If due diligence indicates a viable project, Reliance will have to buy a stake in the Krishnapatnam Port Company, the sole licensee of the project. This company was formed when the state government first allocated the site to Natco, a south-based pharmaceuticals company. Given the dire financial trouble that Natco is currently in, it has been looking out for a partner. Observers claim that RIL may prefer to buy out the project.

The original site included a 40,000 hectareindustrial area that would provide traffic for the port. However, RIL will draw up its own plans, more in line with its own strategic interests as a major player in the supply and distribution of LNG. Three years ago the Andhra Pradesh government had invited tenders for a 2,000mw LNG-based power plant at Krishnapatnam, very close to the port site for which Reliance was one of the bidders. Although the project has lapsed as the state government did not take a decision, it is likely to be re-tendered as the LNG terminal will be the cornerstone of the project.

Although it is the west coast that has seen most of the action in private ports, the eastern seaboard is seen as a very lucrative region by private sector port construction and management companies. The west coast has P&O's terminal at JNPT, Gujarat Pipavav (GPPL) in the private sector, besides the relatively efficient public sector ports like Kandla, Mumbai and Nhava Sheva, making it difficult for new private operators to attract dedicatedtraffic.

The east coast, however, is a different kettle of fish. There are only five major ports on the east coast. Chennai is the largest, but also has a very long pre-berthing period. In the last couple of years, the port has been plagued by severe labour trouble.

The privatisation of Bharati docks, the container terminal, expected to bring in much needed efficiency at the port has been hanging fire for some time now. Calcutta, at one time a premier port, is antiquated and does not handle container traffic.The only competition in the area will come from the recently privatised container terminal at Tuticorin, which is handled by the Port of Singapore Authority (PSA). A global player which runs seven ports around the world, PSA will prove to be a tough rival for any private port in the region.

The port has handled 100,000 TEUs last year and hopes to end the current year with 150,000 TEUs. The other potential competitor is L&T, which is setting up a Rs 1,600-crore port at Damra in Orissa, but could takeup to three years to construct and is yet to sign back-to-back agreements for its cargo traffic.

INSIGHT
Power units to give good returns

Given that there are only five major ports on the east coast, of which both Chennai and Calcutta have antiquated facilities and are beset with problems, Reliance's urgency to push through the Krishnapatnam project in Andhra is understandable. However, more interesting than the port in Andhra could be the re-tendering for the 2000mw LNG power plant within the complex.

The 2000mw power plant will assure Reliance better returns as returns from a power project are normally higher than those of a port. Considering the size of the power plant, the only problem that the company can face will be getting through all the bureaucratic hurdles.

There are no two ways about LNG being a better fuel as compared to others. With the size of the plant being set up and the huge demand from growing industralisation in Andhra Pradesh and Tamil Nadu, RIL will undoubtedlybe in a better position to supply cheap and quality power to the states.