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As PIB okays new cost estimate... -- ...Ennore Port set to sail

P. Manoj

THE COUNTRY'S first major corporatised port at Ennore, near Chennai, is set to sail even as the Public Investment Board (PIB) finalises the revised cost estimate of Rs 1,058.52 crore for the port. The estimate will soon be placed before the Cabinet Commi ttee on Economic Affairs (CCEA) for approval.

Earlier, the Department of Shipping in the Ministry of Surface Transport proposed a revised cost estimate of Rs 950 crore to the PIB. But after taking into account the interest accruing during the construction stage, the PIB felt that the actual cost wou ld be much more.

The capitalisation of the interest accrued till the port is ready for operations has pushed up the revised cost estimate over the one worked out by the Ministry. The Department of Shipping is also close to finalising the debt equity structure for the por t in consultation with the Finance Ministry. Based on the revised cost estimates, the Department of Shipping has worked out a debt-equity ratio of 1.5:1 (Rs 700 crore of debt and Rs 300 crore of equity).

The construction of the Ennore Port was financed largely by loans provided by the Asian Development Bank (ADB) and the Chennai Port Trust. Of the ADB loan of $150.15 million, the draw-down so far has been $113.94 million. The ADB loan was borrowed by the Finance Ministry and then lent to the Chennai Port Trust (ChPT).

The ChPT was responsible for constructing the Ennore Port. The on-lending was at interest rates applicable to all plan loans provided by the Union Government to public sector undertakings and autonomous bodies.

But the onus of repaying the ADB loan, including the interest thereon, falls on the Finance Ministry by virtue of being the borrower. Consequently, the Finance Ministry has proposed that a certain portion of the ADB loan to the port be converted into equ ity of the port.

The Ennore Port will initially handle coal at two berths, with a total capacity of 16 million tonnes per annum, dedicated for the Tamil Nadu Electricity Board (TNEB). The port is supposed to earn revenues right from Day One of the coal berths operations.

Since the Ennore port will be outside the purview of the Major Port Trusts Act, 1963, it will also be out of the jurisdiction of the Tariff Authority for Major Ports (TAMP), the tariff regulatory body for the major port trusts.

Therefore, the tariff at the Ennore Port will be settled through negotiations between the port authorities and the port user, that is, the TNEB. When the port enters the second phase, the tariff to be levied by the private operators will also have to be negotiated with the port company.

The first corporatised port in the country will in all likelihood have an officer of the Indian Administrative Service (IAS) as its chief executive officer. The Government has short-listed three candidates for the top slot at the Ennore Port and the sele ction will be made soon. The board of Ennore Port Limited will also include representatives from the Union Government, the ChPT and professionals.

The Ennore Port will function as a landlord port with the Government investing money for developing basic infrastructure such as dredging and breakwaters at the port, while the port's other facilities will be funded through investments from private opera tors, captive users and major port trusts.

The Union Government has amended the Major Port Trusts Act, 1963, to enable the major port trusts to subscribe to the equity of corporatised major ports. Fresh equity will be issued to the trusts, operators and captive users at a premium to finance the s econd phase of the port. The premium will be fixed keeping in view the return on project investment and income potential of Ennore Port Limited.

The allotment of berths to the operators in the second phase will be conditional upon equity contribution by them at the proposed premium. But if the actual amount of premium falls short of the target fixed in the resource mobilisation programme, Ennore Port Limited will borrow from the market.

The Government-owned land at the Ennore Port will be leased out to the corporate entity for a period of 50 years, after which it will revert to the Union Government.