The government has advised the port not to issue tax -free bonds, said Luxman Radhakrishnan, chairman, JNPT on Wednesday. This is the minimum that the government could have done to help a port like us. Everywhere else in the world capital dredging is funded by the government, he added.
He was speaking on the sidelines of the Logistics Summit 2011 organised by the Confederation of Indian Industry in Mumbai.
The company will now raise money from Indian banks by paying higher interest rates which will delay its expansion and result in loss of revenue for a brief period.
The government has been playing spoil sport for JNPTs expansion even as India expects to grow its exports by 20% every year and aims to double exports to $450 billion by 2014 from $225 billion for the fiscal year ended March 2011.
The value for this dredging contract was about R500 crore five years back, says Radhakrishnan. The proposal was rejected by the government saying it is expensive. According to him, the company is still in talks with the ministry of finance to allow it to raise infrastructure bonds to fund this project, he added. We cannot afford to delay it further.
The company, in addition to raising money from banks, would now have to fund it through its internal accruals and debt. If talks fail then we will have to fund 30% via equity and 70% via debt and raise money at 14% interest cost, Radhakrishnan said.
The port, now has a draft or depth of water a ship sinks according to its load, of 11 meters and the biggest ship it can accommodate is one which can carry 6,000 20 feet containers. A 14 metres draft would have allowed it to handle larger ship which can carry 8,000 20 feet containers.
JNPT is building the countrys largest terminal and fourth one for the company, at a cost of R6,700 crore. The terminal contract, to be completed in three years, was awarded to a consortium of Port of Singapore Authority (PSA) and ABG Ports in October.
Earlier, JNPT held talks with Japan International Cooperation Agency (Jica) for a soft loan of R1,000 crore to fund its first phase of dredging. However, after the devastating earthquake and tsunami in Japan this year, raising yen loan was difficult. "We will get the money from them for the next phase of our dredging work to take the depth to 17 meters, says the chairman. Yen loan will take another two years to come.
JNPT is contemplating multiple options for next phase of dredging, which will cost R4,000 crore. For the rest, we can go for a public private partnership or PPP model or pay off on an annuity basis, he explained.
JNPT also plans to develop a R4,000 crore special economic zone spread over 750 acres near the port situated on the east of downtown Mumbai and also wants to acquire land for future port expansions.