Attracted by growth opportunities, the Port of Rotterdam Authority, which operates one of the largest ports in the world, has opened negotiations with India’s biggest engineering and construction firm Larsen and Toubro Ltd (L&T) for investing in a greenfield port in India.
A formal announcement of a deal could come as early as later this month.
“This is one market that we cannot afford to ignore,” said a Port of Rotterdam executive, who didn’t want to be named. “We are exploring opportunities for port business in India and are in talks with L&T. We believe that 2008 will be a critical year for the project, when we may make an announcement. A high-level delegation from the Netherlands will be in India this month to discuss the plans and work out the modalities.”
He declined to say what locations are being considered for the proposed port.
M.V. Kotwal, senior executive vice-president and member of the board, L&T, confirmed the development, saying: “They have initiated talks with us, but it is too premature to comment.”
Port of Rotterdam is looking to use the joint venture to acquire 5,000 acres, but will outsource port operations under a revenue sharing arrangement.
Explaining the business plan, the Port of Rotterdam executive said the company aims to develop and provide land and infrastructure, do mapping, coordinate marine traffic, issue rules, regulations and permits, and market the port overseas.
“We have done the appraisal study and plan to develop it (much like the) Sohar port in Oman,” he said. “A special economic zone (SEZ) will be part of the new port.”
The Sohar port is a 50:50 joint venture between the government of Oman and Port of Rotterdam.
Indeed, L&T is setting up a modular fabrication facility at the Sohar port at an investment of $40 million (Rs158 crore). The facility will fabricate integrated decks of 10,000-20,000 tonnes, jack-up rigs, and so-called floating production storage and offloading vessels. The facility is being set up by L&T Modular Fabrication Yard Llc. with Zubair Corp., a local partner.
L&T is among the 13 firms that have been shortlisted for developing nine new ports in Gujarat, where it is the lone bidder for the Sutrapada port project. These nine ports will be awarded to private operators for a period of 30 years.
The company also has plans to set up the country’s biggest shipbuilding facility at Kattupalli in Tamil Nadu, in an effort to tap growing domestic and global demand for ships.
L&T will invest around Rs3,000 crore in the shipyard and port project, and will build cargo ships, warships and offshore oil rigs.
“This would be significant for the Indian port sector as the Port of Rotterdam has been watching and waiting for opportunities in the Indian port sector for a long time. They have been associated as a consultant for the Indian port sector for long. It remains to be seen whether the proposed port will be a container or a bulk port. Without including the SEZ, the minimum estimated investment will be of $500 million, which is inclusive of breakwater cost,” predicted Arvind Mahajan, executive director at audit and advisory firm KPMG.
L&T posted a net profit of Rs2,261 crore in the year ended March 2007 on sales of Rs20,348 crore.
India already has 12 major ports and 187 non-major ports, which handle more than 90% of foreign trade. These 12 Union government-run ports— Chennai, Cochin, Ennore, Jawaharlal Nehru, Kolkata (including Haldia), Kandla, Marmugao, Mumbai, New Mangalore, Paradip, Tuticorin and Visakhapatanam— have a capacity to handle 508 million tonnes per annum of cargo.