Bangalore: A Rs 1,000 crore expansion of Paradip port in Orissa has stalled because the government is yet to provide it with a forest clearance necessary to begin construction.
The Union government-owned port had in 2009 selected developers to build two cargo berths for loading coal and iron ore that will help the harbour to add 20 million tonnes (mt) to its capacity of 76 mt.
The state government has not yet recommended a forest clearance to the Union ministry of environment and forests, which is mandated to take a final decision on the matter.
The delay of already two years is likely to raise project costs.
“There will be cost escalation,” said K.K. Sinha, chief executive of Essar Ports Ltd, which signed an agreement with Paradip port on 10 November 2009 to develop coal berth with a capacity to handle a 10 mt at a cost of Rs 479 crore.
Parag Parikh, head, finance, at Gammon Infrastructure Projects Ltd, a member of the group awarded the iron ore terminal, said: “We will take a comprehensive view of the cost escalation and revision in tariffs only after obtaining the forest clearance.”
The agreement for the Rs 591.35 crore, 10 mt capacity iron ore berth was signed with a consortium of Hong Kong-based commodity trader Noble Group Ltd, Gammon Infrastructure Projects Ltd and MMTC Ltd on 1 July 2009.
Forest department officials of the Orissa government declined to comment.
“The port should not have awarded the contracts without the forest clearance,” admitted G.J. Rao, chairman of Paradip port.
It the projects cost more, it would impact tariffs set by the Union government’s tariff regulator, which were calculated on the basis of capital costs estimated in 2007, Rao said.