Thursday, 6 September 2012

Indian port sector: Investment woes increase as infra companies denied clearances.

graphic:Economic times


Reports say that some of the largest infrastructure players in India have now been banned from port projects at Goa and Tuticorin on security grounds.  Companies Adani Port and Special Economic Zone and Punj Lloyd have been stopped by the Home Ministry from involvement in the 425 crore rupee terminal at Mormugao, Goa, and Lanco Infratech, another major player, has been barred from the 200 crore cargo berth at Tuticorin. Clearances are required by private players from the Ministries of Defence, External Affairs and Home before they can participate in port infrastructure projects.

Shipping pundits say that the propensity of the powers that be to bar private players on security grounds- Adani had been stopped earlier before from investing in JNPT Mumbai and Vizhinjam in Kerala- is likely to put a dampener on investment into the shipping sector. Recent developments at the Cochin Shipyard seem to underscore their point: a “major expansion” mooted through gradual disinvestment saw howls of protest from many, including some members of the parliamentary consultative committee on shipping, who see it as back door privatisation of a performing asset.
Even as Commodore K. Subramaniam, CMD of the shipyard, was encouraging fresh investment, saying it was needed to boost capacity and sustain growth of ship repair and shipbuilding, A. Sampath MP, a member of the consultative committee, issued a press release lambasting the plan.

“Privatising Cochin port is like killing the goose that lays golden eggs, as the port has been profitable even when the global shipping industry is facing a major crisis", he said. He also pointed out that Bibhu Prasad Tarai (CPI-Odisha) and Fransisco Sardinha (Congress-Goa), both members of the committee, had "given their dissent note on the move".

Industry players are watching the developments connected to Mormugao and Tuticorin carefully. Adani, who has been denied security clearance four times earlier, has responded guardedly. "We are not aware that the ministry of home affairs has denied national security clearance to APSEZ to participate in the terminal development projects in Mormugao and Tuticorin Ports. APSEZ was not shortlisted since a coal terminal project has been awarded to the company in Mormugao and so the question of security clearance does not arise. We would think the company should get national security clearance in normal course, which even foreign companies operating in India are allowed," Rajeeva Sinha, Director, Adani Ports, told the Economic Times.

India's 12th Five Year Plan envisages an investment of a staggering Rs 73,700 crore in the port sector as part of the 12th Five-Year Plan. The national maritime agenda sets ambitious targets- port traffic to be more than trebled in its 13 major ports and 187 minor ports in the next eight years (2,500 million tonnes from 800 million tonnes today).  To keep pace, capacity at all ports should rise more than threefold as well; some experts wonder how that will happen in the present scenario.

"Security standards at various ports have been a cause of concern. But the denial of security clearance to certain companies is likely to affect some port projects, especially when the government is trying to improve efficiency and award more projects at various ports," said Manish Saigal, partner at KPMG to the Economic Times.


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