Vadinar project plan may deepen Gujarat spat with Centre over port

Vadinar project plan may deepen Gujarat spat with Centre over port

Bangalore: The Union government-owned Kandla port on India’s western coast has invited so called expressions of interest from private firms to develop integrated port facilities at its satellite port at Vadinar.

With a water depth of 34m, roughly twice that at many ports in the country, Vadinar can handle big cargo ships including very large crude tankers, ultra large crude tankers, mega container ships, big dry bulk and liquid bulk carriers with ease.

The move will likely aggravate a two-decade-long dispute between the Union government and the state government of Gujarat over Vadinar.

Vadinar, a part of Gujarat’s Salaya port, was taken over by the Centre in 1978 and brought under the limits of Kandla port to set up India’s first offshore oil terminal designed to handle crude oil imported by state-run Indian Oil Corp. Ltd or IOC to feed its refineries at Koyali in Gujarat and Mathura in Uttar Pradesh.

A gazette notification to formalize the transfer of Vadinar to Kandla port was issued by both the Centre and the state government on 5 May 1978.

Since 1988, successive governments in Gujarat have urged the Centre to de-link Vadinar from the limits of Kandla port and hand it back to the state. The Union shipping ministry has made it clear that it had no intention of returning Vadinar port to Gujarat.

Kandla’s recent invitations of expressions of interest to set up facilities to handle dry bulk, liquid bulk, containers, and a bunkering (ship fuel) complex and shipbuilding and repair facilities at Vadinar is contrary to a condition that the Centre would use it only for handling crude oil cargo, said officials in Gujarat Maritime Board, the state’s maritime regulator, who did not want to be identified. Mint could not independently verify this claim.

Officials at Kandla port are contesting this claim of the Gujarat government.

“If such a condition was there in the agreement, then the Essar Group would not have set up a jetty to ship products coming out if its 10-million-tonne refinery at Vadinar," said an official, seeking anonymity given the sensitive nature of the issue.

Vadinar is key to the fortunes of Kandla, India’s biggest port by cargo handled last year. More than 50% of some 64.98 million tonnes (mt) of cargo handled at Kandla through March is contributed by Vadinar. The satellite port handled some 36mt of crude oil and products, accounting for about 30% of the revenues of Kandla port.

IOC imports about 22mt of crude a year through Vadinar while Essar ships another 10mt a year, which will increase after it completes a planned expansion of its refinery to 30mt a year. A second product jetty being constructed by Essar at Vadinar will start operations by December 2009.

To get a share of the business from Vadinar, the state government had proposed last year that the Gujarat Maritime Board could team up with Kandla port to develop non-crude cargo handling facilities at Vadinar.

An industry executive said the new Vadinar project may get delayed or even fail to materialize as it needs environmental approvals from the state government. “It is possible that Gujarat may create hurdles to the project," he said, preferring anonymity. Essar, he said, had to approach the Supreme Court to get its first jetty project cleared after a stay granted by the Gujarat high court on a public interest litigation. The jetty opened in December 2006, more than three years behind schedule.