Govt weighs plan to acquire stressed private port assets3 min read . Updated: 23 May 2018, 10:01 AM IST
The shipping ministry's move comes in the backdrop of major ports requiring capacity expansion given the substantial rise in the traffic handled by them
New Delhi:The Union shipping ministry is considering potential acquisitions of stressed private port assets to enhance the country’s port capacity, starting with two ports in Maharashtra.
The move, the first such from the shipping ministry, comes in the backdrop of major ports requiring capacity expansion given the substantial rise in the traffic handled by them.
“The cargo capacity of present ports is limited and with the increasing traffic, they need to expand. So, we are evaluating stressed private port assets for acquisition. To begin with, Rewas Port and Dighi Port in Maharashtra have been shortlisted. Valuation of Rewas is already being undertaken by the Jawaharlal Nehru Port Trust (JNPT) and Dighi is still under discussion," a shipping ministry official said on condition of anonymity.
A final decision will be taken only after the valuation is over, said the official.
According to the shipping ministry’s plans, the acquisition of stressed private ports can be done either by a major port alone or by forming a consortium depending on the circumstances.
According to Sagarmala Programme, cargo traffic at Indian ports will be approximately 2,500 million metric tonne per annum (mmtpa) by 2025 against the current handling capacity of 1,500 mmtpa.
Under the programme, a road map has been prepared for increasing port capacity to over 3,000 mmtpa by 2025.
Another government official, who is part of the government’s port valuation programme said, “Major Indian ports are now booking profits and if the money can be deployed in infrastructure creation and enhancing capacity, it will help to boost the economy."
He added greenfield projects need huge investments and in the last few years, despite private commitment for investment, nothing much has come up.
The Rewas port project is backed by Reliance Industries Ltd, Jai Corp., and others. The Dighi Port is currently in the bankruptcy court.
India has 12 major ports across Kolkata, Paradip, Visakhapatnam, Kamarajar (Ennore), Chennai, V.O. Chidambaranar, Cochin, New Mangaluru, Mormugao, Mumbai, Jawaharlal Nehru Port Trust and Kandla.
Manish Sharma, partner and transport and logistics leader at consultancy firm PWC, welcomed the move.
He said that in recent years, there has been a stagnation in new private ports taking off because of a host of factors especially fiscal capacity of developers, which gets further compounded by the greenfield risk profile of a new port, making it challenging to find capital for such large lumpy investments.
Hence, it makes eminent sense that the shipping ministry is looking at port capacity expansion by acquiring such non-major ports and addressing the risk of development, he said.
Given that the landlord model of major ports is already a flourishing example of public private partnership, even these new ports can then be developed through similar landlord arrangements, with the ministry funding the initial risk capital for the port’s common infrastructure and connectivity.
Acquisition of Rewas Port by Jawaharlal Nehru Port Trust is very logical as Rewas can serve as an extension of Jawaharlal Nehru Port Trust and all risks currently challenging the Rewas project like demarcation of seaside port boundaries between Rewas and Mumbai port, as well as risk of re-laying the oil and gas pipelines of ONGC and rail/road connectivity, will be more effectively managed with the ministry at helm of affairs.
Similarly, Dighi is an industrial node on DMIC and the Dighi port project has also witnessed investments on ground also which would have otherwise faced stress had the ministry not stepped in.
Being the project owner, the shipping ministry can also ensure cargo for Dighi. He further added that some other non major ports like Nargol in South Gujarat and ports on Karnataka coastline can also be looked at under a similar model.