Dogged by delays, JNPT opts for PPP model for phase-II dredging

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Feb 3 2012, 05:46am hrs
Funds-starved Jawaharlal Nehru Port Trust (JNPT), which operates Indias largest container port, will partner private companies through a public-private partnership (PPP) model to deepen its ship channel for R5,000 crore. This will help it avoid funding delays and speed up work on the plan that was stuck for eight years.

This model, the first by a port operator, will deepen its channel from 10 metres to 17 metres, allowing larger container vessels to berth at the port.

I want to bring in financial innovation in the second phase of dredging for channel deepening, JNPT chairman L Radhakrishnan told FE in an exclusive interview. We have made a concept paper on this and are in the process of selecting international consultants for making technical, financial and managerial assessments.

JNPT has plans to deepen its channel in two phases. The first phase of dredging by 3 metres, costing R1,571 crore, has been stuck as the government has not yet given permission to finalise one of the three bidders. The delay is resulting in loss of revenue for the port operator as large ships choose to anchor at larger ports in Sri Lanka.

We do not have these kind of funds, so the PPP model will secure funds for dredging without compromising on our future expansion plans, said Radhakrishnan. The Japan International Cooperation Agency (Jica) has also shown some interest in funding, and we want their funds to come in at a faster rate, he added.

Dredging on a PPP model will be a good strategy as private parties will be more efficient in maintaining the channel depth and make them responsible for it, said Ganesh Radhakrishnan, a consultant with PricewaterhouseCoopers India. World over, big companies are ordering for ships of about 80,000 TEUs or twenty-foot equivalent units and the mother-ship size is going up. JNPT is preparing to attract these ships.

The bids for the first phase is slated to open on March 24 and work completed in 25 months. The proposal is to come before the Cabinet committee of infrastructure anytime. We got a Public Investment Board or PIB approval in October, says JNPT's Radhakrishnan.

The delay in the first phase reflects the bureaucratic hurdles a project faces in India. JNPT, which obtained government environmental clearance in March 2004 for its dredging work, is still unable to start its work despite a fourfold rise in cost. The company's plan to raise funds by issuing tax-free bonds have also been delayed by the government for a year. We were to raise tax-free bonds and now the ministry of shipping is talking to the ministry to finance to give us a go-ahead on the same, he added.

Consultants say large ports should have deeper channels and competitive tariff to attract larger ships.