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JN port to raise Rs2,600 crore in dollar loans for road-widening project

Doubling the highway from the existing four lane to cater to the growing traffic is estimated to cost about `3,200 crore

Bengaluru: The Jawaharlal Nehru (JN) Port Trust, which ships more than half of India’s containerized cargo passing through its ports, plans to raise as much as 2,600 crore worth of dollar-denominated loans by March to help fund a road-widening project for faster evacuation of cargo.

Doubling the highway from the existing four lane to cater to the growing traffic is estimated to cost about 3,200 crore. While the highway project will be executed by India’s highway development agency, the National Highways Authority of India (NHAI), the project will be funded entirely by JN port.

“Leveraging the dollar-denominated receivables of JN port accruing from vessel-related charges can be utilized to provide a natural hedge against the dollar-denominated long-term funding," a spokesman for the port located near Mumbai and one of the 12 owned by the Union government, said.

This will be the first such dollar borrowing by a port owned by the Union government.

Vessel-related charges or so-called marine charges such as port dues, berth hire and pilotage are paid by ships calling at a port. Vessel-related charges for foreign-going vessels are denominated in dollars but collected in rupees after applying the prevailing exchange rate, according to a practice followed since 1991.

Cargo-related charges at ports such as wharfage, crane hire, storage, warehouse, demurrage and estate rentals are denominated and collected in rupees.

“This (dollar loan) will enable the port to get a competitive low interest rate as compared to interest rate for rupee term loan, thus resulting in substantial interest cost saving for JN port. Owing to competitively lower interest rates of dollar-denominated borrowings of 4% as compared to typical interest rates of 12% for rupee term loan, there would be saving of around 8% in interest costs for JN port, the spokesman added.

The dollar loan plan is an initiative of the shipping ministry under which the dozen ports have been asked to explore the possibility of availing of external borrowings, which are available at very competitive rates in the global market.

JN port is looking to load over five million 20ft equivalent units (TEUs) in the financial year that began in April, driven by further improvements in productivity and efficiency at its three existing container terminals and the opening of a new terminal in the next few days, port trust chairman Neeraj Bansal said. A TEU is the standard size of a container and a common measure of capacity in the container business.

JN port handled 4.467 million TEUs in the year ended March, the highest since it was opened in 1989, clocking a growth of 7.33% over the previous year’s volume of 4.161 million TEUs.

Overall, the port handled 63.8 million tonnes (mt) of cargo during 2014-15, up 2.36% compared with the 62.33 mt loaded a year ago.

The port’s operating income rose 9.7% to 1,475.85 crore (provisional) in 2014-15 from 1,345.29 crore a year earlier. Profit before tax increased to 785.45 crore (provisional), 2.4% more than the previous year’s 767.06 crore.

With another container terminal under construction, the port’s container-loading capacity will more than double over the next seven years, putting a strain on the port’s cargo evacuation infrastructure, necessitating the need to widen the road linking the port to eight lanes.

“The dollar-denominated loan will reduce the cost of funding the road widening project drastically," a spokesman for the shipping ministry said.

JN port held a pre-bid meeting with bankers including State Bank of India and Yes Bank Ltd on Monday to hire a transaction adviser to help mobilize funds, the port spokesman added.

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