) basis for a concession period of 30 years.

Approximately 1,000 ships are said to pass through Indian waters every day to and from Southeast Asia and Far East Asia from the Suez Canal.

India’s three largest oil refiners – Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd – are all located at Kochi port as bunker suppliers.

In July of this year, Matrix Bharat - a joint venture between Matrix Marine Fuels and India's state-run oil company Bharat Petroleum Corp. Ltd. - began offering 380-centistoke (cst) fuel oil from Cochin Oil Terminal and Wellington Island.

According to market sources, six companies had originally expressed interest in the terminal project. The five shortlisted companies are Bharat Petroleum Corporation Ltd, Indian Oil Tanking Infrastructure, Adani Group, Punj Lloyd Ltd. and Gammon India Ltd..

Cochin Port Trust had been in talks with Indian Oil Corporation to fund the project, but negotiations are understood to have broken down after more than a year of discussions.

“The port did consider the IOC business model of funding the project. But the fund would be treated as debt and considering repayment of the fund with interest, the port fears that it will land the port in a debt trap. Since it has been more than a year after IOC was asked to review its model and no favourable decision has been received, the plan has been dropped," port chairman P Ramchandran is reported to have said.

The new bunker terminal would initially have an annual capacity of 2 million tonnes, which would later be doubled.

The number of vessels calling at Kochi is expected to rise with the commissioning of the international container transshipment terminal in a few months. Recent data shows that vessel calls rose to 1,278, up from 1,082 the previous year. Cargo traffic for the year ended May 2010 increased by 27.5 percent to 2.805 million tonnes.

Commenting on the strategic location of the terminal, Ramchandran said: “As it will be strategically located close to international maritime routes, the terminal will be an ideal location even for vessels passing by which can be fuelled using barges from the terminal. With the Kerala government reducing the tax from 12% to 0.5%, a special rate for bunkering from the terminal, it would prove advantageous to the port.”