The Cabinet Committee on Economic Affairs (CCEA) has directed Jawaharlal Nehru Port Authority not to “offer any corporate guarantee” while raising funds for building a mega port at Vadhavan near Dahanu in Maharashtra’s Palghar district with an investment of Rs76,220 crore.
The CCEA said that a corporate guarantee by Jawaharlal Nehru Port Authority to raise debt for the project will “lead to the creation of contingent liability on the Government of India”, particularly when the government is not providing any budgetary support for the project, multiple sources said.
The core infrastructure for the port such as construction of breakwater, shore protection works, approach trestle, rail and road connectivity, dredging, reclamation, land acquisition and other common utilities will cost Rs 38, 976 crore.
Of this, Vadhavan Port Project Ltd (VPPL) will carry out dredging and reclamation works worth Rs 17,709 crore through a suitably structured public-private-partnership (PPP) model such as an annuity model with appropriate risk sharing and financial support arrangement between VPPL and the concessionaire. VPPL will develop the remaining core infrastructure through the engineering, procurement and construction (EPC) route.
VPPL is a special purpose vehicle formed by the state-owned Jawaharlal Nehru Port Authority with 74 percent stake and Maharashtra Maritime Board (MMB) holding 26 percent to implement the new port.
The balance project cost of Rs 37,244 crore will be invested by the private operators of container terminals, multipurpose berths, coastal cargo berths, RO-RO and liquid berths selected by Vadhavan Port Project Ltd through PPP model.
The project will be structured on a debt-equity ratio of 70:30. The equity portion of the project of Rs11,693 crores will be shared by JNPA (Rs 8,653 crore) and MMB (Rs 3,040 crore).
VPPL will raise debt of Rs 27,283 crore while the Ministry of Road Transport and Highways/ National Highways Authority of India will pitch in with Rs 2,881 crore for the road connectivity and the Indian Railways will take up rail connectivity with an investment of Rs 1,765 crore.
The project’s internal rate of return (IRR) for JNPA/VPPL has been worked out at 10.6 percent assuming an interest rate of 8 percent on the loan.
Lenders have indicated their willingness to price the loan in the 7-7.5 percent range, which they said can be reduced further if corporate guarantee is extended.
But the Public Investment Board (PIB) which appraised the project was not in favour of JNPA providing a corporate guarantee while raising the loan, stating that “it essentially is a contingent liability on the Government of India”.
PIB’s recommendation that JNPA should not provide corporate guarantee during fund raising was accepted by the CCEA while approving the project on 19 June, the sources said.
(source: ET Infra)
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