However, it has refused Gangavaram Port's proposal to collect the water front charges at the rate of Rs 103.68 per metric tonne of LNG cargo handled from Petronet.
Petronet is a Joint Venture set up by GAIL (India) Ltd ONGC, Indian Oil Corporation Ltd and Bharat Petroleum Corporation Ltd to import LNG and set up LNG terminals in the country with an authorised capital is Rs 1,200 crore (USD 240 million).
Gangavaram Port Ltd along with PLL has proposed to construct and operate a 5 MMTPA LNG Terminal with a provision to expand further to 10 MMTPA.
The JV company will have equity contributions from PLL (76 per cent) Gangavaram Port Ltd (8 per cent) and other parties such as prospective LNG suppliers/buyers or any strategic investor.
PLL will be the majority share holder and will have complete management control over the JV Company.
According to a government order issued yesterday, the Gangavaram Port Ltd will submit to the government the Detailed Project Report that was submitted to the lenders for achieving Financial Closure and ensure financial sustainability of the project.
"Government after detailed examination of the proposal in consultation with Law and Finance Departments and keeping in view the recommendations of the Empowered Group of Ministers, hereby accord approval to M/s Gangavaram Port Limited, Visakhapatnam District for establishing LNG Terminal at Gangavaram Port," the order said.
However, the order clarified: "The Gangavaram Port Ltd shall not collect water front charges as proposed by them in the Term Sheet Agreement. The Gangavaram Port Ltd may collect Port Service Charges as provided in the Concession Agreement."
As per the agreement between PLL and Gangavaram Port, the LNG Terminal is likely to be operational by the end of 2016.
The LNG Terminal is expected to contribute immensely to the economic development of the region by providing additional and lower cost alternate fuel to various sectors such as refinery, power, fertiliser and transport which in-turn would result in the substantial downstream investments in these sectors.
The terminal will be set up at the cost of Rs 4,500 crore with an initial capacity of 5 million ton per annum, which will be later increased to 10 million ton, Petronet had said earlier.
Petronet, currently has two operational LNG Terminals at Dahej and Kochi.