New port plan raises viability concerns for Krishnapatnam

Proposed Ramayapatnam facility falls in an exclusive zone of about 100km given to the existing port
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First Published: Tue, Nov 20 2012. 11 21 PM IST
New ports being developed by coastal states with the help of private investors are typically given an exclusive right to operate without a competing facility coming up within a certain radius to improve their viability.
New ports being developed by coastal states with the help of private investors are typically given an exclusive right to operate without a competing facility coming up within a certain radius to improve their viability.
Updated: Wed, Nov 21 2012. 12 56 AM IST
Bangalore: A plan by the Union government to build a port at Ramayapatnam in Andhra Pradesh has raised the hackles of the Krishnapatnam Port operator.
The proposed facility at Ramayapatnam falls within an exclusive zone of about 100km granted to the existing port, according to Anil Yendluri, chief executive of Krishnapatnam Port Co. Ltd.
New ports being developed by coastal states with the help of private investors are typically given an exclusive right to operate without a competing facility coming up within a certain radius to improve their viability. The distance varies from state to state.
“There is no such thing as an exclusive zone of 100km radius for Krishnapatnam Port,” said Sunil Sharma, ports secretary, Andhra Pradesh. “Things are being done as per procedure.”
The shipping ministry will soon approach the cabinet seeking its approval to set up the new port. The location, Ramayapatnam, was chosen by the ministry based on state government’s advice, a ministry spokesman said.
The concession agreement signed by Krishnapatnam Port Co. and the Andhra Pradesh government for the 30-year contract that can be extended to 50 years contradicts the claim made by the port operating firm.
“The government of Andhra Pradesh hereby agree that no party other than the concessionaire (Krishnapatnam Port Co.) shall have the right to develop a new port within 30km of either side of Krishnapatnam port limits during the concession period under this agreement,” says the agreement signed on 17 September 2004.
Krishnapatnam Port Co. is 92% owned by Hyderabad-based CVR Group, which has interests in construction, ports, power, steel, information technology and exports. London-based private equity firm 3i Group Plc. invested $161 million (around Rs.885 crore today) in the operator in February 2009 through its India Infrastructure Fund for a 26% stake. 3i’s stake has since dropped to 8%.
“Valuations keep changing,” Yendluri said.
Both the Union and state governments have equal powers to declare port limits. “Whoever declares a port limit first, the other side has to respect it. If the Centre declares Ramayapatnam as a major port (one run by the Union government), the state government cannot do a thing about it,” said the co-owner of a Chennai-based port firm, asking not to be named.
“Exclusivity rights are given to ensure correct utilization of capacity and to check assets created from turning non-performing assets,” this person said, pointing out that “greenfield ports require huge investments and are long-gestation projects”.
Krishnapatnam Port has the capacity to handle 40-45 million tonnes (mt) of cargo from 11 berths built with an investment of about Rs.4,000 crore. It is one of India’s deepest ports with a draft of 18.5 metres and is capable of accommodating the biggest ships operating today. In the year to March, the port loaded 15.9 mt of cargo and since April this year, it has handled 13.8 mt of cargo.
The port clocked a net profit of about Rs.70 crore on revenue of about Rs.700 crore in the year to March, Yendluri said.
Iron ore shipments, which were the mainstay of the port when it started operations in July 2008, have since dwindled to zero due to a ban on the export of the mineral from Karnataka, one of the country’s largest source.
The port got its iron ore cargo from Karnataka’s Bellary-Hospet region and, during the peak in 2009-10, loaded 10.5 mt of the steel-making commodity.
Coal has replaced iron ore as the major commodity handled by the port to cater to the needs of power plants in the hinterland. From less than 100,000 tonnes in 2008-09, the port loaded 11.3 mt of coal in 2011-12. “We are set to handle 15-16 mt of coal this year,” Yendluri said.
The iron ore crisis led the Krishnapatnam Port to change its development plan and diversify its cargo mix.
The port quickly converted its iron ore berth into a container terminal with a capacity to load 1.2 million containers a year. It is also looking at liquified natural gas cargo, cars meant for exports, edible oils and fertilizers.
“As a port, we always have to be prepared for change in the cargo profile and diversify,” Yendluri said. “We are talking to car makers in Chennai and Karnataka, and hope to start the car terminal in the first quarter of 2014.”
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First Published: Tue, Nov 20 2012. 11 21 PM IST
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