L&T scraps Gujarat port project citing environmental reasons4 min read . Updated: 21 Aug 2015, 07:02 AM IST
Firm also in talks with Adani Group to sell its stake in the Kattupalli International Container Terminal near Chennai
Mumbai: Larsen & Tourbo (L&T), India’ largest engineering and construction company, has scrapped a plan to develop a new port in Kacchigadh, near the temple town of Dwarka in Gujarat, owing to environmental reasons, according to two state government officials close to the development.
“L&T has written to the government that it no longer intends to pursue the port project in Gujarat due to environmental reasons. L&T had appointed the Gujarat Ecology Commission to carry out environmental studies and found that the place was full of corals and mangroves. As a result they want to exit," said an official of the Gujarat Maritime Board (GMB), the state regulator of ports and maritime activities.
GMB has approved L&T’s request to scrap the project and has forwarded it to the state government for its final consent.
The company had also planned to set up a 2,000MW coal-based power project and was planning to use the multi-purpose port for shipping the coal.
The government will soon permit L&T to drop the project, said the one of the two people aforementioned. Both spoke on condition of anonymity.
“Since L&T is exiting or trying to exit port projects where it is a developer and it is not pursuing any new project due to various reasons, it seems it does not want to focus on it now and maybe even exit the sector (as developer) as of now. L&T itself had chosen this new site so instead of citing just environmental reasons, it should also say that the project is no longer financially viable from a cargo point of view and a power plant point of view," said Anand Sharma, director of Mumbai-based Mantrana Maritime Advisory Pvt. Ltd, a consultancy firm.
GMB had earlier chosen L&T for building a port and power project in Sutrapada near Porbandar. However, the company faced some land-related issues and had to relocate the site to Kacchigadh in 2011, about 200 km from the earlier site.
Construction of the Positra port near Dwarka which is in a national marine park sanctuary area, too, has been stuck for more than a decade-and-a-half due to opposition from environmentalists.
The project was conceived by Nikhil Gandhi-controlled Sea King Infrastructure Ltd.
“The Saurashtra region where L&T was planning to set up its port has always faced port traffic issues. The company wanted to initially use the port for captive purposes for its power project but the slowdown in the power sector also made things unviable for them. The proposed port has a good draft (for anchoring and berthing ships) that can go up to 15 metres after dredging," said a Mumbai-based port expert who has worked with L&T on its port projects. He did not wish to be identified.
An email sent to L&T on 19 August remained unanswered.
L&T is also in talks with Gautam Adani-controlled Adani Group to sell its stake in the Kattupalli International Container Terminal near Chennai. According to two officials close to the development, L&T wants to exit the terminal and talks are at an advanced stage.
An official of the Adani Group confirmed on condition of anonymity that discussions are on. The second government official quoted above said talks were at an advanced stage and were centred on valuation. The total cost of the project would be about ₹ 5,000 crore, he said.
L&T will continue to own and run its shipping business in Kattupalli; it wants to exit only the port terminal project, the two added.
In May 2014, L&T group company L&T Infrastructure Development Projects Ltd and Tata Steel Ltd sold their stake in Dhamra port in Odisha to Adani Ports and Special Economic Zone Ltd. The firm was also looking to develop a greenfield port in Odisha in 2011, but it has so far not identified any location.
“It seems L&T wants to move away from being a port developer and focus more on its core business, that is engineering and construction, at least for the time being," the Mumbai-based expert said.
An official of L&T Group said the company looks for opportunities in various sectors, including ports, and after building and developing one, the company is open to selling it if there is a good opportunity. The executive declined to be named.
“Running and operating a port is not the core competency of L&T. Since it has expertise in construction, design and engineering, it can make more profit by building a port and then selling it off at some point. It did so in the case of Dhamra. Even in the case of Kattupalli, it has sound expertise in shipyards and is betting big on defence projects. But it is not very easy to attract cargo, so if it gets a good premium it makes good business sense to exit the terminal part," Sharma said.
He said while the Adani Group, India’s largest port developer, has been looking for acquisitions and there are some talks of other private companies also looking to get into the port sector, consolidation in the sector is yet to happen.